ECT Modernisation Project

Published: 01/06/2021 13:05

The Energy Charter Treaty (ECT) is a multilateral treaty that protects investments associated with economic activity in the energy sector. It has more than 50 state signatories from Europe, Central Asia and other regions. The ECT seeks to protect and promote foreign energy investment, free trade in energy products, and freedom of energy transit. Under the ECT, investors can bring international arbitration claims directly against the host state for violation of these protections. Such claims may be brought at the International Centre for the Settlement of Investment Disputes (ICSID), at the Arbitration Institute of the Stockholm Chamber of Commerce, or as ad hoc proceedings under the UNCITRAL Arbitration Rules. To date, more than 130 such claims have been filed by investors.

The ECT is currently undergoing a modernisation process. A main driver of reform is the agreement among a majority of member states that significant revisions are necessary to bring the ECT in line with global energy transition policy and sustainability goals, as defined by the Paris Agreement and other global climate agreements. A widely held view is that certain provisions of the ECT are insufficient for the ECT to facilitate and support the agreed global energy transition.

There has been no comprehensive study assessing how arbitral tribunals have interpreted the ECT and weighed its investor protections against the energy transition policies of host states. The Net Zero Lawyers Alliance has proposed to facilitate such an assessment, for the purpose of informing the ECT modernisation process and supporting focused reform. The project is intended to provide an objective study of ECT arbitral awards, assessing arbitral tribunal findings against energy transition policy. Climate Change Counsel is leading this study of awards rendered in arbitrations under the ECT, assessing their alignment with or departure from energy transition policy, to be completed by COP 26.

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