The fair and equitable treatment in the Energy Charter Treaty

Description

The number of investment arbitration cases from the energy sector is increasing, accompanied by a rise in a more frequent invocation of the Energy Charter Treaty. 1 Statistics show that the most frequently alleged breach by the claimants is the breach of article 10(1) of the Energy Charter Treaty, which makes provision for the obligation to fair and equitable treatment (FET) of investments of investors in the host state. 2 Based on various investorstate arbitration decisions, the fair and equitable standard is usually associated with the (sub-)standard of the investor’s legitimate expectations. Therefore, this work examines the requirements of the fair and equitable treatment and the legitimate expectations doctrines as interpretated by arbitral tribunals in the Energy Charter Treaty related arbitral practice. The first part of the work introduces the reader to the concept of the fair and equitable treatment standard and its sub-standard, the legitimate expectations. The legitimate expectations is a sub-standard that Tribunals have become increasingly reliant on in finding a state liable for a breach of the fair and equitable treatment standard. This is followed by brief presentation of the Energy Charter Treaty as the relevant international convention, and a subsequent presentation of institutions and arbitration rules, to provide the required basic information on these institutions and procedural rules. The Energy Charter Treaty is important for two reasons: first, it provides the legal base for investment arbitration, and second, it provides basic substantive law. Besides the Energy Charter Treaty, other institutions and rules are also addressed briefly, because in accordance with article 26(2) of the Energy Charter Treaty, the investor party to the dispute may submit the dispute for resolution to the judiciary of the host country, to a special dispute settlement procedure as per prior agreement, or may choose among: (i) ICSID arbitration, which provides a forum for investment arbitration and procedural rules, (ii) ad hoc arbitration with UNCITRAL Arbitration Rules, which are only procedural rules, (iii) Arbitration Institute of the Stockholm Chamber of Commerce (SCC) or (iv) Permanent Court of Arbitration (PCA) both of which provide forum and procedural rules. The second part of the work examines the relevant arbitral practice. There is a relatively large number of cases which were initiated based on the Energy Charter Treaty, more than 130. 3 In the majority of these cases the final award has already been delivered. As we have already mentioned, the majority of these awards deal with the issue of fair and equitable treatment (and the legitimate expectations of the investor), meaning that there is a body of cases suitable for research. This makes possible drawing of conclusions and even finding trends. There is a group of cases within the case law related to green energy investments within the European Union. We examine them separately, due to their common characteristics. However, we do not examine cases related to the infamous Yukos dispute, as that subject is specific and distinct enough that it could serve as the basis of an independent monograph, and its unique specialties render it not too suitable for a general analysis like what this book intends to provide. The examination of the case law is closed with a conclusion, which contains the most important findings of the book.