The large international technology companies deploy all their artillery before a potential clash in the courts with the Government of Spain over the new demands that the Executive intends to implement. According to legal sources aware of the situation, SpainDC, the association that brings together large data center developers in Spain, has gone to the Council of State to present allegations to the draft royal decree being processed by the Ministry for the Ecological Transition.
The employers' association, which includes global technological giants such as Amazon, Google and Microsoft, wants the supreme government advisory body for legal issues to have first-hand and direct information on its dissenting position on key issues of the royal decree. The Government will also have to send the regulatory project to the Council of State in the coming weeks so that it can make its opinion before its final approval.
Although the opinion on the regulatory standards made by the body chaired by the former vice president of the Government Carmen Calvo are merely prescriptive (they do not oblige regulators to follow their opinions), they carry a lot of weight. This was demonstrated by the legal reports of the Council of State on the electricity grid circulars issued by the National Markets and Competition Commission (CNMC) last year.
The employers' association chaired by Emilio Díaz (CEO of Nabiax) and directed by Begoña Villacís is clear that the new regulations, in addition to being widely harmful from an economic point of view, have difficult legal fit, hence this Friday they did not rule out ending up in court if the regulation is not reviewed.
“SpainDC doubts the legal fit of the new decree,” the association warned in a statement, which has labeled the regulations being drafted as “discriminatory.” "There are elements that we believe are contrary to the legal system and exceed what can be done in this way. When a norm imposes obligations of this intensity, the legal coverage has to be especially solid," explained Begoña Villacís from the CEOE headquarters.
Regarding legal compliance, the representatives of the data centers point out, among other legal issues, that “the allegations question whether the Ministry [in reference to Ecological Transition] assumes certain powers in matters related to access, connection and energy regulation that SpainDC considers legally attributed to the CNMC as an independent regulator,” according to their public statement.
The issue is critical for Spain, since data centers are necessary infrastructure for Spain's digital development and the potential for long-term present and future vectors such as artificial intelligence.
Spain has ideal conditions for the development of these assets, as demonstrated by the world's largest technology companies. Their spokespersons estimate that almost 67 billion in investment can be mobilized until 2030. However, companies are willing to defend themselves in court and request multimillion-dollar claims if they suffer a blow to investments that were already committed before the new proposal for regulatory requirements was launched.
Proof of the strength that these companies are demonstrating is in their legal response. Villacís, director of SpainDC, is a lawyer by training and spent years at the highest levels of politics as one of the leaders of Ciudadanos, making her widely knowledgeable about the State's means of achieving maximum influence. But in addition to their legal know-how, since the draft of the royal decree project went to public hearing, the big technology companies have put several of the best law firms in the country to work.
These companies, many of which come from the international arena, already have reports and opinions on the decree and its flaws. The work comes from some of the most prestigious law firms in the country such as Garrigues, Cuatrecasas or A&O Shearman, among others. These specialists are currently scrutinizing all regulatory issues, as detailed in their papers. But in addition to having specialized public and regulatory law teams, these firms have some of the best lawyers in the world in litigation practice.
This Friday, SpainDC opened the door to the courts if they do not achieve a dialogue with the Government to which they are open to seek consensus positions that can accommodate all parties. However, many of the investors in these projects are foreign capital that could pose international arbitration to the Kingdom of Spain. A scenario that the employers have not wanted to evaluate at that level of detail.
The issue represents a difficult sword of Damocles for the Executive that still suffers a strong international stigma due to the dozens of arbitrations it suffered due to another regulatory change concerning the field of energy in 2013, a problem for Spain at multiple levels that still remains unresolved.
Although the issue is still far from escalating to these levels of conflict, the new Spanish regulations on data centers are already being a prominent topic of conversation in the main financial centers, say sources close to technology. Last week, companies and funds showed “concern” at a forum organized by Goldman Sachs in the City of London, as revealed by EL PAÍS/CincoDías.
Despite the legal and judicial framework that big technology companies are building and the pressure exerted from minute one, the situation is still in a very preliminary phase, since the deadline for allegations established by the Government ended this Thursday, so there are still various procedures to be resolved before the regulations are approved. And the Government is open to changes if the philosophy of the decree is maintained.
The expectation is maximum. The Executive itself indicated this Thursday that it has received more than 600 allegations of all kinds in just 14 days. But for now it does not avoid the legal threat from the companies and reaffirms its intentions to force companies to provide themselves with 80% additional renewable energy hour by hour to allow them to function. This is precisely the point of greatest sensitivity for companies, which consider it unfeasible from a technical and economic point of view. Furthermore, the sources consulted add that all the new demands are especially harmful for smaller companies, since the technological giants of Wall Street have more capacity and financial lung to withstand the regulatory onslaught of Spain.
