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Eurus Energy case study

Freshfields secures largest-ever ISDS award for a Japanese investor

When Spain's renewables incentive regime reforms left Japanese investor Eurus Energy out of pocket, the company turned to Freshfields for help. Our cross-border team helped secure a €106.2m damages award, the largest publicly known ISDS award for a Japanese investor. The outcome not only provides a significant victory for Eurus, but also has potentially significant implications for the wider Japanese legal landscape.

Freshfields represented Japanese investor Eurus Energy in its arbitration against Spain, brought in response to reforms to Spain’s renewables incentive regime. The reforms reduced subsidies and imposed a 7% tax on the revenue of power generators and, Eurus argued, had the indirect effect of retroactively clawing back previously paid subsidies. Eurus, which has 12 wind farm projects in Galicia and three projects in Asturias, filed a claim under the Energy Charter Treaty (ECT) for indirect expropriation, failure to provide fair and equitable treatment, and denial of justice.

Spain had regulated the generation of electricity using a two-tiered system with an ‘ordinary regime’ that was subject to a free-market pricing system, and a ‘special regime’ where producers, such as Eurus, were entitled to additional remuneration. Spain introduced a series of reforms between 2012 and 2014, after which it clawed back subsidies paid prior to 2013 that were higher than those that would have been payable under the reforms.

Eurus argued it had a legitimate expectation that the regulatory regime would remain unchanged over the life of the projects. However, Spain argued that the special regime was based on the principle of reasonable return, meaning a producer was only guaranteed to receive sufficient funds to recover investment costs and operating costs, and make a return in line with market criteria. It argued that incentives for facilities were always subject to an undefined cap.

While a majority of the tribunal, originally chaired by the late James Crawford of Australia, found that Eurus could not have formed a legitimate expectation that the renewables regime would remain unchanged, Freshfields’ cross-border team persuaded the tribunal to look beyond the expressly stated intention of the Spanish reforms and see their wider ramifications. In a unanimous decision, the tribunal held that Spain’s reforms had the effect of retroactively clawing back previously earned profits and was inconsistent with the ECT’s stability principle.

Crawford passed away in June 2021, and the tribunal was reconstituted with Anne K. Hoffmann as chair.

Following extensive advocacy at the damages stage, the tribunal agreed with each aspect of our client’s quantum arguments and modelling, awarding Eurus €106.2m in damages. Counsel for Spain had argued that Eurus had already benefited from the Spanish renewables incentive scheme and so should receive no damages, while Spain’s quantum expert placed the damages due at €41m. Freshfields presented an incredibly convincing economic argument, noting the interaction between the impact of the legislative reforms and the damage caused to the client, resulting in unanimous agreement from the tribunal.

Given that this would be the client’s first experience with investor-State arbitration, the Freshfields team, led by partners Nicholas Lingard in Singapore, Joaquín Terceño in Tokyo and Peter Turner KC in Paris, counsel Ignacio Borrego in Madrid, senior associates Samantha Tan, Ana Calvo, Yuri Mantilla and Daniel Allen and Claire Pauly (no longer with the firm), and associates Ewa Kondracka and Karen Kong, provided complete strategy throughout. Eurus relied heavily on Freshfields, who were given significant leeway to guide Eurus through the matter and shape the strategic and tactical decisions.

This case is one of many that Spain has faced from renewables investors following its regulatory reforms and the country has moved to have damages awards annulled as a result of the European Court of Justice’s ruling in Achmea. This ruling found investor-state arbitration under an intra-EU bilateral investment treaty to be incompatible under EU law. Foreseeing the potential complications arising from this decision, Freshfields made the strategic decision in advising Eurus to withdraw its Dutch subsidiary, Eurus Energy Europe, as a co-claimant in the ICSID case in 2018. Since Spain is seeking to annul many of the claims made against it from European claimants in this regard, Freshfields’ advice has proved invaluable.

The positive outcome for Eurus is rooted in our team’s detailed analysis of the facts and the law. While the amount of damages awarded to Eurus in this matter is significant – indeed, it is the largest ever publicly known ISDS award for a Japanese investor – the greater value arguably stems from the fact that Eurus will not be subject to Spain’s attempts to annul the award. The foresight shown and the strategic advice given by the Freshfields team in this regard enables Eurus to continue its business in Spain without the prospect of further arbitration. The Eurus award could have wider impact still, with the expectation that it could increase the pressure on Spain to negotiate and agree a global settlement in its other ECT claims.

‘For Japan, this matter is quite significant,’ says partner Joaquín Terceño. He adds that ‘while Japanese companies conduct a lot of international business, they don’t engage in international arbitration as often as companies in some other countries.’ Terceño notes that many Japanese companies rightfully focus on finding commercial resolutions to their conflicts instead of commencing litigation or arbitration, but that ‘a victory like this for one of their peers underscores the value of having international arbitration—and particularly investor-State arbitration—as an option when other efforts to resolve a dispute fail, a message that the Japanese government is also voicing.’ Coupled with Japanese government efforts to encourage increased use of international arbitration to settle disputes, this matter could provide the impetus to radically alter the Japanese commercial and legal landscape.

Freshfields helped secure a


damages award



publicly known ISDS award for a Japanese investor