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

Ecologistas en Acción | 29-Jun-2022
Finalizan las negociaciones para reformar el Tratado de la Carta de la Energía con la adopción de un acuerdo inaceptable. La Comisión Europea ha ignorado la petición del Parlamento Europeo, del Gobierno español y del parlamento holandés, de iniciar la salida conjunta del Tratado.
IISD | 28-Jun-2022
The new "agreement in principle" for a modernized Energy Charter Treaty (ECT) falls short of pledges to make the trade and investment deal better suited to achieving international climate goals, IISD experts say.
CMS Law-Now | 27-Jun-2022
In a award, made in Green Power Partners K/S and SCE Solar Don Benito APS v Spain, a tribunal unanimously denied its jurisdiction over an intra-EU investment dispute arising under the Energy Charter Treaty.
Novethic | 27-Jun-2022
Critiqué depuis des années, le Traité sur la charte de l’énergie faisait l’objet d’une refonte depuis 2018. Malgré la pression, la Commission européenne a choisi de rester dans le TCE, moyennant quelques amendements.
The Guardian | 27-Jun-2022
1994 agreement allows investors to sue governments for changes in energy policy that harm their profits.
FranceInfo | 23-Jun-2022
Critiqué par les climatologues comme par les organisations environnementales, ce traité signé dans les années 1990 fait l’objet d’une ultime réunion de négociations entre pays européens.
Le Monde | 21-Jun-2022
Cinq jeunes Européens devaient porter plainte, mardi, devant la Cour européenne des droits de l’homme contre plusieurs Etats signataires de cet accord, estimant qu’il ne permet pas le respect de l’accord de Paris sur la lutte contre le réchauffement climatique.
The Guardian | 21-Jun-2022
Five claimants aged 17-31 want their governments to exit the energy charter treaty, which compensates oil and gas firms.

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