The application of the rebus sic stantibus clause to the lease of land of a photovoltaic solar plant installed under the regulation of Royal Decree 661/2007

Written on 21 Dec 2018

The judgements of the Supreme Court of the June 30 and October 15 of 2004 have led to the application of the rebus sic stantibus clause. This comes as a result of rejecting the classical and rigorous interpretation of little practical course, based on the principle of justice and equality, to give way to an objectification of the legal concept, based on the theory of the basis of the business. In our case, thanks to the institution of the rebus sic stantibus it has been possible to obtain a reduction in the rent of the land of a photovoltaic plant due to the modification of the regulatory framework.

The serious international crisis of the last decade has led to an increase in the number of cases in which the rebus sic stantibus clause has once again been applied. This has permitted our High Court to carry out the revision of the institution and to abandon the previous classical and rigorous interpretation. After the judgements of June 30 and October 15, the Supreme Court has redefined its foundations to give way to an objectification of the legal concept. Within which the protection of the balance of benefits (principle of commutability) and the ultimate economic purposes of the contract are the elements to be taken into account in order to revise or adapt it.

In our case, a reduction in the rent of the land was requested due to the sudden and drastic modification of the regulatory framework. Royal Decree 661/2007, of 25 May, regulating the production of electricity under the special regime, which provided for the payment of a regulated tariff for a period of 25 years, was in force at the time the installation was put into operation. However, just 6 years later, and after various intermediary decrees, the legislator promptly repealed that regulatory framework with Royal Decree-Law 9/2013 adopting urgent measures to guarantee the financial stability of the electricity system, and with the following implementing regulations. The repeal destroyed any profit margin and put at risk the viability of the photovoltaic plant itself.

The Court in its Judgement dictated in September 2018 declared the suitability of the application of the rebus sic stantibus clause, and the reduction of the rent of the land in an amount close to 30% of its cost, from the presentation of the demand until the end of the term of the contract. In its arguments, the Judgment states that it was proven that there was an unforeseeable alteration of the circumstances that gave rise to the signing of the contract, since the repeal of Royal Decree 661/2007, in view of which the rent price was fixed, could not have been foreseen by the company owning the plant. The change, in the words of the Court, was surprising, unexpected and affected the foundations of the business, so that the balance of benefits was completely eliminated for one of the parties.

Thanks to the jurisprudential advance given by the Supreme Court, we observe how the legal concept has found a true practical application today. This Judgment constitutes one of the first precedents that consider the application of the rebus sic stantibus clause in view of the well-known drastic modification of the regulatory framework established by Royal Decree 661/2007, which seriously affected a multitude of photovoltaic plants installed in our country.