Linklaters has secured a significant win for Banco Santander, CaixaBank and Bankia in a long-running dispute over the Spanish government’s hibernation of the controversial Castor natural gas storage facility, located off the coast of Vinaròs in Spain.

Banco Santander, CaixaBank and Bankia sought compensation from the Spanish government for investments made in 2014 to enable the government’s hibernation of the malfunctioning Castor facility. The banks had responded to the government’s call for contributions and provided the €1.35 billion needed to pay the concessionaire to terminate the concession. In exchange, Royal Decree-Law 13/2014 granted the banks an account receivable to be paid out of domestic gas revenues over 30 years. However, this arrangement was subsequently declared unconstitutional by Spain’s Constitutional Court.

The banks sought a return of the sums invested, on the basis that the annulment of the account receivable had led to a very significant capital loss. The Supreme Court ultimately ruled in favour of the banks, granting them the right to be paid by the government the amounts they had provided to acquire the payment rights.

In addition to the considerable compensation, the Supreme Court judgment establishes an important precedent for future Spanish cases for government liability, as this is the first time the Court recognises a right to be compensated for damages caused by an unconstitutional law that was originally favourable to the interested party.

The Linklaters team advising Banco Santander, CaixaBank and Bankia included José Giménez, partner and head of Public Law and Regulated Sectors in Spain, and managing associate, Mario García.

The case is Santander, CaixaBank and Bankia v. Council of Ministers, Supreme Court decision no- 1404/2020 (Admin., Section 5), case no. 454/2018.