The Energy Charter Treaty (ECT) is a multilateral trade and investment treaty in force since 1998 providing for an international binding legal framework for energy cooperation between 53 Contracting Parties, among which the European Union and EURATOM are also tincluded in their own capacity. Today, it is the most used investment agreement globally. It is the only intergovernmental agreement applicable to all energy sources (fossil fuels, renewables, nuclear and others) at every stage of the supply chain (production, distribution, transit). It provides for a dispute resolution mechanism based on arbitration, with the fossil fuels and renewable energy disputes dominating the arena, both in numbers and total damages awarded, i.e., approx. EUR 500 mil. + Yukos cases (EUR 41bn) for fossil fuels and approx. EUR 1.2bn for renewables. On June 1, 2022 there were 54 pending cases.

The ECT reform emerged as a necessity due to (i) the inconsistent interpretation and application of the ECT provisions by tribunals, national courts and recently by the Court of Justice of the European Union (CJUE), (ii) the EU’s concerns regarding the investment protection provisions in the ECT and (iii) the necessity to align the ECT with the Paris Agreement, and with EU’s goals on sustainable investment, climate change and net zero goals. The modernization discussions started in 2017, but the first negotiation round took place only in July 2020. After five years, the ECT Reform was concluded in 2022.

A closer look at the practice of tribunals in cases under the auspices of the ECT reflect the point on consistency. The notion of “investment” has been interpreted broadly sometimes (Energoalliance v Moldova, Petrobart v Kyrgyz Republic) and narrower other times (Energorynok v Moldova). But this is not only an investment arbitration tribunal’s issue. This lack of consistency is also observed in practice by regional and national courts: The CJUE in its preliminary ruling addressing the questions from Paris Court of Appeal, in Republic of Moldova v. Komstroy (Energolliance) had also a narrower interpretation of the notion of “investment”, while the Court of Cassation in Paris had a broader reading of “investment”.

Different tribunals have also interpreted the standards of protection divergently creating uncertainty about the obligations of fair and equitable treatment, full protection and security, and minimum standard of treatment contained in Article 10(1) ECT. An added ingredient has been the tension between EU law and the ECT. After Achmea, the EU Commission in its amicus briefs, and the EU Member States as respondents argued in favour of the incompatibility between the ECT dispute resolution mechanism in intra-EU ECT disputes.

Tribunals were divided on the matter. While the Electrabel v. Hungary tribunal held that EU law prevailed over the ECT ‘in case of any material inconsistency’, the opposite conclusion was reached in RREEF v Spain. But in AES v. Hungary, a case comparable to Electrabel, the tribunal—in line with basic principles of public international law— considered EU law as a ‘fact’. The Vattenfall tribunal held that the ECT prevailed over EU law. However, in September 2021, the CJUE saw an opportunity to bring its own regional “clarity” by opining in its preliminary ruling that the ECT will be outranked in an intra-EU ECT-related dispute.

Thus, for the CJUE—which is not the authoritative interpreter of the ECT—an ECT investment tribunal would not have jurisdiction in such disputes. Yet, Komstroy was never an intra-EU ECT dispute, but a dispute involving a non-EU State and a third country investor. Moreover, CJUE did not rely on the Vienna Convention on the Law of Treaties, but on the EU law supremacy over an apparent conflicting international norm.

Now that the ECT reform has been concluded, its outcome features various aspects: The facilitation of sustainable investments with the creation of a modern framework, the increase in the level of investment protection, the creation of mechanisms that allow States to pursue their individual energy security and climate goals, the apparent end of intra-EU applications under the ECT, the strengthening of environmental and social provisions, and the inclusion of new definitions for relevant terms such as “investor” and “investment”.

From a public international law perspective, certain questions had been raised before the reform to the ECT: Does the CJUE have jurisdiction to interpret ECT as EU law since Komstroy was an extra-EU dispute having the arbitration seat in an EU Member State? Can one signatory, i.e., the EU, impose its multilateral investment court system in the ECT? Is the CJUE competent to provide an interpretation of the rights and obligations on non-EU ECT Contracting Parties? How to reconcile the principles of supremacy and autonomy of EU law, as a sui generis and regional legal order, with the public international law order governing ECT as a multilateral treaty?

Now that the modernization process has concluded, what are the answers which are provided by reform of the ECT? This panel will discuss the ongoing tensions between EU law and International Investment Law, as well as the new status created by the deal achieved after the negotiations of modernization of the ECT.