The Modernisation of the Energy Charter Treaty Called a Missed Opportunity

Abstract

The Energy Charter Treaty (ECT) has long been a vital international instrument for the protection of foreign investments (FDI) in the energy sector. Its modernisation has significantly intensified in the last couple of years, and an Agreement in Principle on the Modernisation of the ECT (AIP) was reached in June 2022. This paper explores whether the new provisions of the AIP modernise the ECT from an investment law perspective. For this purpose, it analyses the developments that led to the AIP as well as indicative investment provisions, such as the definition of ‘investment’, FET and legitimate expectations, or the new provision on Regional Economic Integration Organisations (REIO), among others. Considering the recent ‘backlash’ against the ECT, the paper argues that the ECT modernisation was not successful, but rather a missed opportunity. Nevertheless, there are alternatives which may save the modernisation process, depending on Contracting Parties’ intentions, interests, or consensus. 

Keywords: Agreement in Principle (AIP), backlash, Energy Charter Treaty (ECT), EU and EU law, investment protection and ISDS, modernisation, sunset clause, Vienna Convention on the Law of Treaties (VCLT 1969)