Not Quite Left Out to Dry: Remedies Under International Investment Treaties Available to Renewable Energy Investors Harmed by Retroactive Legislative Changes -

Introduction:

In recent years, project developers, investment funds, and energy companies have invested heavily in renewable energy as a result of incentive programs offered in the legislation of countries such as Germany, Spain, and Italy, among others. Many governments enacted these incentive programs to encourage investors to develop and fund renewable energy projects because producing energy from renewable sources is more expensive than from conventional sources. In addition, states are striving to achieve green energy targets as well as decrease dependency on hydrocarbons. The success of those regimes can be attributed to the states’ explicit guarantees of attractive and stable incentives over a fixed period of time, typically twenty years or more. The long-term stability of these measures was extremely important to investors because the expense of developing and operating a renewable energy facility often takes a decade or more to recover.

Currently, however, the once-booming renewable energy market in parts of Europe is at a virtual standstill. Some countries, including most notably Spain and Italy, have made significant, retroactive changes to their investment regimes, in some cases abolishing the very incentives that were needed to bring about the investments, in direct contravention of the stability provisions explicitly stated in the laws. For investors in the sector, the ongoing reform came as a complete surprise, jeopardizing their ability to repay initial cost outlays, much less earn an eventual profit. These unanticipated modifications have created financial hardship and uncertainty in the market; and they have left many investors wishing they had never invested in these countries.