Energy Charter Treaty (ECT)

One of the few and most important multilateral international treaties in the field of Energy is the Energy Charter Treaty (ECT), which was proposed in 1990 by Ruud Lubbers, who was Prime Minister of Netherlands, based on the idea of fostering East–West cooperation in the energy sector.Today, the Treaty has 54 full members and 44 observer members, with Iran being among the observers.This Treaty aims to provide a legal framework for promoting long-term cooperation in the energy sector, grounded in interaction and mutual benefit.It is based on the following five key pillars:Protection and promotion of energy investments through the development and harmonization of national transactionsFree trade in energy, energy products, and equipment in line with WTO principlesEnergy transitReduction of the environmental impact of energy consumption through improved energy efficiencyEstablishment of dispute resolution mechanisms between states or between states and investors, primarily through arbitrationGiven the protections provided under this Treaty for foreign investments, host countries can effectively reduce investment risks by joining it, thereby encouraging foreign direct investment (FDI) in the energy sector.Conversely, capital-exporting countries benefit from the legal and institutional safeguards of the Treaty, which enable them to sustain their contracts, even in cases where the host country may no longer wish to continue them. This has led to a significant number of investment arbitration cases being brought before international arbitral tribunals under the ECT; a list of which is provided in a separate file.Consequently, a wave of withdrawals from the Treaty has emerged, prompting a process of review and reform that resulted in the creation of the Modernised Energy Charter Treaty (New ECT). The differences between the original and the modernised version are examined in detail in another file.