Category: Investment law

The UK’s Withdrawal from the Energy Charter Treaty Poses Risks for Energy Affordability and Security

By Professor David Collins, The City Law School

Scarcely covered by the mainstream media, this Thursday (22 Feb 2024) the UK announced the withdrawal from the controversial Energy Charter Treaty (ECT), following nine EU Member States, including G7 countries France, Germany and Italy.

Entering into force in 1998 and signed by the UK in 1994, the ECT is an international investment agreement (IIA) designed to encourage foreign direct investment in the energy sector by providing protection to foreign investors against excessive governmental interference, such as expropriation or the denial of justice in administrative or legal proceedings. The ECT has been perhaps the most significant of all the IIAs, spawning more investor-state dispute settlement (ISDS) claims than any other single treaty and with it, a host of awards issued by ad hoc tribunals. By falling under the protection of the ECT, foreign investors were granted assurances that they could rely on international law rather than the unfamiliar and unstable legal systems in host countries. Investment in the energy sector is especially needful of stable and reliable legal protections because of the extended period between making an investment and achieving a return. Under the ECT, investors may seek compensation for the loss of their future profits, not merely sustained losses. Many of the investment projects facilitated by the ECT related to infrastructure privatization projects in former Soviet countries.

Very much a product of its time, the ECT faced growing criticism for its continued encouragement of investment into energy derived from fossil fuels, paying insufficient attention to the modern fixation on climate change mitigation via renewable sources. Announcing the UK’s withdrawal, the Minister of State for Energy Security and Net Zero stated that continued ECT membership was incompatible with the country’s transition towards Net Zero. With this justification in mind, the UK’s withdrawal from the ECT could not have come at a worse time; it was acknowledged recently that the true costs of the UK’s Net Zero transition were wildly understated – costing trillions of pounds more than had been reported to parliament. Government ministers were accused by former Chancellor of the Exchequer of being ‘systematically dishonest’ about the costs of the plans.

Continue reading

Reforms to the Energy Charter Treaty: Rebalancing International Investment Law or a Step Too Far?

David Collins

The Energy Charter Treaty (ECT) is a multi-party investment treaty covering investment in the energy sector. Established in the 1990s, the ECT has over 50 signatories, including the UK. The ECT contains many of the traditional protections for foreign investment found in international investment agreements (IIAs), and much like international investment law generally, the treaty has been subjected to widespread criticism in recent years. The ECT has been particularly vilified for its alleged failure to deal with climate change by maintaining extensive protections for industries that supposedly contribute to this global problem.

Continue reading

When Environmental Issues Appear in International Investment Arbitration: Saar Papier Vertriebs GmbH v. Republic of Poland (I)

Sekander Zulker Nayeen

The concept of international investment law evolved mainly for the purpose of giving protection to foreign investment. That is why only investors can bring a claim of breach of protection standards before the investment arbitral tribunal and the tribunal only follows the concerned International Investment Agreements (IIAs) to determine such breach. However, with the advent of the concept of sustainable development, nowadays, environmental protection of a host State has become a major concern in competition with the investment protection before the investor-state arbitral tribunal. States are now frequently claiming the prevalence of their regulatory power for environmental protection over investment protection. In some cases, for example Glamis v US, the tribunal’s decision was influenced by the State’s regulatory power for environmental protection. In some recent cases, for example Burlington v Ecuador and Perenco  v Ecuador, environmental issues arose with some separate standing. In these cases, the tribunals entertained host States’ counterclaims and awarded compensation against the investors. In such backdrop, I would like to have a detour in an arbitral decision wherein environmental issues were raised by the State for the first time. I want to look back how the tribunal had decided that case.

Continue reading

Canada’s new model FIPA and UK-Canada FTA negotiations

David Collins

On the occasion of the UK’s ongoing re-negotiation of the placeholding UK-Canada Free Trade Continuity Agreement rolled over last year from the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, it is useful to draw attention to Canada’s newly issued model Foreign Investment Promotion Agreement (FIPA). Upgraded from the 2014 version, the 2021 model FIPA sets out Canada’s starting asks for its trading partners in the field of investment – a key feature of modern Free Trade Agreements (FTAs) as well as a vital contributor to the economies of both countries. In 2019, the inward stock of foreign direct investment (FDI) in the UK from Canada was £20.0 billion accounting for 1.3% of the total UK inward FDI stock.

Continue reading

© 2024 City Law Forum

Theme by Anders NorenUp ↑

Skip to toolbar