Investment Arbitration Under The Energy Charter Treaty

Author:Mr Alejandro López Ortiz and Michael P. Lennon Jr.
Profession:Mayer Brown


The Energy Charter Treaty (ECT) creates a legal framework for energy trade, transit and investment among member states. The ECT, a multilateral investment treaty, aims to unite its signatories behind the common goals of setting up open energy markets, securing and diversifying energy supply and stimulating cross-border investment and trade in the energy sector.

The ECT has 52 signatories, 47 of which have ratified it. While a multilateral treaty with binding force, the ECT is limited in scope to the energy sector. It includes provisions on:

Investment protection. Trade. Transit. Energy efficiency and environmental protection. Dispute resolution. The most commonly chosen forum for investor-state disputes arising under the ECT is international arbitration. At the time of writing, 62 arbitration claims were known to have been brought under the ECT, of which eight were settled, 29 are still pending and 25 resulted in final awards. A list of known ECT cases is available on the ECT website.

This Note explains:

The definitions that determine which investors and investments enjoy the protection of the ECT. The provisions relating to investment protection. The dispute resolution provisions, focusing on the arbitration option. Where possible, these are discussed by reference to awards in cases brought under the ECT.


The investment protection provisions of the ECT are contained in Part III of that treaty. To invoke those protections, a claimant must demonstrate that it has made an investment in an ECT contracting state and that it qualifies as an investor from another contracting state. Both "investment" and "investor" are defined in the ECT.


Article 1(6) of the ECT defines investment as all types of assets directly or indirectly controlled or owned by an investor. These assets include:

Tangible and intangible, and movable and immovable property. Any property rights, such as leases, mortgages, liens, and pledges. A company or business enterprise, or shares, stock or other forms of equity participation in a company or business enterprise, and bonds and other debt of a company or business enterprise. Claims to money and to performance under a contract that has an economic value and is associated with an investment. Intellectual property. Returns. Any right conferred by law or contract or by virtue of any licences and permits granted by law to undertake energy sector economic activity. In addition, any change in the form of the assets invested does not affect their character as investments.

An investment

"includes all investments, whether existing at or made after the later of the date of entry into force of this Treaty for the Contracting Party of the Investor making the investment and that for the Contracting Party in the Area of which the investment is made (hereinafter referred to as the 'Effective Date') provided that the Treaty shall only apply to matters affecting such investments after the Effective Date."

(Article 1(6), ECT.)

Issues commonly arise in relation to the ownership or control of shares in this context. Claimants have often invoked the ownership or control of shares in companies as sufficient to qualify as an investment. States have objected to the jurisdiction of arbitral tribunals on the basis that the claimant investors did not, in...

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