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

Energy Charter | 25-Nov-2022
The conference expects to meet ad hoc in April 2023 to finalise the discussion on the adoption of the amendments to the ECT.
Reporterre | 25-Nov-2022
Le Traité sur la charte de l’énergie a du plomb dans l’aile. Le Parlement européen a voté une résolution demandant un retrait coordonné et conjoint de l’Union européenne du traité.
Client Earth | 25-Nov-2022
The European Parliament has adopted a resolution calling on the European Commission to initiate the process toward a coordinated exit of the EU from the Energy Charter Treaty.
Actu-environnement | 24-Nov-2022
La Conférence de la charte de l’énergie prévoit de se réunir ad hoc en avril 2023 pour finaliser la discussion sur l’adoption des amendements au TCE.
CIAR Global | 22-Nov-2022
La minera Berkeley ha presentado al Gobierno de España la notificación de disputa de inversión, el primer paso que activa las negociaciones antes de la presentación formal de un arbitraje internacional que invoca el incumplimiento del Tratado de la Carta de la Energía (TCE).
Le Progrès | 22-Nov-2022
Un projet pour sa modernisation devait être validé, mais les États membres de l’Union européenne n’arrivent pas à se mettre d’accord.
BX1 | 22-Nov-2022
Les coupoles d’ONG CNCD et le 11.11.11 ont mené jeudi midi une nouvelle action pour appeler le gouvernement fédéral à sortir du Traité sur la Charte de l’Énergie.
Market Watch | 21-Nov-2022
La minera australiana dice que espera unas "rápidas negociaciones" pero abre la puerta a un litigio internacional contra España.
Euractiv | 21-Nov-2022
The European Commission will ask to remove the modernisation of the Energy Charter Treaty from the agenda of an ECT summit on Tuesday 22 November after EU countries failed to reach a majority in favour of reforming the charter.
L’Essentiel | 21-Nov-2022
Ce traité permet à des entreprises de réclamer des dédommagements à un État dont les décisions et l’environnement réglementaire affectent la rentabilité de leurs investissements.

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