CYIL vol. 12 (2021)

CYIL 12 (2021) THE MODERNIZATION OF THE ENERGY CHARTER TREATY TO ENABLE CLIMATE… the prohibition of unreasonable and discriminatory measure, which in the ECT is a stand- alone provision, is the most frequently invoked breach. Moreover, the breach of the FET standard is found in 62% of all cases decided in favour of investor. 68 While most ECT parties agree on the need to clarify the provision, they disagree on a new formulation. The EU proposed a closed list of the most outrageous measures that shall constitute the breach of the FET. 69 The same would be the preference of Turkey. 70 On the other hand, Switzerland favours an open-ended list of FET obligations 71 and Japan does not wish to amend the provision at all. 72 The FET standard has been often interpreted as providing protection to investors’ reliance on a reasonable, transparent, and consistent legal framework of the host state. Based on the EU Proposal the frustration of the investor’s expectation would only be considered a breach of the FET, if the host state made a specific representation upon which the investor relied in deciding to make or maintain the covered investment. 73 Thus, legitimate expectations under the FET will not arise from general legislation and will not give rise to any self-standing substantive obligation. The tribunal may ‘take them into account’ when applying the FET obligation. Further, a breach of another provision of the ECT or of any other international agreement will not constitute a breach of the FET. The EU Proposal further makes no use of the doctrine of proportionality that was applied by a number of tribunals in achieving the balance between investor protection and state’s regulatory space. Several states have already redefined the FET standard in their own international investment agreements and the modernized ECT follows these developments. 74 In this context it is noteworthy that a number of investors in the renewable energy sector relied on the FET standard when states changed their pre-existing investment incentives. The investors were mostly successful with their claims in Spain and Italy and prevailingly unsuccessful in the Czech Republic. It is important to realise that setting the correct balance between an investor’s right to expect regulatory stability and the state’s right to regulate for a public objective will also have an impact on pro-climate measures. Especially, small investors, which do not have as much negotiation power as opposed to big players, would suffer from too high a threshold for finding a breach of the FET and loose protection from being harmed by conniving or discriminatory conduct by host state governments should they not be able to rely on reasonable and justified expectations with respect to stability and transparency of the legal environment of the host state. 68 Statistics of ECT Cases (as of 20/3/2021). Available at: < https://www.energychartertreaty.org/fileadmin/ DocumentsMedia/Statistics/All_statistics_-_20_March_2021.pdf>. Visited on 1 June 2021. 69 Such as denial of justice in criminal, civil or administrative proceedings, fundamental breach of due process, manifest arbitrariness, targeted discrimination on manifestly wrongful grounds, such as gender, race, or religious belief, or abusive treatment such as harassment, duress or coercion. See Article 10 of the EU Proposal. 70 Decision of the Energy Charter Conference. CCDEC 2019 08 STR. 6 October 2019, p. 18. 71 Ibid. 72 Ibid. 73 Article 10 of the EU Proposal. See also Decision of the Energy Charter Conference. CCDEC 2019 08 STR. 6 October 2019, p. 17. 74 E.g., Comprehensive Economic and Trade Agreement (CETA), Brazil-India Bilateral Investment Agreement (2020) or EU-Vietnam Investment Protection Agreement (2019).

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