The Investment Treaty Arbitration Review: Energy Charter Treaty


Despite calls for reform and controversial public debate in the last years surrounding the negotiation of chapters on investment protection in free trade agreements, the practice of investment arbitration continues. It remains a popular means for investors worldwide to seek the protection of their rights under bi- or multilateral investment treaties. This holds especially true for the Energy Charter Treaty (ECT),2 which in 2019 again saw an influx of new cases and remains the international investment agreement most used by investors.3

In the past, the prominence of the ECT could be explained by its geopolitical and economic origin. At times, it protected investors in the highly profitable but also often strictly governed energy sectors, especially after the breakdown of the Soviet Union, when several countries had regained – for the first time in decades – sovereignty over their natural resources.

However, in the past few years, the key factor for the activity surrounding the ECT is its availability for investors in the solar energy sector to challenge the revocation of incentives states had granted to them during the 2000s. The number of cases brought by investors is still expanding, with Spain and Italy still being the most targeted states.4

In 2018, the arbitration world was turned upside down when the Court of Justice of the European Union (CJEU) issued its judgment in Slovak Republic v. Achmea BV.5 The shockwaves of it were still felt in 2019. There are several reasons why the judgment is of particular importance to the ECT. First, it is simply because of the number of intra-EU cases that are brought under the ECT. In 2019, all of the 18 decisions taken by tribunals under the ECT concerned intra-EU disputes. Second, it may be argued that the Achmea judgment is not that surprising in what it explicitly states, but in what it implies. Although the ECT is not mentioned in the judgment, its potential implications on the application of the ECT remain subject to debate. Finally, besides its legal implications, its effect on the investment climate – especially given the created uncertainty by the Achmea judgment – is significant. A number of claims initiated against Spain and Italy after the judgment may have been guided by the awareness of investors to act quickly before the Member States of the European Union start to implement the Achmea judgment, which might also involve changes to the ECT.6

This year's chapter will deal with such possible changes to the ECT in more detail. The reason for this focus is a new dynamic that started in 2019: The Charter Conference has established and mandated a 'Modernisation Group' to start negotiations on the modernisation of the ECT. The process is part of a wider reform discussion on the design of a next generation of investment agreements that is already taking place in forums such as the UNCITRAL Working Group III and frequent UNCTAD conferences. With a view to the ECT, this chapter will shed some light on the legal framework for treaty change and on possible amendments to substantive provisions.


The ECT7 is a multilateral treaty with its inception and origin dating from the early 1990s. The breakdown of the Soviet empire, the fall of the Berlin Wall and the following reunification of Germany led to a general reconfiguration of east–west relations. Russia and its eastern European neighbours' richness of energy resources combined with western Europe's general anxiety to diversify its sources of energy supply led to an initiative by the European Communities to establish a new legal basis of commercial relations in the energy sector.

In 1991, both western and eastern European states signed the European Charter, the political foundation of the ECT and as such a non-binding declaration of principles, including guidelines for the negotiation of a subsequent binding treaty. The result of the ensuing negotiations was the conclusion of the ECT, which was signed in December 1994 and entered into effect in April 1998.8

The following is an overview of the ECT's most pivotal provisions, limiting itself to Article 13 (i.e., the protection against undue and uncompensated expropriation), Article 10(1) (guaranteeing fair and equitable treatment (FET)) and Article 26 of the ECT (i.e., the dispute settlement mechanism under the ECT).

i Protection against direct or indirect expropriation under the ECT

The ECT follows the standard under customary international law and investment treaty practice and does not per se prohibit expropriation – whether it be 'direct', by transfer of legal title, or 'indirect' by measures doing without the transfer of legal title, leading to a substantial loss of control or economic value.9 The ECT recognises a host state's right to expropriate the property of investments made in that state by investors but predicates the lawfulness of the expropriation on the conditions set out in Article 13(1):

Investments of Investors of a Contracting Party in the Area of any other Contracting Party shall not be nationalised, expropriated or subjected to a measure or measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as 'Expropriation') except where such Expropriation is: (a) for a purpose which is in the public interest; (b) not discriminatory; (c) carried out under due process of law; and (d) accompanied by the payment of prompt, adequate and effective compensation.
          Such compensation shall amount to the fair market value of the Investment expropriated at the time immediately before the Expropriation or impending Expropriation became known in such a way as to affect the value of the Investment (hereinafter referred to as the “Valuation Date”).
          Such fair market value shall at the request of the Investor be expressed in a Freely Convertible Currency on the basis of the market rate of exchange existing for that currency on the Valuation Date. Compensation shall also include interest at a commercial rate established on a market basis from the date of Expropriation until the date of payment.

For the purpose of determining a breach of Article 13(1), tribunals will simply try to establish: (1) the transfer of title or a measure having the same effect; (2) whether the transfer was made for a public purpose; (3) whether the transfer was conducted in a non-discriminatory manner; (4) whether the transfer was carried out under due process of law; and (5) whether the transfer was followed by payment of adequate and prompt compensation.

In the context of expropriation, tribunals are inclined to not only take into account the effect of the measure, but also the purpose, the manner and context in which the state acted (the 'police powers doctrine').10

ii Guarantee of FET under the ECT

The FET clause of the ECT can be found in sentence 2 of Article 10(1), which, in its pertinent parts, reads:

Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party.

As a result of the generally broad and unspecific definition of the FET standard, a great range of attempts to define the standard exist. Over the years, jurisprudence made clear that to find the FET standard violated, it is of the greatest importance to assess the specific factual elements of the state's conduct with regard to the investor.

Based on this analysis, tribunals will analyse, inter alia, whether the state acted in accordance with its representations of a stable and predictable business and legal environment.11

As indicated above, any analysis of the FET standard under the ECT is first and foremost based on the facts of the case. There are certain indications on which tribunals place special importance. For example, not every violation of the host state's law is a violation of the FET standard.12 However, changes in the legal framework of the investment have to be communicated and applied in a transparent, non-arbitrary manner and with consistency. Otherwise, the host state's conduct may very well be an infringement of the investor's rights under Article 10(1).

As stated by Dolzer:

Inconsistent conduct by the host state confuses the investor, stands in the way of proper planning, and is not conductive to an investment-friendly climate. Not surprisingly, arbitral tribunals have confirmed that inconsistency of conduct by the host state, as regards the investor's obligations, is not compatible with the requirement of FET.13

Prominently featuring in the discussions on investment arbitration, the issue at heart is the host state's 'right to regulate'. The jurisprudence on the ECT has not developed consistent case law in dealing with this matter. Rather, the decisions may be divided into two categories.

A narrower approach demands that expectations must be based on clear and concrete assurances from the host state expressed in direct communication aimed at the investor regarding the specific business or relationship.

The more flexible approach only requires the investor to prove that it identified a basis for its expectations in generally applicable laws – namely the legal and regulatory framework that existed at the time of making the investment.

When balancing investor rights and the host state's right to regulate, tribunals will, however, accord to states a right to change policies over time.14

As stated by Dolzer:

Consistency may not be required under circumstances in which the host state had convincing reason to change course. As regards its legislative power, the host state will, in principle, have the right to pursue its interests in the light of the new circumstances, but not ignore the interests of the investor who had earlier adjusted his conduct to the previous course required by the host state. The power to regulate operates within the limits of rights conferred upon the investor. Correspondingly, it will have to be assumed that the reversing of a position in a dramatic manner with serious negative effects upon the investor will be consistent with FET only in the presence of serious exceptional reasons, compelling the host state to reverse its previous decision and to require the investor to re-adapt its business.15

As stated by Patrizia et al:

While the existing arbitral decisions on claims asserted under the ECT do not provide clear guidance, arbitral decisions applying other investment treaties indicate that tribunals will examine the specific circumstances of each case when considering whether the investor's expectations were reasonable under the FET standard. The tribunals . . . will likely consider, on a case-by-case basis, the conduct of the state as a whole, including whether the state made any specific assurances to investors and the reason for, and form of, the changes in legal framework, as well as any other circumstances surrounding the investment.16

iii Dispute settlement under the ECT

The dispute settlement mechanism of the ECT is enshrined in its Article 26(1), which sets out that disputes between 'a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former' shall be resolved amicably. If an amicable resolution of the dispute cannot be reached within three months, the investor is entitled to submit the dispute to either the national courts or administrative tribunals of the contracting party, the forum previously agreed by the parties or international arbitration. Should the investor choose to submit the dispute to arbitration, the investor will face the decision of whether it wants the case to be administered under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention),17 ad hoc arbitration under the UNCITRAL Arbitration Rules or arbitral proceedings under the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).

iv The provisional application of the ECT

Because of its immediate implications in practice, it is worth taking a look at Article 45(1) of the ECT regulating the treaty's provisional application. Article 45(1) reads: 'Each signatory agrees to apply this Treaty provisionally pending its entry into force for such signatory in accordance with Article 44, to the extent that such provisional application is not inconsistent with its constitution, laws or regulations.'

The following paragraphs of Article 45 set out the regulatory framework for a declaration to not apply the Treaty provisionally (Article 45(2)) or to terminate the provisional application once a state has subjected itself to it (Article 45(3)). Article 45 follows the international standard of multilateral treaties and economic-related treaties of being applied provisionally, while containing quite elaborate language. Indeed, when comparing Article 25 of the Vienna Convention on the Law of Treaties (VCLT) with Article 45 of the ECT, the sophisticated wording of the latter is striking.

v The ECT's tax carve-out

One of the ECT's provisions that features heavily in solar claims as well as other proceedings is the tax carve-out. Article 21(1) of the ECT provides that: 'Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties'. Therefore, the provision effectively seeks to carve out measures relating to tax from the ECT's investor protection regime.

However, Article 21(5) of the ECT stipulates that Article 13, protection against unlawful expropriation, still applies to taxes. In this case, a special regime applies. Article 21(5) of the ECT requires the investor to refer the issue of whether the tax amounts to an expropriation or is discriminatory to the competent tax authority of the host state.

Tribunals are split over the question of whether this stipulates a compulsory requirement for the investor to fulfil before initiating arbitral proceedings. In Plama v. Bulgaria, the tribunal ruled that it was, in fact, a compulsory requirement.18 The tribunal in Yukos et al. v. Russia came to the opposite conclusion for cases where referral to relevant authorities would be an exercise in futility.19 In addition, Article 21(1) of the ECT does not apply, according to the Yukos et al. v. Russia tribunal, if the alleged action does not constitute a bona fide exercise of a state's regulatory powers.20


The table below contains decisions of arbitral tribunals that emerged during 2019 and up to the time of writing.21 All of the 18 decisions rendered in 2019 concern intra-EU disputes. In no case has the intra-EU objection based on the Achmea judgment been raised successfully.

NameDate of the award or decisionCase No.
CEF Energia BV v. Italian RepublicAward, 16 January 2019SCC Case No. 158/2015
Infrastructure Services Luxembourg S.à.r.l. and Energia Termosolar B.V. (formerly Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V.) v. Kingdom of SpainDecision on Rectification of the Award, 29 January 2019ICSID Case No. ARB/13/31
Landesbank Baden-Württemberg, HSH Nordbank AG, Landesbank Hessen-Thüringen Girozentrale and Norddeutsche Landesbank-GirozentraleDecision on an Objection to Jurisdiction, 25 February 2019ICSID Case No. ARB/15/45
Vattenfall AB et al. v. GermanyDecision on Proposal to Disqualify Members of the Tribunal, 6 March 2019ICSID Case No. ARB/12/12
EVN AG v. Republic of BulgariaAward and Dissenting Opinion by Daniel M Price, 10 April 2019ICSID Case No. ARB/13/17
Eskosol S.p.A. in liquidazione v. Italian RepublicDecision on Termination Request and Intra-EU Objection, 7 May 2019ICSID Case No. ARB/15/50
WA Investments Europa Nova Ltd. v. Czech RepublicAward, 15 May 2019PCA Case No. 2014-19
Voltaic Network GmbH v. Czech RepublicAward, 15 May 2019PCA Case No. 2014-20
Photovoltaic Knopf Betriebs GMBH v. Czech RepublicAward, 15 May 2019PCA Case No. 2014-21
I.C.W. Europe Investments Limited v. Czech RepublicAward, 15 May 2019PCA Case No. 2014-22
NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of SpainDecision on Jurisdiction, Liability and Quantum Principles, 12 March 2019ICSID Case No. ARB/14/11
NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of SpainFinal Award, 31 May 2019ICSID Case No. ARB/14/11
9REN Holding S.a.r.l v. Kingdom of SpainAward, 31 May 2019ICSID Case No. ARB/15/15
Cube Infrastructure Fund SICAV and others v. Kingdom of SpainFinal Award, 26 June 2019ICSID Case No. ARB/15/20
Rockhopper Italia S.p.A., Rockhopper Mediterranean Ltd, and Rockhopper Exploration Plc v. Italian RepublicDecision on the Intra-EU Jurisdictional Objection, 29 June 2019ICSID Case No. ARB/17/14
SolEs Badajoz GmbH v. Kingdom of SpainAward, 31 July 2019ICSID Case No. ARB/15/38
Infrastructure Services Luxembourg S.à.r.l. and Energia Termosolar B.V. (formerly Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V.) v. Kingdom of SpainDecision on the Continuation of the Provisional Stay of Enforcement of the Award, 21 October 2019ICSID Case No. ARB/13/31
RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of SpainAward, 11 December 2019ICSID Case No. ARB/13/30
The PV Investors v. Kingdom of SpainFinal Award, 28 February 2020 Concurring and Dissenting Opinion of Charles N Brower, 28 February 2020PCA Case No. 2012-14


The following is a closer look at the impact of the Achmea judgment on the ECT. As almost all awards dealt with this issue, the analysis will, instead of looking at each case individually, provide an overview of the general notions that the tribunals applied in 2019 to assess the potential impact of Achmea.

i The intra-EU objection and the CJEU's Achmea judgment

In 2008, the Dutch insurance company Achmea BV (formerly known as Eureko BV) commenced an arbitration against the Slovak Republic under the Dutch–Slovakian bilateral investment treaty (BIT) claiming compensation based on the state's repeal of the liberalisation of its healthcare market.22 In its 2012 award, the tribunal constituted under the UNCITRAL rules found the state in breach of the FET standard and awarded Achmea damages in the amount of €22.1 million.23 Slovakia decided to bring set-aside proceedings before the Higher District Court of Frankfurt of Main, Germany, the court of the seat of the arbitration. The Higher District Court rejected all of Slovakia's arguments, which had, inter alia, argued that the tribunal lacked jurisdiction over the dispute because the BIT's arbitration clause was incompatible with EU law.24

On appeal, the German Federal Court of Justice made use of its power under Article 267 of the Treaty on the Functioning of the European Union (TFEU) and referred several questions to the CJEU, including the question on the compatibility of the ECT's arbitration clause with EU law.25

The starting point for the CJEU's judgment is its understanding of the primacy and uniform application of EU law, which Member States, including their domestic courts, are obliged to enforce. Member State courts, especially, as noted by the CJEU, are given the opportunity through Article 267 of the TFEU to resolve potential conflicts between national and EU law by referring questions in cases before them to the CJEU.

The CJEU then went on to find that an arbitral tribunal constituted under a BIT might have to rule on matters of EU law where, based on the text of the BIT, it must apply the law of the respondent state, which automatically also includes EU law. A potential safeguard against possible divergent judgments and awards was supported by Advocate General Wathelet in his opinion. He stated that the arbitral tribunal enjoyed the power of requesting a ruling from the CJEU on referred questions, as the arbitral tribunal constituted a 'court or tribunal of a Member State' pursuant to Article 267 of the TFEU.

The CJEU departed from these considerations of its Advocate General and held that an arbitral tribunal constituted under the BIT is outside of the jurisdiction of the European Union and its Member States, this being the reason for the existence of the arbitration clause in a BIT in the first place. Accordingly, it is not open for arbitral tribunals constituted under BITs to call on the CJEU to have contentious issues of EU law resolved.

In a next step, the CJEU examined the award, which it found to be final and only subject to a very limited review by the courts of the Member States. The CJEU found that by virtue of concluding the BIT, the Member States established a regime that effectively prevents 'disputes from being resolved in a manner that ensures the full effectiveness of EU law'.26 The violation of the principle of the effectiveness of EU law then leads to the CJEU's final ruling 'that Articles 267 and 344 TFEU must be interpreted as precluding' a dispute settlement clause in an intra-EU BIT.27 This means, in practice, that a valid arbitration agreement between a Member State of the European Union and an investor of another EU Member State cannot be concluded. The lack of a valid arbitration agreement is one of the limited grounds under the New York Convention, and most national arbitration laws, on which an award may be set aside or refused recognition and enforcement.28

The referring court, the German Federal Court of Justice, set aside the Achmea award. Thereby, the German Federal Court of Justice followed the decision by the CJEU in substance and rejected any arguments presented by the investors as to why the CJEU's Achmea judgment would not lead to an annulment of the award.29

ii Dismissal of objections to jurisdiction in recent ECT decisions

In 2019, arbitral tribunals constituted under the ECT have continued to dismiss all objections to jurisdiction raised in different intra-EU cases.

In the past, the European Commission and Member States argued that the ECT's investment protection regime does not apply to inter-EU proceedings. The crux of this issue lies in the wording of Article 26 of the ECT. Member States on the receiving end of intra-EU arbitrations argued that intra-EU proceedings are 'disconnected' from the ECT's scope because of an implicit disconnection clause, incorporated in the ECT through the 2007 EU Lisbon Treaty, which modified EU Member States rights and obligations, and removed intra-EU disputes from the scope of Article 26 of the ECT.30 The Lisbon Treaty qualifies, according to their argument, as a 'successive treat[y] relating to the same subject-matter' pursuant to Article 30 of the VCLT. Under this article, such a modification is possible if the earlier treaty provides that 'it is subject to, or that it is not to be considered as incompatible with, [a] later treaty'.

The European Commission, which appears as amicus curiae in almost all intra-EU disputes, further argues that it was not the European Union or its Member States' intention to create obligations between the Member States, as they acted throughout the negotiations of the ECT as one block with the Commission as their voice.31

A second line of argument advanced by the European Commission highlights certain provisions of the ECT, which, according the European Commission, show that the ECT acknowledges that EU Member States never offered to arbitrate with investors from another EU Member State.32 One of the requirements for an investor to submit a dispute to arbitration according to Article 26(1) of the ECT is that it made an investment in the area of another contracting party. Pursuant to Article 1(10) of the ECT, 'area' is defined as the territory of a state or as 'the areas of the member states of a [Regional Economic Integration Organisation]'. The European Commission argued that an investment made by an investor from an EU Member State on the territory of another EU Member State is made within the same area, meaning the area of the European Union as a Regional Economic Integration Organisation.33 The Commission also takes the view that 'EU law forms part of the “applicable rules and principles of international law” under Article 26(6) ECT, and the “relevant rules of international law applicable in the relations between the parties” pursuant to Article 31(3)(c) VCLT'.34 As such, EU law is part of the applicable law determinative for assessing the validity of an arbitration. Adherence to 'systemic coherence' and the principle of autonomy of EU law requires an interpretation avoiding any conflict with EU law, which 'leads to the conclusion that there is no offer to arbitrate'.35

On 15 January 2019, the Member States of the European Union issued a political declaration in which the consequences of the Achmea judgment were discussed. Exposing divergences among the Member States, two additional declarations (one by Finland, Luxembourg, Malta, Slovenia and Sweden, and another by Hungary) were issued because of different positions regarding the impact of the Achmea judgment on the ECT.36

The arguments and the declarations mentioned above have so far not succeeded to convince arbitral tribunals since the Achmea judgment has been delivered. The starting point for tribunals is an interpretation of Article 26 of the ECT pursuant to Article 31(1) of the VCLT, which provides that treaties 'shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose'. As the plain wording of Article 26 of the ECT does not include a qualification of any kind with regard to intra-EU arbitrations – and circumstances and context of the ECT do not suggest otherwise – tribunals conclude that the ECT continues to apply to intra-EU arbitrations.37

Also, the argument that an investment has been made in the same area has been quickly dealt with by tribunals. In Landesbank Baden-Württemberg et al. v. Spain, the tribunal referenced the decision in Foresight38 where the tribunal found that the term 'in the area' in Article 26(1) of the ECT must be seen in light of the specific dispute.39 If an investor chooses to initiate arbitration proceedings against an EU Member State and not the European Union, 'the area' referenced in Article 26(1) of the ECT means the territory of that particular Member State.

Taking into account the specific circumstances of the Achmea judgment, tribunals found throughout 2019 that the CJEU carefully limited its ruling to BITs concluded between EU Member States, and left it open for investors to initiate arbitral proceedings under other international instruments that are not solely intra-EU BITs. There are indeed significant differences between an intra-EU BIT and the ECT. The former is concluded between two EU Member States, while the latter is signed by the European Union, its Member States and 25 other countries that are not Member States of the European Union.40 This distinction was made by Advocate General Wathelet in his opinion predating the CJEU's Achmea judgment and not rejected by the CJEU in its judgment.41

Furthermore, tribunals in Landesbank Baden-Württemberg et al. v. Spain and in SolEs Badajoz GmbH v. Spain emphasised that even if EU law prohibited Spain from making an offer to arbitrate, such a prohibition would not take priority over the ECT because of Article 16 of the Treaty.42 In case of conflict, Article 16 of the ECT produces a prevailing effect of such rules that are more favourable to the investor. In addition, Article 16 is an express collision clause and thus constitutions lex specialis in relation to other general conflict rules as the lex posterior principle in Article 30 VCLT.43

Since January 2019, respondents also referred to the declaration of 22 Member States of the EU on the legal consequences of the Achmea judgment to support their objections to jurisdiction. Yet, tribunals have so far not followed the argument, mainly for two reasons. First, the declaration has not been signed by all Member States leading tribunals to the conclusion that it does not establish a subsequent agreement within the meaning of Article 31 (3)(b) VCLT.44 According to the tribunal in LBBW, the declaration was 'too fragile a foundation on which to construct an agreement between the ECT Contracting States that Article 26 means something radically different from what it appears to say'.45 Second, the declaration itself distinguishes between bilateral agreements and intra-EU claims under the ECT by stating 'Member States together with the Commission will discuss without undue delay whether any additional steps are necessary to draw all the consequences from the Achmea judgment in relation to the intra-EU application of the Energy Charter Treaty'. Finally, the tribunal in Rockhopper found that the declaration could not be viewed as a declaration of interpretation in the sense of general international law because the effect would be that of a treaty change.46 It is to the topic of treaty change that the chapter will now turn – in the light of a different development: The modernisation process of the ECT.


Calls for reform of traditional dispute mechanisms as well as demands for renegotiation of substantive provisions in international investment agreements have been voiced for some time. As a result, a general reform discussion on the design of a next generation of investment agreements is taking place in forums as the UNCITRAL Working Group III and frequent UNCTAD conferences.47 With its decision of 9 November 2019, the Energy Charter Conference has now turned to another chapter in the reform discussion. It establishes and mandates a 'Modernisation Group' to start negotiations on the modernisation of the Energy Charter Treaty. The negotiations will take into account already identified topics and suggested policy options issued earlier in 2019 and 2018.48

Suggested policy options include almost all core provisions of the ECT such as the definition of 'Investment' and 'Investor', the FET clause, the MFN clause and the notion of 'indirect investment'. Proposals also touch on new provisions dealing with questions as security for costs, third-party funding, transparency and sustainable development. The comments to different policy options given by the parties to the ECT show widespread agreement on some topics while there also seem to be visible divergence on others.49 For example, there has been substantial agreement that the MFN clause should not extend to dispute settlement provisions and also include for MFN obligations to apply only to investors in 'like circumstances' or 'like situations'. Similarly, most comments agree on the inclusion of a clause requiring investments to be made in accordance with host state law. Little agreement could, however, be found on what a modernisation of the FET clause could look like. The EU and Turkey favoured a closed list of specific FET obligations – as in recent EU investment treaties. By contrast, Switzerland wanted an open-ended list, while Azerbaijan proposed only that a list of actions breaching FET should be included, without clarifying whether this was inclusive or exclusive. A connection between FET and the international minimum standard of treatment of foreigners under customary international law was supported by Azerbaijan and Georgia. Azerbaijan added that the definition should clarify that a violation of other clauses was not a violation of FET. Meanwhile, five of the eight submissions (Albania, the EU, Georgia, Switzerland and Turkey) clarified their view that the full protection and security obligation covered only the physical security of investors and investments.

Interestingly, only the EU and its Member States have so far commented on possible changes to the investor–state dispute mechanism in Article 26 of the ECT. The EU highlighted that it strives to ensure that its ongoing multilateral reforms of investor–state dispute settlement, such as those within the UNCITRAL Working Group III and ICSID, will be applied to the ECT. This includes the ambition that a future Multilateral Investment Court applies to the ECT.50

With a view to the technical frame for treaty change, one has to recall the multilateral nature of the ECT. Amendments to the ECT have to follow the procedure set out in Article 42 of the ECT. Pursuant to this Article, proposed amendments must be adopted by the Charter Conference and even if the amendment is adopted by the Charter Conference, it cannot come into effect (between parties having ratified the amendment) until it has been ratified by at least three-quarters of the ECT Member States.

The Conference Decision of October 2019 includes a provisional timetable that plans for quarterly negotiation rounds to take stock of the progress at the end of 2020. This schedule might, however, be delayed taking into account the latest developments and necessary efforts in combating the coronavirus in 2020.


The cases discussed above from 2019 exemplify the importance of investment arbitration between EU Member States under the ECT. From the outset of 2018, it was to be expected that the European Union and its Member States will spend much of 2019 dealing with issues between themselves, issues that were already clearly identified in the three different notes issued by EU Member States in January 2019, which differ as to the application of the judgment to the ECT.51 At the same time, it is remarkable that awards against eastern European and central Asian countries remain a rarity nowadays. That may be, inter alia, explained by the fact that the Ukrainian–Russian crisis, which resulted in a couple of arbitrations, falls outside of the scope of the ECT.

The intra-EU objections might lead to attempts by the European Union to modify, reform or renew the ECT as is already evidenced by the Council's mandate given to the European Commission on 15 July 2019. The undertaking of modernising the ECT is, however, not only of interest to the EU Member States. The modernisation process of the Treaty is now in full swing with several parties from different regions of the world having commented on proposed treaty changes. It remains to be seen how concrete the next proposals and comments during the year will become and how close this will lead the ECT parties to a possible adoption by the Charter Conference in 2021.


The 2019 arbitral decisions surrounding the ECT mainly concerned the western European community. In the upcoming year, renewable energy cases will most likely continue to play an important role in investment arbitration under the ECT. Before that backdrop, it can be expected that it will still take some time for the European Union and its Member States to identify common ground regarding the implications of the Achmea judgment with respect to the ECT.

However, it should not be overlooked that the ECT's signatories are not only western European states, but also many capital-importing countries in eastern Europe and central Asia. With China's belt and road initiative now well underway and the commencement of construction of the Nord Stream II project, the focus might again shift east. Not least because of the dozens of treaty claims pending against western European states, being a politically contested subject, the ECT will therefore remain an important legal instrument of investment protection in the years to come.


1 Patricia Nacimiento is the co-head of the German dispute resolution team at Herbert Smith Freehills LLP.

3 See UNCTAD overview of investment arbitration cases filed, Investors filed a total of three new cases under the ECT in 2019, see­all-investment-dispute-settlement-cases.

4 See footnote 3. Spain was hit with an additional four arbitrations under the ECT in 2018 and a further one in 2019, while other claims were filed against Italy.

5 Slovak Republic v. Achmea B.V., Judgment of the CJEU, 6 March 2018, Case C-284/16, ECLI:EU:C:2018:158.

6 Compare the declaration by 22 of the 28 Member States regarding the implementation of the Achmea judgment.

7 For literature on the ECT, see also: S Jagusch, A Sinclair and P Devenish, 'The Energy Charter Treaty: The Range of Disputes and Decisions', Global Arbitration Review: The Guide to Energy Arbitrations (general editor J William Rowley QC, editors D Bishop and G Kaiser, 2015) pages 30–45.

8 As at the time of writing, 52 states have signed the Energy Charter Treaty. All EU Member States are individual signatories, but the Treaty has also been signed collectively by the European Union and Euratom bringing the total number of parties to the Treaty to 54, although five of these states have not ratified the Treaty yet. Belarus expressly applies the Treaty provisionally.

9 See, C Schreuer, 'The Concept of Expropriation under the ECT: Essays in Honour of Christian Tomuschat', 2006, pages 115, 144.

10 Saluka Investments BV v. The Czech Republic, Permanent Court of Arbitration, Partial Award, 17 March 2006. However, the ECT itself is silent on the question of whether requirements other than those listed in Article 13(1) are to be included in a tribunal's analysis.

11 Schreuer, footnote 14.

12 ibid.

13 R Dolzer, 'Fair and Equitable Treatment: Today's Contours', 12 Santa Clara J Int'l Law 7, 2014.

14 See, for example, Saluka Investments BV v. Czech Republic, Permanent Court of Arbitration, Partial Award, 17 March 2006; as well as C A Patrizia, J R Profalzer, S W Cooper and I V Timofeyev, 'Investment Disputes Involving the Renewable Energy Industry Under the Energy Charter Treaty', Global Arbitration Review: The Guide to Energy Arbitrations (general editor J William Rowley QC, editors D Bishop and G Kaiser, 2015) footnotes 32, 33.

15 Footnote 18.

16 Patrizia et al., op. cit., footnote 15, pages 78–79.

17 If one but not both of the host state and investor's state have not ratified the ICSID Convention, the investor may elect arbitration under the ICSID Additional Facility Rules.

18 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, para. 266.

19 Yukos Universial (Isle of Man) et al. v. Russian Federation, PCA Case No. AA 228, Final Award, 18 July 2014, para. 1422 et seq.

20 id., para. 1407.

22 Achmea B.V. v. The Slovak Republic, UNCITRAL, PCA Case No. 2008-13 (formerly Eureko B.V. v. The Slovak Republic), Award, 7 December 2012.

23 id., paras 283 and 352.

24 Judgment of the Higher Regional Court of Frankfurt (German), 18 December 2014, paras 33, 50–57.

25 Decision of the German Court of Justice, 3 March 2016.

26 id., para. 56.

27 id., para. 60.

28 See, New York Convention, Article 1(a): 'the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.'

29 Para. 14 Achmea argued, inter alia, that Slovakia was barred from invoking the invalidity of the arbitration agreement according to the principle of good faith enshrined in Section 242 of the German Civil Code.

30 Greentech Energy Systems A/S, et al v. Italian Republic, SCC Case No. V 2015/095, Award, 23 December 2018, para. 265.

31 id., para. 283.

32 id., para. 279.

33 id., para. 280.

34 Vattenfall AB et al. v. Germany, ICSID Case No ARB/12/12, Decision on the Achmea Issue, 18 August 2018, para. 81.

35 id., para. 83.

36 The separate declaration issued, inter alia, by Sweden is of particular relevance to the ECT, as Sweden, diverging from the majority of Member States, will not direct its state-owned companies to end any commenced arbitration. Thus, the Vattenfall AB et al. v. Germany arbitration will not be affected.

37 Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on an Objection to Jurisdiction, 25 February 2019, para. 117; Rockhopper Italia S.p.A. et al. v. Italian Republic, ICSID Case No. ARB/17/14, Decision on the Intra-EU Jurisdictional Objection, 29 June 2019, para. 146; SolEs Badajoz GmbH v. Kingdom of Spain, ICSID Case No. ARB/15/38, Award, 31 July 2019, para. 237.

38 Foresight Luxembourg Solar 1 S. Á.R1. et al. v. Kingdom of Spain, SCC Case No. 2015/150, Final Award, 14 November 2018, para. 211.

39 Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on an Objection to Jurisdiction, 25 February 2019, paras. 96, 124–127. See also, Vattenfall AB et al. v. Germany, ICSID Case No ARB/12/12, Decision on the Achmea Issue, 18 August 2018, para. 179 et seq.

40 Greentech Energy Systems A/S, et al v. Italian Republic, SCC Case No. V 2015/095, Award, 23 December 2018, para. 398.

41 Slovak Republic v. Achmea B.V., Case C-284/16, Judgment of 6 March 2018, para. 58

42 Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on an Objection to Jurisdiction, 25 February 2019, paras. 177, 183; SolEs Badajoz GmbH v. Kingdom of Spain, ICSID Case No. ARB/15/38, Award, 31 July 2019, para. 250.

43 Vattenfall AB et al. v. Germany, ICSID Case No ARB/12/12, Decision on the Achmea Issue, 18 August 2018, para. 217.

44 The PV Investors v. Kingdom of Spain, PCA Case No. 2012-14, Final Award, 28 February 2020, para. 549; Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on an Objection to Jurisdiction, 25 February 2019, para. 166

45 Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on an Objection to Jurisdiction, 25 February 2019, para. 166.

46 Rockhopper Italia S.p.A. et al. v. Italian Republic, ICSID Case No. ARB/17/14, Decision on the Intra-EU Jurisdictional Objection, 29 June 2019, para. 195.

47 See the latest Report of the UNCITRAL Working Group III (Investor-State Dispute Settlement Reform), 28 January 2020, A/CN.9/1004/Add.1.

48 ECT Secretariat, Decision of the Energy Charter Conference, 6 October 2019, CCDEC 2019 08 STR; Decision of the Energy Charter Conference, 27 November 2018, CCDEC 2018 18 STR.

49 See the comments by the ECT-Parties in ECT Secretariat, Decision of the Energy Charter Conference, 6 October 2019, CCDEC 2019 08 STR.

50 Council of the European Union, Negotiating Directives for the Modernisation of the Energy Charter Treaty, 15 July 2019, 10745/19.

51 Compare footnotes 6 and 36.

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