Recently, most of the discussion about the Energy Charter Treaty (“ECT”) has focused on the efforts to adopt a modernised version of the treaty, or on the decision of some of its member States – Italy, the Netherlands, Spain, Poland and France – to withdraw from it.?With such (dark) clouds hanging over the future of the ECT, comparatively little attention has been paid to the updated statistics on investment arbitration cases brought under the ECT, which the Energy Charter Secretariat has released a few weeks ago in May 2023 (the report is publicly available free of charge here: https://www.energychartertreaty.org/cases/statistics/. Yet, the report is an invaluable source of information on ECT arbitrations, on which there often is limited publicly available information.?
Looking through the keyhole, so to speak,
Juliette Migeon
and I list below 10 key statistics about ECT arbitrations.??
- Number of cases: The total number of known ECT-based investment arbitration cases has now reached 158.?There has been only 1 new case registered in 2023 and 10 new cases registered in 2022. To put things in perspective, there were 30 new cases registered in 2015 when Spain backtracked on regulatory measures it had implemented to incentivize investment in renewable energy. ?
- Energy sources involved: Among these cases, 59% concern renewable power generation (compared to 34% for fossil fuels).?Solar-photovoltaic is the most represented subsector (28%).?
- ?Status of ECT cases: Out of 158 registered ECT cases, 53 remain pending.?11 were settled, 8 discontinued. Awards were rendered in 79 cases (in 18 of these cases, there are pending annulment proceedings).?
- Outcome of ECT cases: In matters in which an award was rendered, tribunals found a breach of the ECT and awarded damages in close to 46%. They found no breach of the ECT in 26% of cases and found a breach of the ECT but awarded no damages in a small 3% of the cases.?They declined jurisdiction in close to 14% of the cases.
- Breaches alleged: The protections found in Article 10 of the Treaty are the ones most commonly raised by investors, with Fair and Equitable Treatment (“FET”) being raised in 25% of the cases.?In contrast, the protection against expropriation under Article 13 of the Treaty was alleged in close to 17%.
- Breaches found: A look at the statistics for breaches found may help explain why investors prefer to rely on the FET standard: based on cases in which such information is publicly available, tribunals found breaches of the FET standard in 64% of the cases in which it was raised, compared to only 12% for an established expropriation.
- Damages awarded: How much money are we talking about? The spectrum of damages awarded is wide: the lowest amount awarded is USD 1.130.859 in the Petrobart Limited v. Kyrgyz Republic (29 March 2005) and the highest is USD 50.02 billion in the Yukos v. Russian Federation saga (18 July 2014). The ratio of damages awarded over damages claimed is similarly wide ranging. ?
- Main actors:?Spain has seen the most ECT claims (51 in total), followed by Italy (14 arbitrations) and Romania (8 arbitrations). ?Looking on the other side of the accused bench, the main nationalities of claimants, are (1) German, (2) Spanish and (3) Italian, leading to a spike of cases from the same economic region in 2015.
- Procedural rules applied: Most arbitration cases under the ECT applied the ICSID Rules, including the Additional Facility (66%). The SCC Rules were applied in 31 cases (19%) and the UNCITRAL Rules in 17 cases (11%).
- Arbitrators: Who decides these cases??The most popular nationality for arbitrators is American, even though the US has not ratified the ECT.?English and French nationalities follow closely. ?
So, things are changing, but it is not the end of ECT arbitrations just yet.?Even as States announce their decision to withdraw from the treaty, investors will still be able to bring claims during the 20-year sunset period.?
Juliette Migeon
and I will be on the lookout for next years’ report!
Thanks, Sara. This is most enlightening!