After a lengthy negotiation process, Contracting Parties at the June 24 meeting of the Energy Charter Conference reached an agreement in principle to modernize the Energy Charter Treaty (ECT)—an outdated investment treaty that protects fossil fuel investors at the expense of critical climate action.
This article argues that the success of efforts to modernize the ECT and prevent the treaty from impeding efforts to transition to clean energy sources will fail unless states participating in the process widen their focus to other IIAs to which they are part.
From March 1 to 4, 2022, the contracting parties of the ECT met for their 11th round of negotiations for a possible reform of the treaty. The meeting was overshadowed by rising energy prices and the Russian invasion of Ukraine, which is likely to have significant consequences for the European energy market.
This article provides an initial assessment of the ECT-based arbitration risk flowing from the COP 26 pledges due to their impact on fossil fuel investments in ECT contracting parties. It further estimates how these impacts could translate into investor–state arbitration claims based on past and ongoing cases in the energy sector.
BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Spain, ICSID Case No. ARB/15/16
Since our last report, two more negotiation rounds have taken place on ECT modernization. The seventh round took place from October 28–November 1, 2021, while the eighth round was held from November 9–11, 2021.
Of all fossil fuels, coal has the greatest climate impact. However, sovereign decisions to phase out coal inevitably affect the investment of coal power plant operators, frequently leading to disputes concerning compensation for lost profits.
This article assesses the degree to which the Energy Charter Treaty can be thought of as a tool to protect renewable energy, and thus aid in energy transition, by analyzing data on ECT-based ISDS cases related to renewable energy investments. The article concludes that proponents of the ECT overstate its potential to have a positive role in the transition to renewable energy.
Since we last reported on the process, there have been two virtual negotiation rounds on ECT modernization, taking place in the midst of increased civil society opposition to the agreement, particularly within the EU.
The Energy Charter Treaty (ECT) faces criticism for its outdated investment provisions and the threats it poses to the energy transition. This article examines one option for states to solve this problem—withdrawal from the treaty—and what this could mean for the EU and its member states, along with its impact on the energy transition in general.
As we reported, German-owned energy company Uniper put the Netherlands on notice of an investment dispute last year, following the announcement of the country’s plan to phase out coal-burning power plants by 2030. Alongside RWE, another German energy company, Uniper made good on that threat earlier this year; both companies initiated ICSID claims lodged under the ECT this spring.
The relationship between the ECT and EU law is characterized by complexity and legal uncertainty, especially as far Article 26, the ECT’s dispute settlement mechanism and its application in an intra-EU setting is concerned. This article examines the question of whether the Achmea judgment’s finding on the incompatibility of intra-EU investment arbitration under BITs also affects the dispute settlement mechanism under the ECT
Following three negotiation rounds on ECT modernization last year, the most recent of which concluded on November 6, 2020, a leaked progress report from December 2020 suggests that state parties are still divided on key issues. This makes progress in negotiations, which require consensus from the national delegations, difficult to come by.
On December 2, 2020, in an answer to questions submitted by MEPs, the EC suggested that the EU could exit the ECT.
The European Council has approved negotiating directives for the EU’s participation in talks to modernize the ECT, confirming its decision during a meeting on July 2, 2019.
REN Holding S.À.R.L. v. The Kingdom of Spain, ICSID Case No. ARB/15/15
NextEra Energy Global Holdings B.V and NextEra Energy Spain Holdings B.V v. Kingdom of Spain, ICSID Case No. ARB/14/11
CEF Energia B.V. v. The Italian Republic, SCC Arbitration V (2015/158)