Energy Charter Treaty
A 1994 multilateral treaty protecting energy investments and opening arbitration against states; criticized for hindering the climate transition, it has been left by the EU and several member states, but still protects existing investments for twenty years.
The Energy Charter Treaty was signed in 1994, in the post-Cold War context, to secure Western investment in the energy resources of the former Soviet bloc. In force since 1998, it protects foreign energy investors against expropriation and unfair treatment, and opens arbitration against the host state. It lies behind some of the largest awards against states in arbitration history, including the one against Russia in favor of Yukos's former shareholders. But the treaty was increasingly invoked by fossil fuel investors against European states that decided to close coal plants or restrict drilling, and by renewable investors against states that had cut their subsidies. Deemed incompatible with climate goals, it has seen withdrawals: France left with effect from the end of 2023, followed by other member states, and the European Union and Euratom decided to withdraw in 2024. The treaty nonetheless has a sunset clause: investments made before withdrawal remain protected for twenty years. For political risk insurance, it shows that a protection instrument can disappear, slowly, and that the energy transition shifts political risk toward the very countries once seen as the safest.
In February 2021, RWE filed an ICSID arbitration against the Netherlands under the treaty, claiming 1.4 billion euros over the law banning coal-fired power generation from 2030. A treaty designed to protect Western investment in the East was being used against a founding member of the European Union.
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