European Commission Opens In-Depth State Aid Investigation into Spanish Arbitration Award

Background

On 4 August 2026, the European Commission commenced an in-depth state aid investigation concerning an arbitral award obliging Spain to compensate JGC Holdings Corporation (“JGC”), a Japanese engineering holding company.

Spain had introduced, in 2007, an unnotified support scheme for renewable-electricity production. The scheme was amended in 2013. In 2017, the Commission approved the amended scheme, while cautioning that compensation awarded by arbitral tribunals to investors in connection with the 2013 amendments would itself constitute notifiable state aid.

JGC subsequently initiated arbitration proceedings to recover the support it contended it would have received under the original 2007 scheme. In 2021, the tribunal found Spain had breached the Energy Charter Treaty. It ordered Spain to pay JGC EUR 23.5 million, plus interest and costs, for losses arising from the 2013 changes.

The Commission’s Preliminary Assessment

Spain notified the award to the Commission and made a payment to Blasket Renewables Investment (“Blasket”), a United States fund which acquired the rights under the award. Blasket has subsequently sought enforcement in a number of jurisdictions.

The Commission’s preliminary view is the award and its implementation constitute state aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (“TFEU”). In its assessment, the measures confer upon JGC an advantage equivalent to that available under the unnotified 2007 scheme; Blasket also benefits.

The Commission has expressed doubts as to whether the measure is compatible with the internal market for the following reasons:

By compensating JGC for the 2013 amendments, the arbitral tribunal may have effectively replaced the Commission’s assessment with its own. This could undermine both the autonomy of the EU legal order and the Commission’s exclusive competence in state aid matters.
It remains uncertain whether the award is consistent with the non-discrimination principle in Article 18 TFEU.
As JGC’s renewable-energy installations had already received support under the 2013 scheme, the further compensation may not be necessary, may have no incentive effect and may be disproportionate.
Restricting the benefit to JGC alone may create an undue distortion of competition.

Next Steps

The Commission will now investigate whether its preliminary concerns are borne out. This will include an assessment of the measure under the 2014 State Aid Guidelines applicable to operating aid for energy produced from renewable sources.

Comment

The investigation highlights the continuing tension between investment-arbitration awards based on protections under the Energy Charter Treaty and the EU state aid regime. It also reinforces the Commission’s position that payment of compensation connected with a non-notified state support scheme may require separate state aid clearance.

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Source: <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_26_1719" target="_blank" class="news-text_link">European Commission press release IP/26/1719</a>, 4 August 2026.