RESOURCES
Coming Soon
Resources
About the Author: evan-clayburg
Countries that have started the accession process:
AFRICA
|
ASIA
|
AMÉRICA LATINA
EUROPA DEL ESTE y ORIENTE MEDIO
|
Otros países contactados por la Secretaría pero que aún no han comenzado el proceso de adhesión son:
Argelia, Bután, Botswana, Ecuador, Egipto, Libanon, Omán, Sudáfrica, Sudán del Sur, Filipinas, Túnez y Zambia.
Countries that have started the accession process:
AFRICA
|
ASIA
|
LATIN AMERICA
MIDDLE EAST AND EASTERN EUROPE
|
Other countries approached by the Secretariat but that have not started accession process yet:
Algeria, Bhutan, Botswana, Ecuador, Egypt, Lebanon, Oman, South Africa, South Sudan, the Philippines, Tunisia and Zambia
|
|
|
||
| The European Union as a whole is also a signatory. | ||||
Countries in special situation:
ASIA
EASTERN EUROPE
|
LATIN AMERICA
MIDDLE EAST
|
AFRICA
|
ASIA
EUROPA DEL ESTE
|
AMÉRICA LATINA
ORIENTE MEDIO
|
AFRICA
|
|
|
|
||
| La Unión Europea también es firmante del tratado. | ||||
Países en situación especial:
|
|
|
||
| The European Union as a whole is also a signatory. | ||||
Countries in special situation:
ASIA
EASTERN EUROPE
|
LATIN AMERICA
MIDDLE EAST
|
AFRICA
|
Countries that have started the accession process:
AFRICA
|
ASIA
|
LATIN AMERICA
MIDDLE EAST AND EASTERN EUROPE
|
Other countries approached by the Secretariat but that have not started accession process yet:
Algeria, Bhutan, Botswana, Ecuador, Egypt, Lebanon, Oman, South Africa, South Sudan, the Philippines, Tunisia and Zambia
Since 2011 Spain has been hit by 47 ECT lawsuits over cuts to renewable energy subsidies. In the midst of a harsh financial crisis and succumbing to lobbying from large utilities such as Endesa, the conservative government had rolled back price guarantees for renewable energy producers, for which costs had surged. One claim has been discontinued and three dismissed, but Spain, so far, lost twelve cases. So far the government has been ordered to pay €821,6 million (approximately US$ 925 million) in total:
NextEra €290 million
Eiser €128 million
BayWa n/a
Antin €101 million
Masdar Solar €64,5 million
Novenergia €53,3 million
9REN Holding €41,8 million
InfraRed and others n/a
SolEs Badajoz €41 million
Greentech Energy System €39 million
Cube Infrastructure €33,7 million
OperaFund €29.3 million
In the 31 cases yet to be decided, investors are demanding over US$6.6 billion in compensation – a mind-boggling sum almost equivalent to Spain’s entire healthcare and education budgets in 2019. Similar cases have been filed against the Czech Republic, Italy, and Bulgaria.
… can be abused by speculative funds trying to make windfall profits: In 85 per cent of the lawsuits, the claimant is a private equity fund or other type of financial investor. Examples include Masdar (an Abu Dhabi Government-owned fund, which also finances oil and gas drilling) and RREEF (part of DWS, a fund of German financial giant Deutsche Bank, which also invests in coal, gas, and airports). Several of the funds only invested in Spain after 2008 and/ or increased their investments in 2010/11 – ie when it was clear the country was already in full-blown crisis mode and some changes to the solar support schemes had already been made. Out of the more than 110 companies involved in the ECT claims until 2017, at least 63 invested after 2008 (sometimes just purchasing existing solar plants); at least 8 more later continued investing despite the changes. Afterwards, these funds argued that their profit expectations were undermined by the change in government policy.
“Some in the select group of investors that can access ISDS view it not only as an insurance policy, but also as an additional source of profit”,
Kyla Tienhaara and Christian Downie, Australian National University
… can make taxpayers pay for corporations’ imaginary future profits: The tribunal in the Eiser case ordered Spain to pay €128 million in compensation for “lost future cash flows”. These are imaginary profits that the fund might have earned with its solar power plants over an assumed 25-year-life in a hypothetical scenario without any subsidy cuts. The Spanish Supreme Court has rejected similar damages claims for extrapolated future profits as absolutely speculative. But ECT tribunals regularly hand out public monies on the basis of such corporate pipe dreams. Who will foot the bill? Ordinary Spaniards who have already been hit by harsh austerity measures, some of whom are also struggling to repay loans which they borrowed to build once-promising solar roofs and fields. There is no compensation bonanza for them.
… could also be used to challenge subsidy cuts for climate-wrecking fossil fuels: In the Eiser case the tribunal found that Spain violated the ECT when it “radically altered” its support scheme for renewables. According to the arbitrators Spain “crossed the line” and “violated the obligation to accord fair and equitable treatment… when the prior regulatory regime”, which had attracted the Eiser fund, “was definitively replaced by an entirely new regime”. This reasoning could easily be applied if the current regulatory regime, which globally subsidises oil, coal, and gas energy in the trillions, was replaced by various governments by an “entirely new regime” which abolishes fossil fuel subsidies.
Bulgaria had to battle three investor claims by energy companies from Austria (EVN, filed in 2013 for €850 million) and the Czech Republic (Energo-Pro and ČEZ filed 2015 and 2016). Among other things the companies challenged a government decision to reduce skyrocketing energy prices. Following protests against high utility bills across the EU’s poorest member state in 2013, Bulgaria’s regulators cut electricity costs for consumers by an average of seven percent. The investors argue that “these actions reduce the proceeds from the sale of electric energy”. Exactly how much money Energo-Pro and ČEZ are claiming is unknown, but ČEZ speaks of “hundreds of millions of euros”. Even though the case of EVN was resolved in favour of the investor, the other two cases are still pending.
Since May 2017 UK-based oil and gas company Rockhopper has been suing Italy over the state’s refusal to grant a concession for oil drilling in the Adriatic Ombrina Mare field. The refusal came after the Italian Parliament banned all new oil and gas operations near the country’s coast in 2016 amidst concerns over the environment, high earthquake risks, and strong opposition to the projects from residents. Rockhopper claims compensation for its sunk costs of about US$40 to $50 million – and for the US$200 to $300 million which it could have made with the oil field had it not been banned.
… circumvent public opposition to dirty energy projects: The Italian Parliament’s ban on new drilling projects near the Italian shore followed a decade of protests and campaigning by residents in many coastal regions of Italy. In April 2013 around 40,000 people – “from the Catholic church to rasta-haired youth groups, from the local tourist industry to coastal mayors, regardless of their political affiliation” as campaigners described it – took to the streets in Pescara to protest against the Ombrina Mare project. They could now pay a high price for having pushed the Italian Parliament to halt new climate-wrecking oil drilling.
… sue countries after they have left the agreement: After being hit by its first multi-million euro claim under the ECT, Italy announced it was leaving the treaty at the end of 2014. Rockhopper led its ECT claim against the country 27 months later. This is possible because of the deeply anti-democratic survival or ‘zombie’ clause, which allows the ECT investor rights to live on even after a country has pulled out of the treaty. For investments made before Italy’s withdrawal took effect (on 1 January 2016) the country can still be sued for two more decades under the ECT, ie until 1 January 2036. So while the country is already the second most sued state under the ECT, and despite having left, Italy could still be subject to many more claims.
… let deep-pocketed financiers put extra litigious heat on countries:
Rockhopper’s legal costs are funded by an unknown litigation financier who will cash in a share of the eventual award.29 This allows the company to draw out the proceedings, increasing Italy’s defence costs and making the country more likely to cave in to corporate demands. As such funding arrangements do not have to be disclosed in ECT- proceedings, potential conflicts of interest an arbitrator might have due to ties with the funder might never be un-earthed.
For more details of this case, vist http://10isdsstories.org/cases/case9/
Dear Ministers,
Commissioners,
Members of Parliament and of the European Parliament,
We are writing to you as concerned civil society groups and trade unions from member states of the Energy Charter Conference, which will hold its annual meeting in Brussels over the next two days (10-11 December 2019). A first negotiation round to modernise the Energy Charter Treaty (ECT) will take place on 11 December.
We – 278 environmental, climate, consumer, development, and trade related civil society groups, as well as trade unions – believe that the ECT is incompatible with the implementation of the Paris Climate Agreement, just transition policies developed together with workers and their unions, and other necessary public policy measures. The ECT has been – and will increasingly be – used by fossil fuel and nuclear energy companies to challenge government decisions to phase out such energy sources. It can also be an obstacle to prioritising investment in renewable energy and energy efficiency, to bringing energy production under public control, and to taking measures to end energy poverty. The ECT in its current form is outdated and a threat to the public interest.
We therefore call on you to ensure that the ECT can no longer undermine action to avoid climate breakdown, protect the environment, and make energy affordable for all. We also call on you to immediately halt the geographic expansion of the ECT to even more signatory states.
The ECT includes many rules – including on energy transit and trade – but the provisions protecting foreign energy investments are of particular concern. They allow foreign investors in the energy sector to directly sue ECT signatory states outside of existing courts, in secretive international tribunals consisting of three private lawyers. In these tribunals investors can claim dizzying sums of public money in compensation for government actions that they argue have affected their profits.
We identify six key problems with the ECT:
Moreover, the ECT’s investor privileges do not bring the claimed economic benefits. There is currently no evidence that the agreement helps facilitate investment to reduce energy poverty, let alone investment into renewable energy.[14]
As it stands, the modernisation process is unlikely to fix these failures. The EU’s mandate for the negotiations, for example, does not foresee an end to investment protection for fossil fuels, nor an exclusion of investment arbitration or other types of investor-state dispute settlement from the ECT.[15] Any changes to the ECT to make it compatible with the Paris Agreement would have to be agreed unanimously by all its members, many of whom are key fossil fuel producing or trading countries. Some members have already stated that they see no need to revise the ECT at all.[16]
We therefore call on you to:
350.org
CEE Bankwatch Network
Friends of the Earth International (FoEI)
Greenpeace
Naturefriends International (NFI)
Public Services International (PSI)
SumOfUs
ClientEarth
Climate Action Network (CAN) Europe
European Environmental Bureau (EEB)
European Public Service Union (EPSU)
Friends of the Earth Europe (FoEE)
The Green 10
Gastivists Collective
Seattle to Brussels Network
We Move Europe
Austria: Anders Handeln; GLOBAL 2000 – Friends of the Earth Austria; Austrian Trade Union Confederation (ÖGB); Attac Austria; KABÖ; AK EUROPA; younion _ Die Daseinsgewerkschaft; Welthaus Wien; WIDE; Gewerkschaft PROGE; NFI; Welthaus der Diözese Innsbruck; Future Aid – Die Zukunft braucht unsere Hilfe!; Center for Encounter and Active Non-Violence; Netzwerk Soziale Verantwortung; Grüne Bildungswerkstatt NÖ; Gemeinwohlökonomie Steiermark; Vienna Institute for International Development and Cooperation (VIDC); Allianz gerechtes Handeln; DKA Austria
Belgium: ACV-CSC; Entraide et Fraternité; 11.11.11; Corporate Europe Observatory (CEO); CNCD – 11.11.11 (Centre National de Coopération au Développement); Mouvement Ouvrier Chrétien; Climat et Justice Sociale (CJS); Kairos Europe (Wallonie/Bruxelles); Broederlijk Delen; Arbeid & Milieu; Grands-Parents pour le Climat; Ecokerk; 11 March Movement; Climate Express; Workers4Climate; Réseau wallon pour l’accès durable à l’énergie (RWADE); ATTAC Wallonie Bruxelles; Food & Water Action Europe; ATB De Natuurvrienden
Bosnia and Herzegovina: Centar za životnu sredinu – Friends of the Earth Bosnia and Herzegovina; Green team Novi Grad; LIR Evolution
Bulgaria: Foundation for Environment and Agriculture
Croatia: Friends of the Earth Croatia
Cyprus: Friends of the Earth Cyprus
Denmark: Global Aktion; NOAH – Friends of the Earth Denmark; 3F BJMF
Estonia: Estonian Green Movement
Finland: TTIP Network Finland; The Finish Association for Nature Conservation; Maan ystävät ry – Friends of the Earth Finland; 350 Finland; EKOenergy
France: Veblen Institute; AITEC; Attac France; Amis de la Terre France; CCFD – Terre Solidaire; ActionAid France – Peuples Solidaires; Sherpa; Confédération paysanne; Collectif Stop TAFTA/CETA; Fondation Nicolas Hulot; Notre affaire à tous; Réseau Foi et Justice Afrique Europe Antenne France; Sciences Citoyennes; Emmaüs International; Fédération Droit Au Logement (DAL); Collectif Causse Méjean – Gaz de Schiste NON !; BLOOM; France Nature Environnement; Alofa Tuvalu; Fondation Copernic; Comité Pauvreté et Politique; Alternatives et Autogestion; Fédération Artisans du Monde; SdN75
Germany: Klima-Allianz Deutschland; Forum Umwelt und Entwicklung / German NGO Forum on Environment and Development; WEED – World Economy, Ecology & Development; urgewald; LobbyControl; Attac Germany; PowerShift; BUND – Friends of the Earth Germany; Berliner Wassertisch; FDCL – Center for Research and Documentation Chile-Latin America; Arbeitsgemeinschaft bäuerliche Landwirtschaft (AbL); Campact; FIAN Deutschland; AntiAtomBonn; Andy Gheorghiu Consulting; NaturFreunde Deutschlands – Naturefriends Germany; IPPNW Germany; Aktionsbuendnis Energiewende Heilbronn
Greece: Naturefriends Greece; OIKOPOLIS; ECOELEUSIS; PERI.POL.O. of Attica
Hungary: WWF Hungary; National Society of Conservationists – Friends of the Earth Hungary; Védegylet; Éghajlatvédelmi Szövetség (Hungarian Climate Alliance); Hungarian PV and Solar Collector Association – MNNSZ; Ökorégió Alapítvány a Fenntartható Fejlődésért; Kalocsakörnyéki Környezetvédelmi Egyesület; Fauna Alapítvány; Kalocsakörnyéki Környezetvédelmi Egyesület; Zöld Akció Egyesület (Green Action); ZÖLD KÖR; “Bihar” Kis-sárréti Civilek Társasága; Clean Air Action Group; Csalàn Környezet-és Természetvédő Egyesület; Mozgalom az Egészséges Város Környezetéért Civil Társaság; Towards Sustainability Association; BME EZK; Tree of Life Organization; CSEMETE Természet- és Környezetvédelmi Egyesület; GATE Green Club NGO; Ökotárs Alapítvány; Hungarian Society for Environmental Education;
Ireland: Irish Environmental Network & Green Foundation Ireland; Extinction Rebellion Ireland; Trócaire; Keep Ireland Fracking Free; FÍS NUA; Climate Change Ireland; ATTAC Ireland; Good Energies Alliance Ireland; Extinction Rebellion Kildare (XRK); Futureproof Clare; Action from Ireland (Afri); Not Here, Not Anywhere; An Taisce (Climate Committee); Feasta: the Foundation for the Economics of Sustainability; An Claíomh Glas; Social Justice Ireland
Kazakhstan: Feminist League
Luxembourg: Mouvement Ecologique
Malta: Friends of the Earth Malta
The Netherlands: The Transnational Institute (TNI); Milieudefensie – Friends of the Earth Netherlands; SOMO; Fossielvrij NL; FNV klimaatwerkgroep; WILPF NL Women’s International League for Peace and Freedom; Natuur & Milieu; Both ENDS; Nivon Natuurvrienden
Norway: Spire; Attac Norway
Poland: Rozruch; Instytut Globalnej Odpowiedzialności (IGO); Fundacja “Rozwój TAK – Odkrywki NIE”; Polish Institute for Human Rights and Business
Portugal: TROCA – Plataforma por um Comércio Internacional Justo; ZERO – Association for the Sustainability of the Earth System; SOS Racismo; GasNaturalNao; Palombar – Associação de conservação da Natureza e do Património Rural; Corporations- Zero Tolerance; Fruta Freia; Vamos Salvar o Jamor; GAIA-Environmental Action and Intervention Group
Romania: Ecoteca Association; Bankwatch Romania; TERRA Mileniul III; Eco V Natura
Slovenia: Focus Association for Sustainable Development; Umanotera
Spain: Confederación General del Trabajo (CGT-España); Ecologistas en Acción; Amigos de la Tierra – Friends of the Earth Spain; ATTAC España; Des de Baix; Catalunya No als Tractats de Comerç i Inversió; Entrepueblos-Entrepobles-Entrepobos-Herriarte; Alternative Republicana; Diputada Asamblea de extremadura (Unidas por Extremadura) Extremeños; eco-union; Amigos de la Tierra Comunidad de Madrid; Observatori DESC; Solidaridad Internacional Andalucis; Unión Sindical Obrera (USO); Ecologistas en Acción de Sanlúcar; Izquierda Unida; Debt Observatory in Globalisation (ODG); NO TTIP-CETA-TISA tARRAGONA-REUS; 24877360p; Enginyeria Sense Fronteres; Plataforma Ciudadana Zaragoza sin Fractura; Asociación de Cultura Popular Alaborada – Gallur; Plataforma por un Nuevo Modelo Energético; Ong AFRICANDO; Confederación Intersindical; Intersindical Valenciana
Basque Country: ELA
Sweden: Swedish Society for Nature Conversation; Jordens Vänner – Friends of the Earth Sweden; Skiftet; latinamerikagrupperna
Switzerland: Alliance Sud; Public Eye; Pro Natura; Campax
The UK: Trade Justice Movement; UNISON – the public service union; Global Justice Now; War on Want; Traidcraft Exchange; Wen (Women’s Environmental Network); Global Justice Glasgow; One World Week; Health Poverty Action; Common Weal; PCS;UK, UNISON Scotland; Rethinking Value Chains; Friends of the Earth England, Wales and Northern Ireland; CORE Coalition; One Planet Limited; The SANE Collective; Carbon Tracker Initiative
Ukraine: Ecoaction
Organisations from ECT observer countries
Australia: Australian Fair Trade and Investment Network; National Toxics Network; Climate Justice Union WA
Canada: Canadian Union of Public Employees (CUPE); Climate Emergency Institute; Stand.Earth
The Gambia: Janjanbureh Uniting Sustainable Tourism and Community Training (JustAct)
Indonesia: WALHI – Friends of the Earth Indonesia
Italy: Stop TTIP Italia; Fairwatch; Gruppo Italiano Amici della Natura; Esperanta Civito / Cité espérantienne; Fondazione Punto Sud
Nigeria: Foundaiton for the Conservation of the Earth (FOCONE); Automobile, Boatyards, Transport, Equipment And Allied Senior Staff Association
Senegal: Lumiere Synergie Developpement; Association Sénégalaise des Amis de la Nature (ASAN)
Uganda: Seatini Uganda; Friends with Environment in Development
USA: FracDallas; ClimateJobsPDX; Labor Council for Latin American Advancement – NYC; 350 New Orleans
Organisations from other countries
Argentina: INPADE / FOCO
El Salvador: CESTA
Ghana: Public Utility Workers Union of TUC-Ghana
Guinee: Federation Nationale des Travailleurs de Guinée
India: RITES Forum
Mozambique: Justiça Ambiental – Friends of the Earth Mozambique
Thailand: Manushya Foundation
Focus on the Global South
Togo: Les Amis de la Terre Togo – Friends of the Earth Togo; Jeunes volontaires pour l’environnement; Attac Togo
Uruguay: REDES – Friends of the Earth Uruguay
Notes
[1]Rockhopper Italia S.p.A., Rockhopper Mediterranean Ltd, and Rockhopper Exploration Plc v. Italian Republic (ICSID Case No. ARB/17/14). For more information on the case see: Friends of the Earth Europe and others (2019) Dirty Oil Attacks on Action on Fossil Fuels: Rockhopper vs Italy, June and the video Dirty Oil vs Beautiful Abruzzo, 25 June 2019.
[2]For more information on the case see: Friends of the Earth Europe and others (2019) Blocking Climate Change Laws with ISDS Threats: Vermilion vs France, June.
[3]Edwin van der Schoot (2019) Claim om kolenverbod voor Staat, De Telegraaf, 5 September.
[4]Kyla Tienhaara and Christian Downie, Risky Business (2018) The Energy Charter Treaty, Renewable Energy and Investor-State Disputes, Global Governance, 24(3), 451-471; Nathalie Bernasconi-Osterwalder and Martin Dietrich Brauch (2019) Redesigning the Energy Charter Treaty to Advance the Low-Carbon Transition, Transnational Dispute Management, February; Yamina Saheb (2019) The Energy Charter Treaty (ECT). Assessing its geopolitical, climate and financial impacts, September.
[5]See Annex 1 to the report ‘One Treaty to rule them all’, sheet “amounts paid by states”. A selectively updated version of this file from September 2019 is available on request.
[6]In the ECT’s non-discrimination clause (art. 10(7)) states promise to accord investments of ECT member states treatment no less favourable than that accorded to investors of the host state or any third state. While no such lawsuits are known to date, this could lead to ECT claims against policy measures that deliberately distinguish between energy investments that advance climate change mitigation objectives and those that hinder their achievement. See: Nathalie Bernasconi-Osterwalder and Martin Dietrich Brauch (2019) Redesigning the Energy Charter Treaty to Advance the Low-Carbon Transition, Transnational Dispute Management, February, 22.
[7]Sarah Keay-Bright (2019) “Outdated Energy Charter Treaty leaves new economy investments unprotected”, Energy Post, 6 March; Yamina Saheb (2019) The Energy Charter Treaty (ECT). Assessing its geopolitical, climate and financial impacts, September, 8.
[8]Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v. Federal Republic of Germany (ICSID Case No. ARB/09/6). For an analysis of the settlement see: Roda Verheyen (2012) Briefing Note: The Coal-fired Power Plant Hamburg-Moorburg, ICSID proceedings by Vattenfall under the Energy Charter Treaty and the result for environmental standards, 11 April.
[9]Vattenfall AB and others v. Federal Republic of Germany (ICSID Case No. ARB/12/12).
[10]World Nuclear News (2019) Aura seeks compensation for Swedish uranium ban, 11 November.
[11]AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of Hungary (II) (ICSID Case No. ARB/07/22); Electrabel S.A. v. The Republic of Hungary (ICSID Case No. ARB/07/19); EVN AG v. Republic of Bulgaria (ICSID Case No. ARB/13/17); ENERGO-PRO a.s. v. Republic of Bulgaria (ICSID Case No. ARB/15/19); ČEZ, a.s. v. Republic of Bulgaria (ICSID Case No. ARB/16/24).
[12]This happened to Albania after it revoked the electricity distribution license of Czech energy giant ČEZ, which filed a €190 million ECT claim in response in 2013. The revocation came after ČEZ had cut off power to the water and sanitation utilities of several Albanian towns, accumulated considerable outstanding debts to the government, and failed to meet other contractual obligations, for example, reducing energy losses and investing in the power grid. Albanians had also complained about high prices, poor service or even an absence of it, as well as power shut-downs. In addition ČEZ had faced fraud investigations by Tirana’s prosecution office including for issuing fake fines to both real and fictive customers in order to drive up its alleged losses on paper and get price hikes approved by the Albanian regulators. Albania settled the case in 2014 and agreed to pay €100 million in damages. See: ČEZ (Czech Republic) v. Albania.
[13]For more information on conflicts of interest and other rule of law problems with the ECT, see: Corporate Europe Observatory and Transnational Institute (2018) One Treaty to Rule them All. The ever-expanding Energy Charter Treaty and the power it gives to corporations to halt the energy transition, June, chapter 3.3 and page 72.
[14]Kyla Tienhaara and Christian Downie, Risky Business (2018) The Energy Charter Treaty, Renewable Energy and Investor-State Disputes, Global Governance, 24(3), 451-471, 451.
[15]Council of the European Union (2019) Negotiating Directives for the Modernisation of the Energy Charter Treaty, 2 July.
[16]In its contribution to the modernisation process, Japan, for example, stated “that it is not necessary to amend the current ECT provisions”. See: Energy Charter Secretariat (2019) Policy Options for Modernisation of the ECT, 6 October.
In 2014 the arbitrators in three related ECT claims (commonly referred to as the Yukos cases) ordered Russia to pay a whopping US$50 billion in compensation to former shareholders of now defunct oil giant Yukos. The tribunal held that measures by the Russian Government which had led to the dismantling of Yukos in 2006/07 amounted to an illegal indirect expropriation. The ruling was annulled by a Dutch court in 2016, which found that the arbitrators had lacked jurisdiction. This decision is currently under appeal while a second wave of Yukos claims is ongoing (by the company’s former management).
… of the colossal amount of money at stake: The US$50 billion order against Russia – roughly equivalent to the GDP of Slovenia – is the largest award in the history of investment arbitration. The total legal costs related to the case – US$124 million, out of which Russia was ordered to pay nearly US$103 million – are as remarkable. Yukos’ lawyers (from Shearman and Sterling, subsequently named “the $1,065 per hour lawyers” by the media) alone billed over US$81 million for legal representation and assistance. Together, the tribunal’s three arbitrators put over €5.3 million into their own pockets; their assistant walked away with nearly €1 million – about 10 times the annual salary of a judicial clerk for a US Supreme Court Judge.
“How could the tribunal’s assistant walk away with US$1 million? How much do ordinary people have to work to make that much money?”,
Arbitration specialist
… Russia lost despite never having ratified the ECT: Russia signed the ECT in 1994, but the Russian Duma never ratified it. Still, the arbitrators accepted the claim, arguing that the ECT applied provisionally to Russia from the date of its signature (until its subsequent withdrawal). While the Dutch court later scrapped this reasoning (arguing that the ECT’s dispute resolution provisions were at odds with the Russian Constitution and therefore not part of the provisional application), this decision does not bind future tribunals. Some have already ignored it and – again – accepted jurisdiction over ECT disputes against Russia.
“When we started the arbitration, everybody told us we were nuts… we were trying to sue Russia under a treaty that Russia had not ratified”,
Yas Banifatemi of law firm Shearman & Sterling, who represented the Yukos shareholders.
… of the abuse by shell companies: It is notable how easily the tribunal accepted the Yukos shareholders as non-Russian foreign investors that could sue Russia under the ECT. The arbitrators had “some sympathy” for Russia’s claim that the investors were mere shell companies, owned and controlled by Russian oligarchs and hence not foreign investors. But they refused to lift the corporate veil of the companies, considering it enough that they were incorporated elsewhere (ie in Cyprus and the UK). In the words of one investment lawyer: “The Energy Charter Treaty – which was designed to protect the interests of foreign investors in host states – was in fact used to protect interests of national investors against their own state.”
… the ECT’s inconsistency with the rule of law, which rests on the idea of equal treatment – that every individual, regardless of wealth and power, has an equal right to bring a case to court. The ECT however creates a parallel justice system which is exclusively available in practise to certain wealthy investors. This creates the absurd situation where in a repressive regime like Russia, rich tycoons have an extra track for legal redress not available to say, victims of torture or other human rights violations. Rather than advancing the rule of law, this unequal treatment can undermine it even further, for example, by reducing incentives to improve host states’ laws and court systems.
Following its first ECT success, (Vattenfall sued Germany again in 2012, seeking €4.3 billion plus interest for lost profits related to two of its nuclear power plants. The legal action came after the German Parliament decided to speed up the phase-out of nuclear energy following the Fukushima disaster in 2011 and countrywide anti-nuclear protests. Amongst other things parliamentarians ordered the immediate and permanent shutdown of Germany’s oldest reactors, including Vattenfall’s Krümmel and Brunsbüttel plants. Due to several breakdowns, both had already been out of service for several years. The case is ongoing at the time of writing (June 2018).
“The… case demonstrates the potential for claims arising out of a state’s decision fundamentally to change its energy policy for environmental reasons”,
Wendy Miles & Nicola Swan of law firm Debevoise & Plimpton
… puts a lot of taxpayers’ money at stake: Vattenfall’s €4.3 billion claim – the equivalent of one quarter of Germany’s entire 2017 health budget– is one of the largest in the history of investor-state arbitration. By April 2018 the German Government had spent more than €15 million in legal and administrative costs to defend the case. Furthermore, Vattenfall has spent €26 million on its lawyers which it also claims from Germany.
… leaves citizens in the dark: Experts have slammed the German Government for “intentionally leaving the German public out in dark” about the details of Vattenfall’s claim. Despite billions in taxpayers’ money at stake, not a single case document has been publicly released. A small group of elected parliamentarians have access to Germany’s arguments in the proceedings, but only in a high-security building and they are not allowed to reveal anything they see to anyone. While the Government did agree to livestream a 10-day hearing in October 2016, experts questioned the usefulness of that exercise: permanent recordings were only made available for two days while notes were not prepared at all (so people had to watch 8 hours per day for 10 successive days) and viewers had to follow the complex oral arguments without any of the written materials.
… creates VIP rights for foreign investors: Together with German energy giants E.ON and RWE, Vattenfall also sued Germany in its constitutional court. In 2016 the latter upheld the nuclear exit, but condemned the fact that its acceleration did not allow the companies to use formerly allocated electricity output allowances, ordering Germany to find a solution for this problem. Even though Vattenfall obtained justice in German courts, it still continues its parallel ECT claim – possibly counting on a much larger amount of taxpayer money in compensation than would ever be available under German law. Germany’s largest association of judges and public prosecutors has criticised parallel justice systems such as those found in the ECT, which are exclusively available to foreign investors, stating that “the creation of special courts for certain groups of litigants is the wrong way forward”.
Leave A Comment