The Evolution of the Fair and Equitable Treatment Standard through the Spanish Renewable Energy Saga

The global push towards reaching the climate change mitigation goals and energy transition has placed the spotlight on international investment law and investment arbitration from a different angle, opening reform avenues focused on modifying investment treaties and arbitration to fit the contemporary sustainable development goals. These reforms are considered as high priority due to the widely perceived detrimental effects of investment protection standards in old-generation investment treaties, as interpreted by arbitral tribunals. During the past decade, the tension between the state’s right to regulate in the public interest and modify existing renewable energy schemes and the guarantees and protections granted to existing investors was on full display in an increasing number of investment arbitrations filed by renewable energy investors, primarily against Italy, the Czech Republic and Spain. The fair and equitable treatment standard (FET) has consistently featured as the most frequent and most successful claim by claimant renewable investors, regardless of the respondent host state and type of investment. Although critics have complained of inconsistent outcomes, a deeper analysis shows that arbitral tribunals have developed consistent lines of interpretation which can (and have) impacted the reformed new-generation FET standard. The awards issued to date in the “renewable energy investment arbitration sagas” reveal a wealth of legal and policy insights, and the potential for a reformed FET standard which can be applied to the benefit of the energy transition process. Through the lens of the Spanish renewable investment awards, as the most abundant and growing sample of case law, this article explores the evolution of the FET standard through arbitral jurisprudence and the proposed reforms which may help harness its protective effects to boost sustainable development.