By Don Quijones, Mexico and Spain, editor at Wolf Street. Originally published at Wolf Street
US brokerage firm Schwab Holdings and Malta-based OperaFund Eco-Invest Sicav have lodged a new international complaint against the Spanish State over its recent cuts to renewable energy subsidies. The case will be heard in the International Center for Settlement Investment, a Washington DC-based investment arbitration institution that is a member of the World Bank.
It is the 19th complaint to date against the Spanish state over its cuts to renewable energy subsidies, propelling Spain to third place in the global leader board of nations facing Investor-State Dispute Settlement (ISDS) suits. In fact, the only two countries facing more suits are the two bugbears of international capital Venezuela (24 complaints) and Argentina (20).
As I wrote in The Global Corporatocracy is Just a Pen Stroke Away From Completion, the “investor-state dispute settlement” provision is what would give the new generation of trade treaties such as Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), and Trade in Services Agreement (TISA) their “claws and teeth.”
It effectively allows privately owned overseas corporations to sue entire nations if they feel that a law lost them money on their investment… Cases do not get heard in a court of law, under the scrutiny of a judge and jury, but rather in front of arbitration panels made up of three professional arbitrators — one representing the company, one representing the country and the other chosen by the first two to sit as president of the panel.
None of these arbitrators are trained judges; they are private individuals often representing some of the biggest international corporate law firms, mostly from the U.S. and Europe.
Turning Off the Free-Money Tap
Spain’s problems began in November 2011 when the former Socialist government began withdrawing its support for renewables. It had previously promoted renewable energy with very generous subsidies that lured energy companies from around the world to launch operations in Spain. But with the financial crisis biting hard, the Zapatero government announced a cut of 30% to subsidies paid to producers of solar energy. When the conservative Popular Party came into office one month later it deepened the cuts, arguing that consumers could no longer pay.
With the honey jar withdrawn, myriad companies, both domestic and foreign, suddenly saw their funds wither. Many projects collapsed. As El Pais reports, while thousands of Spanish investors lodged appeals with the Supreme Court, a group of large foreign businesses took the case to international arbitration:
Fifteen businesses that had invested in Spanish solar energy lodged their first international claim, using the Energy Charter of the United Nations Commission on International Trade Law (UNCITRAL). This was only the second time that investors had used this legislation to bring charges against a member of the EU. Created in 1991 to encourage investment in the former Soviet bloc, the treaty aimed to provide investors with guarantees.
After that came a further 20 investors: sovereign funds such as that of Abu Dhabi, German municipalities and a Canadian civil service pension fund. Even major Spanish companies such as Abengoa and Isolux presented compensation demands, arguing that their solar energy plants belonged to affiliates in the Netherlands and Luxembourg…
No exact figures are available as to how much is at stake, but sources talk of billions of euros. In 2014 alone, Spanish consumers paid €6.5 billion in renewable subsidies.
The Spanish government would much rather the cases were heard in the European Court of Justice, arguing that the cuts had been approved by democratically elected parliaments, that a reasonable profit is still to be made from renewable investments, and that above all, Spaniards have been affected just as much as foreign investors. But investors continue to seek redress through arbitration.
The irony is pungent: of all Europe’s governments, few have expressed such fervent support for TTIP and its ISDS charter as Spain. While more and more local councils up and down the country declare their opposition to the covert trade treaty, the country’s two major establishment parties — the governing People’s Party (PP) and the only-in-name Socialist Party (AKA PSOE) — are completely, unquestioningly, on board.
Both parties joined forces In a vote last year to block a motion calling for a national referendum on TTIP. The government even refuses to hold a parliamentary debate on the issue.
Yet now, in what can only be described as a master class in political hypocrisy, that same government cries foul of a system of international justice that it continues to wholeheartedly support — a system of justice that could soon cost Spanish taxpayers billions of euros in damages. Naturally, the government will not waver in its commitment to ISDS, for the simple reason that Spain’s largest companies will also be able to rake in billions by suing other governments for threatening their profits.
Spain’s renewable energy nightmare should serve as a stark warning about the threat posed by TTIP and its ISDS charter. If passed into law, it will establish a global corporate protection racket. A rigid framework of international corporate law will be imposed above local and national existing laws to exclusively protect the interests of corporations, relieving them of financial risk and social and environmental responsibility. From then on, every investment they make will effectively be backstopped by our governments and taxpayers; it will be too-big-to-fail on an unimaginable scale. By Don Quijones, Raging Bull-Shit.
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