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

Euractiv | 19-Aug-2021
Slovenian environmental NGOs have called on infrastructure minister Jernej Vrtovec to use the country’s EU presidency to propose a political discussion on the bloc exiting the Energy Charter Treaty.
Ok Diario | 9-Aug-2021
Con denuncias activas todavía por valor de unos 5.000 millones de euros, ahora la irlandesa Spanish Solar se une a la larga lista de denunciantes y ha presentado una nueva demanda de arbitraje a España ante el Ciadi.
Market Research Telecast | 9-Aug-2021
Spanish Solar demands compensation from the Spanish Government for having cut the premiums for the use of energy once the investments have been made.
Capital Monitor | 30-Jul-2021
The Energy Charter Treaty, which gives oil and gas companies a route to suing governments, is increasingly hindering climate policy reform, say campaigners. And it is not the only agreement of its type.
TASS | 30-Jul-2021
The Russian Prosecutor General’s Office stressed that Russia’s well-founded position had made it possible to reject most of requirements made by Yukos Capital.
Bloomberg | 30-Jul-2021
The Permanent Court of Arbitration ruled that Russia illegally expropriated loans provided by Yukos Capital Sarl to its former parent company.
CIAR Global | 20-Jul-2021
La Comisión Europea va a examinar con detenimiento si el laudo del arbitraje del fondo Antin contra España se ajusta a las normas de la Unión Europea en materia de ayudas estatales.
European Commission | 20-Jul-2021
The European Commission has opened an in-depth investigation in order to assess whether an arbitration award, to be paid by Spain in favour of Antin, is in line with EU rules on State aid.
Kluwer Arbitration Blog | 12-Jul-2021
The Dutch Ministry of Economic Affairs initiated “anti-arbitration” proceedings before the German courts to “avert” two ECT-based ICSID arbitrations brought against it by the German energy companies RWE and Uniper.
L’Humanité | 9-Jul-2021
Alors qu’a lieu un nouveau round de négociation pour « moderniser » le Traité sur la charte de l’énergie, 400 organisations de la société civile lancent un ultimatum pour sortir au plus vite de cet accord.

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