The European Commission is investigating whether the Spanish government's payment of an arbitration award to Japanese engineering firm JGC Holdings, over changes to renewables support, is compliant with EU state aid rules, it said Wednesday.
The inquiry related to a scheme Spain launched in 2007 to spur development of renewable electricity generation. Spain did not notify the commission of the scheme, but did inform it about a change of rules to the scheme made in 2013, which the commission approved in 2017.
In that approval, the commission said that any compensation awarded by arbitration tribunals to investors and resulting from the change in the scheme's rules, would be considered state aid, obliging Spain to notify the commission of any such payments.
After the rule changes, JGC, a Japanese engineering holding company, started arbitration proceedings against Spain and made a compensation claim over financial support it was no longer eligible for due to the rule changes.
An arbitral tribunal found in 2021 that Spain had infringed the Energy Charter Treaty and ordered Spain to pay 23.5 million euros ($27.2 million ) in compensation to JGC in accordance with its claim.
Spain informed the commission of this compensation and that it had made the payment to Blasket Renewables Investment, a US fund that was assigned the rights to the award and which was preparing to seek enforcement in the Netherlands.
The commission's preliminary stance is that the award constitutes provision of state aid as it granted JGC an advantage equivalent to that which was offered by the 2007 scheme prior to rule changes, a scheme whose existence was never notified to the commission.
The EC will now continue to investigate that aid's compatibility with the internal market and whether it breaches EU treaties.
State aid is prohibited by the commission unless it has granted approval for it, the commission said. The commission will seek to find out whether the support to JGC could distort competition.