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

Le Vif | 28-Feb-2022
Le Traité sur la Charte de l’énergie (TCE) pourrait mettre en échec l’adoption de mesures structurelles ambitieuses de protection sociale visant à contrer la hausse de prix de l’énergie et à protéger les ménages.
Climate Home News | 28-Feb-2022
The German government has been worried about being sued by the fossil fuel companies behind the Russian gas pipeline under the Energy Charter Treaty.
Climate Home News | 26-Jan-2022
Campaigners say the UK and Switzerland are defending fossil fuel interests in Energy Charter Treaty modernisation talks to tempt firms to relocate their HQs.
IISD | 24-Jan-2022
The fossil fuel industry is the most litigious industry in the ISDS system by number of cases, accounting for almost 20% of the total known ISDS cases across all sectors.
AK Europa | 19-Jan-2022
This policy brief outlines not only serious reasons for terminating the treaty but also various possible exit scenarios.
La Información | 18-Jan-2022
Los servicios jurídicos del Estado contratacan encargando un informe pericial sobre la rentabilidad de las plantas energéticas en las que invirtió el demandante junto a FCC.
Friends of the Earth Europe | 17-Jan-2022
A new example of how this secretive corporate court system is undermining climate and environmental policies of EU member states has been brought to light.
Capital Monitor | 17-Jan-2022
Countries party to the Energy Charter Treaty are under yet more pressure to reform the agreement following the Cop26 climate summit, as they weigh the benefits of climate action against the likelihood of getting sued.
Euractiv | 13-Jan-2022
Last year Ascent Resources initiated arbitration proceedings against the Slovenian state under the UK-Slovenia Bilateral Investment Treaty and the Energy Charter Treaty.
IISD | 23-Dec-2021
Dans sa décision finale du 25 janvier 2021, un tribunal CIRDI ordonnait à l’Espagne de verser des dommages-intérêts à des investisseurs allemands en indemnisation de la réduction d’un régime de subventions.

0 | 10 | 20 | 30 | 40 | 50 | 60 | 70 | 80 | ... | 390