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

Swiss Info | 18-Jul-2024
The European Union will withdraw from the Energy Charter Treaty, an international agreement that protects investments in coal and oil. But Switzerland is sticking to the agreement which scientists considered incompatible with climate goals.
CIAR Global | 11-Jul-2024
Un tribunal de Bélgica ha autorizado el embargo de 32 millones de euros de contra la agencia española de navegación aérea ENAIRE hacia el pago del laudo del fondo Infrared, producto de los arbitrajes originados por las reclamaciones de compañías inversoras en España contra las reformas de las energías renovables.
European Commission | 2-Jul-2024
The EU has taken the final step to exit the Energy Charter Treaty; the Union and its Member States have also reached a formal agreement to put an end to the continuation of intra-EU arbitration proceedings under the ECT.
Lexology | 14-Jun-2024
Two recent decisions by the Swiss Federal Tribunal and the US Court of Appeal for the District of Columbia Circuit confirmed that international law does not offer arguments to contest either arbitral jurisdiction or the validity of arbitral awards in intra-EU investment cases.
El Salto | 30-May-2024
La salida del TCE se erige como un faro de esperanza y un testimonio del poder de nuestro activismo colectivo para moldear un mañana mejor.
Reuters | 29-May-2024
Australian mining group Berkeley Energia filed a request for an arbitration to seek $1 billion in damages from the Spanish government after it refused to give final approval for its uranium mine project.
Zone Bourse | 29-May-2024
Le groupe minier australien Berkeley Energia a déposé une demande d’arbitrage pour réclamer un milliard de dollars de dommages et intérêts au gouvernement espagnol, qui a refusé de donner son approbation finale à son projet de mine d’uranium.
CIAR Global | 27-May-2024
La Abogacía General del Estado española ha presentado la solicitud de anulación del laudo del arbitraje entre España y la energética alemana E.ON a la que un tribunal del Centro Internacional de Arreglo de Diferencias relativas a Inversiones (CIADI) dio la razón y concedió una indemnización que ronda los 300 millones de euros.
The Conversation | 27-May-2024
Peu connu du grand public, le Traité sur la charte de l’énergie (TCE) protège les investissements étrangers dans le domaine de l’énergie des pays signataires… mais sans distinguer les fossiles des renouvelables.
CIAR Global | 16-May-2024
El 14 de mayo de 2024, el Boletín Oficial del Estado (BOE) español publicó la denuncia de España del Tratado de la Carta de la Energía (TCE) y del Protocolo de la Carta de la Energía sobre la eficacia energética y los aspectos medioambientales relacionados.