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

The Lever | 9-Jun-2022
Oil and gas investors are using investor-state dispute settlement to successfully argue that climate policies are cutting into their profits.
Bon Pote | 8-Jun-2022
Le traité sur la Charte de l’énergie est un accord multilatéral qui permet aux investisseurs étrangers d’exiger jusqu’à plusieurs milliards d’euros des Etats en compensation de l’impact négatif de changements de législation.
CIAR Global | 7-Jun-2022
En un Amicus Brief presentado por la Comisión Europea el 31 de mayo ante un tribunal estadounidense, el órgano europeo argumenta que el laudo dictado contra España viola la legislación de los 27.
Global Justice Now | 23-May-2022
UK government urged to exit controversial Energy Charter Treaty, dubbed ‘the fossil fuel industry’s secret weapon’.
Ecologistas en Acción | 20-May-2022
Amigos de la Tierra, Ecologistas en Acción, Greenpeace, SEO/BirdLife y WWF han enviado una carta al Gobierno español pidiendo el abandono inmediato del Tratado de la Carta de la Energía.
Salisbury Journal | 19-May-2022
Protestors will be gathering to march to the Rockhopper Exploration headquarters. The company is suing the Italian government for £236 million due to its refusal to allow oil drilling off the Adriatic Coast.
Brig Newspaper | 19-May-2022
Global Justice Stirling is holding a rally against corporate courts in front of Buchanan Galleries in Glasgow.
Euractiv | 18-May-2022
Davantage d’États membres de l’Union européenne ont manifesté leur impatience à l’égard de la réforme en cours du Traité sur la Charte de l’énergie qui entrave les efforts visant à éliminer les combustibles fossiles.
Euractiv | 17-May-2022
More European Union countries have shown signs of impatience with the ongoing reform of the Energy Charter Treaty, which critics say impedes efforts to phase out fossil fuels, according to leaked diplomatic cables.
The Guardian | 17-May-2022
One of the biggest barriers will be the legal infrastructure that oil and gas companies and some coal companies have constructed to defend their investments, through treaties like the energy charter treaty.

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