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

La Tribune | 14-Nov-2022
Cette convention permet aux géants de l’énergie de se retourner contre les États signataires qui mèneraient des politiques climatiques défavorables à leurs investissements. Dans le même temps, l’Allemagne va ratifier l’accord CETA.
EJIL: Talk! | 8-Nov-2022
The Bureau of Economic Security of Ukraine (ESBU) seized the assets of one of Ukraine’s largest fuel retailers, AMIC Ukraine, the local subsidiary of AMIC Energy, an Austrian private equity firm.
Kluwer Arbitration Blog | 7-Nov-2022
This article focuses on the implications of the revised text for dispute resolution under the ECT. We address the environmental focus of the anticipated reforms and conciliation of State-to-State disputes relating to sustainable development and climate change.
IISD | 7-Nov-2022
Cette affaire concerne un différend lancé contre la Roumanie par 10 investisseurs en réponse aux modifications apportées par la Roumanie à un régime d’incitation visant à attirer les investissements dans les sources d’énergie renouvelables.
Energy Monitor | 4-Nov-2022
EU countries are voting with their feet, quitting the investor protection pact despite the EU’s efforts to reform it – but the European Commission warns it will be worse to be outside than in.
No TCI | 1-Nov-2022
El Gobierno de España ha oficializado su decisión de salirse del Tratado de la Carta de la Energía, a través de una carta enviada a la Comisión Europea.
Le Monde | 28-Oct-2022
L’annonce du retrait prochain de la France du traité sur la charte de l’énergie doit être saluée et va dans le sens d’une meilleure efficacité des politiques climatiques.
CIAR Global | 27-Oct-2022
La Comisión Europea muestra su disconformidad con el retiro del Tratado de la Carta de la Energía de los cinco países que han dado este paso y advierte que es mejor defender la negociación desde dentro, puesto que todos los que renuncien al TCE tendrán que someterse a las viejas reglas durante 20 años más.
swissinfo.ch | 26-Oct-2022
El presidente de Francia, Emmanuel Macron, anunció este viernes que su país ha decidido retirarse del Tratado de la Carta de la Energía (ETC, por sus siglas en inglés), que protege las inversiones en ciertas infraestructuras energéticas.
Balkan Green Energy News | 26-Oct-2022
A tribunal operating under the World Bank has ruled in favor of ten companies that initiated arbitration with the argument that Romania violated the Energy Charter Treaty by lowering incentives for their solar power plants.

0 | 10 | 20 | 30 | 40 | 50 | 60 | 70 | 80 | ... | 470