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

Stop CETA Mercosur | 24-Oct-2022
Suite à des années d’alertes, de sensibilisation et de mobilisation de la société civile, auxquelles le collectif national Stop CETA Mercosur ont pris leur part, Emmanuel Macron vient d’annoncer que "la France a décidé de se retirer du Traité sur la charte de l’énergie.
Novethic | 24-Oct-2022
Alors que la pression ne cessait de s’accroître sur la France, Emmanuel Macron a finalement annoncé la sortie du pays du Traité sur la charte de l’énergie. Un texte qui freine la transition énergétique européenne. L’Espagne, les Pays-Bas et la Pologne ont déjà annoncé leur retrait du texte.
The Guardian | 24-Oct-2022
Quitting the ECT, which protects fossil fuel investors from policy changes that might threaten their profits, was ‘coherent’ with Paris climate deal, Macron said.
Extractive360 | 21-Oct-2022
Signing the ECT would give the transnational companies in the energy sector a weapon to re-colonise Nigeria, as it would also be incompatible with Nigeria’s economic diversification aspirations.
La Croix | 21-Oct-2022
Dans un avis, le Haut Conseil pour le climat estime que la protection des investissements dans les énergies fossiles dans le Traité sur la charte de l’énergie va à l’encontre des ambitions affichées par l’accord de Paris sur le climat. | 19-Oct-2022
El Gobierno neerlandés anunció este martes que se retirará del controvertido Tratado de la Carta de la Energía (TCE) porque considera que no está en consonancia con el acuerdo climático de París y supone una barrera para lograr los objetivos de reducción del calentamiento global.
Collectif Stop CETA Mercosur | 19-Oct-2022
The Netherlands is leaving a controversial energy treaty because it conflicts with Paris climate accord commitments, energy minister Rob Jetten said
DutchNews | 19-Oct-2022
The Netherlands is leaving a controversial energy treaty because it conflicts with Paris climate accord commitments, energy minister Rob Jetten said
Kluwer Arbitration Blog | 18-Oct-2022
The renegotiated ECT does not rise to the mounting global challenges regarding energy investment, climate action, and sustainable development.
Libération | 18-Oct-2022
Inconnu au bataillon mais très influent sur les politiques écologiques mises en place par les Etats européens, le Traité sur la charte de l’énergie est aujourd’hui sous le feu des critiques des associations.

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