Energy Charter Treaty

The Energy Charter Treaty (ECT) is a plurilateral investment agreement between 53 European and Central Asian countries. It was signed in 1994 and entered into force in April 1998.

About 30 countries around the world are at different stages of joining the ECT. Burundi, Eswatini (formerly Swaziland) and Mauritania are first in line, followed by Pakistan and Uganda.

The original objective of the ECT was to overcome the political and economic divisions between Eastern and Western Europe after the demise of the Soviet Union, as well as to strengthen Europe’s energy security. European countries wanted to secure the access to fossil fuel resources of the former Soviet countries by protecting foreign energy investments in these countries.

The ECT provides for an Investor State Dispute Settlement (ISDS) mechanism to resolve disputes between an investor and a member state. To this day, it is the world’s most widely used legal instrument for initiating ISDS arbitrations. It has been invoked by investors in 124 cases.

Critics argue that as with most other investment agreements, it places investors’ economic rights and interests over the social, ecological and economic interests of host states and their societies. The ECT imposes obligations on the host state but not on foreign investors. The ECT has also been condemned by environmental activists for protecting the fossil fuel industry and undermining serious climate action.

Spain has been subject to 45 arbitration disputes under the ECT after it implemented a series of energy reforms affecting the renewables sector, including a reduction in subsidies for producers. While some cases are still pending, Spain has already been ordered to pay over €800 million.

You can find out more about the Energy Charter Treaty on the ECT’s dirty secrets website.

Key cases include:

Vattenfall (Sweden) vs. Germany: In 2007 the Swedish energy corporation was granted a provisional permit to build a coal-fired power plant near the city of Hamburg. In an effort to protect the Elbe river from the waste waters dumped from the plant, environmental restrictions were added before the final approval of its construction. The investor initiated a dispute, arguing it would make the project unviable. The case was ultimately settled in 2011, with the city of Hamburg agreeing to the lowering of environmental standards.

Yukos (Isle of Man) vs. Russia: Yukos was a Russian oil and gas company. It was acquired from the Russian government during the controversial “loans for shares” auctions of the mid 1990s, whereby some of the largest state industrial assets were leased (in effect privatized) through auctions for money lent by commercial banks to the government. The auctions were rigged and lacked competition, and effectively became a form of selling for a very low price. In 2003, the Yukos CEO was arrested on charges of fraud and tax evasion and the following year Yukos’ assets were frozen or confiscated. In 2007 Yukos’ former shareholders filed a claim for over US$100 billion, seeking compensation for their expropriation. The dispute resulted in 2014 in the arbitrators awarding the majority shareholders over US$50 billion in damages. The investors have been trying to enforce the award in several countries since then.

NextEra (Netherland) vs. Spain: The Dutch investor filed for arbitration in May 2014, after Spain changed the regulatory framework applicable to its investment, namely the construction of two solar power plants. NextEra claimed that Spain abolished the long-term premium and tariff system, negatively affecting the profitability of the project. However, Spain alleged that NextEra should have been aware that changes could be made to the regulatory regime. In May 2019, the investor was awarded around €290 million. Spain filed for annulment in October 2019.

Photo: Marc Maes / Twitter

Last update: April 2020

The Guardian | 19-Apr-2021
Energy conglomerates have recourse to special courts and legal regimes that they helped design – and they won’t go down without a fight.
Total Slovenia News | 24-Mar-2021
The British company pursues its investment treaty claim under the UK-Slovenia bilateral investment treaty and the Energy Charter Treaty.
SOMO | 17-Mar-2021
How investment treaties and investor-to-state dispute settlement grant foreign investors greater rights than Dutch and EU law.
El País | 11-Mar-2021
La Cámara de Comercio de Estocolmo falla que no ha vulnerado la Carta de la Energía y obliga a pagar las costas al fondo.
Future Beyond Shell | 11-Mar-2021
To realise a future beyond fossil fuels, it is imperative to look at how to disentangle the legal shackles that enable companies to frustrate climate policy and shift the burden of their stranded assets onto the shoulders of taxpayers through arbitration claims.
CIAR Global | 10-Mar-2021
Las medidas tomadas por España en relación con las primas a las energías renovables fueron “razonables” por lo que no concede ninguna compensación al demandante. Esa es la decisión del tribunal del arbitraje Freif Eurowind Holdings v. España, que, desde 2017, ha sido administrado por el Instituto de Arbitraje de la Stockholm Chamber of Commerce (SCC).
Clarín | 8-Mar-2021
Según las cifras que ahora se han anunciado de manera oficial, Vattenfall recibirá la mayor parte de la compensación, 1.425 millones de euros. Por su parte, se destinarán 880 millones de euros a RWE, 80 millones a EnBW y 42,5 millones a Eon/PreussenElektra.
Bourse Direct | 6-Mar-2021
Les entreprises se sont engagées à retirer toutes les procédures judiciaires en cours, dont le groupe Vattenfall devant un tribunal arbitral de la Banque mondiale.
Reuters | 6-Mar-2021
Vattenfall will get 1.606 billion euros and agreed to end pursuing a separate damages claim in the World Bank’s ICSID arbitration tribunal.
CIAR Global | 5-Mar-2021
El Abogado General de la Unión Europea Maciej Szpunar concluyó el 3 de marzo de 2021 que el arbitraje del Tratado de la Carta de la Energía (TCE) intracomunitario es incompatible con el Derecho de la Unión tomando como base la sentencia Achmea, y plantea que las disputas pueden confiarse a los tribunales nacionales de los Estados miembros.

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