Our firm was a Silver Partner at the la InvesTenergy Conference “Energiy for the future. Smart investing”. A speaker in the second Panel of the conference, lawyer Ovidiu Miheț, told the more than 120 participants how investors can protect their businesses in the situation of legislative changes.
The speech was very interesting, and not only from the legal point of view, as it brought practical ideas to the investors and players on the energy market. Below, you will find some fragments.
„In order to learn how to invest intelligently, one must first study the past. There have been companies which invested intelligently in green energies, and some are now on the brink of insolvency, others in delicate situations, because of legislative changes that came along the way and which were not taken into account when the investors made their business plans. We, as lawyers, try to provide remedies and ensure the necessary protection to investors, so that they can run their business”, said Ovidiu Miheț, highlighting that „our country’s legislation includes provisions that allow for the legal protection of the investors’ interestsl”.
“There are remedies, but – as we all can see – the Romanian courts are somewhat reluctant in giving judgments against the state when it comes to investments in the millions of euros. There is another way, widely used in Europe, namely international arbitration, which mainly allows foreign investors and those having subsidiaries in Romania to appeal to arbitration tribunals. The ground can be the European Energy Charter or different bilateral conventions. Based on these, investors may apply to the International Arbitration Courts”, said Ovidiu Miheț.
Regarding the situation of E-RES investors, since 2010 there have been numerous requests for damages caused by legislative changes. According to our information, 17 such applications have been registered so far, mainly against Spain, the Czech Republic and Italy. Bulgaria and Germany are also in a prelitigious stage, and there are a number of companies that go through the necessary steps to address the arbitral tribunal. “At the beginning of this year, we had basically the first decision in such a dispute. This is the case of Sharan vs. Spain, where photovoltaic investors have sued the Spanish State claiming damages for the fact that they were, as a result of legislative changes, limited the time they benefited from the feed-in tariff, they were limited the hours when they were covered by a regulated tariff and, moreover, they were set a series of charges for their access to the network. Unfortunately for the investors, this first decision was a negative one, the reasoning of the Stockholm Arbitration Court being that there is no firm commitment on the part of the state to keep the legislation unchanged for the duration of the investment, the investor must do a rigorous due diligence, and the legislative changes are imposed by other principles of energy market regulation. As long as the legislative changes do not affect the business in its entirety and are in line with the principles set out in energy conventions and domestic law, the investor is not entitled to compensation. At first glance, the court’s decision seems disastrous, but this is not the case because it involves minor legislative changes, and the major ones were in 2013. The decision was given with the separate opinion of an arbitrator who considered that the legislative changes violated the provisions of the Energy Charter on the fair and equitable treatment of the investor”, said Ovidiu Miheț.
He also drew attention to one of the most interesting cases for investors that is also against the Spanish state. 14 groups of investors in a joint action, totaling 88 plaintiffs, sued the Spanish State for damages caused by legislative changes.
“Hence, the cases continue, the chances of investors in the renewable sector are not lost, but reverting to the urge to invest intelligently in energy in the future, I believe that this trend of legislative changes in several European countries should be considered by future investors. No matter how many remedies the lawyers, the law, the Paris Convention, the Energy Charter, European directives, etc. offer, obtaining the results, by trial or arbitration, takes time – up to 4-5 years, maybe more. Attention, legislative changes need to be budgeted in the business plan and I recommend the preventive attitude, energy market participants should be very active in the public consultation phase on the adoption of new normative acts”, concluded our colleague.
The debate on the future of in Romania, launched by the InvesTenergy publication, has reached its goal, proved to be necessary and useful, as proven by the interest of the 130 participants present at the event – authorities, MPs, investors, energy market actors, lawyers, media representatives – concerned about what is happening with the energy sector.