Dispute Settlement

The Energy Charter Treaty contains a comprehensive system for settling disputes on matters covered by the Treaty. The two basic forms of binding dispute settlement are state-state arbitration on the interpretation or application of almost all aspects of the Treaty (except for competition and environmental issues), and investor-state arbitration for investment disputes. There are special provisions, based on the WTO model, for the resolution of inter-state trade issues and the Treaty also offers a conciliation procedure for transit disputes.

The starting point for all these mechanisms is the desirability of an amicable agreement between the parties to any dispute. However, in the event that this does not prove possible, then the Treaty opens a number of additional avenues to promote and reach a settlement.

Dispute settlement mechanisms available under the Energy Charter Treaty
  • Disputes between parties to the Treaty: Article 27 provides for an arbitration procedure for disputes regarding the interpretation or application of the Treaty (except for competition and environmental issues).
  • Disputes between investors and host governments: Article 26 provides various options for investors to take host governments to international arbitration in the event of an alleged breach of the Treaty's investment provisions.
  • Transit disputes: Article 7.7 provides a specialised conciliation mechanism for transit disputes, allowing for a faster and less formal procedure.
  • Trade disputes: Article 29 and Annex D include a mechanism (following closely the WTO model) for settling trade disputes between Energy Charter member countries, provided that at least one of them is not a WTO member.
  • Competition and environmental issues: as far as disputes concerning competition (Article 6) and environmental issues (Article 19) are concerned, the Treaty provides for bilateral (in the case of competition) or multilateral (in the case of environmental protection) non-binding consultation mechanisms.
Use of the dispute settlement mechanisms 

Over the years since the Treaty has entered into force, the investor-state dispute settlement mechanism has a proven operational record. If an investor chooses to bring a dispute to arbitration, there are three possible avenues: the International Centre for the Settlement of Investment Disputes (ICSID - an autonomous international institution with close links to the World Bank); a sole arbitrator or an ad hoc arbitration tribunal established under the rules of the United Nations Commission on International Trade Law (UNCITRAL); or an application to the Arbitration Institute of the Stockholm Chamber of Commerce. International arbitral awards are binding and final, and each Contracting Party is obliged to make provision for the effective enforcement of such awards in its area.

The Secretariat is currently aware of over sixty cases (click on the link for more information) that have been brought by investors to international arbitration.

The frequency with which disputes are brought by investors under the Energy Charter Treaty is increasing, due in part to an increased awareness among energy investors and the legal community about the Treaty. Bringing a case to international arbitration is a last resort for any investor. Nonetheless, the existence of a credible option to take a case to arbitration is important in encouraging member countries to observe their Treaty obligations and in promoting a stable environment for investment in line with the aims of the Treaty.

There has been less recourse to the various state-to-state dispute settlement mechanisms. The Secretariat knows of one case in which a member country has initiated a procedure pursuant to Article 27 of the Treaty. This dispute was settled through diplomatic channels.

Unconditional consent to arbitration, Annexes ID and IA

Under ECT Article 26(3)(a), there are two exceptions to a State's unconditional consent to international arbitration.

Please click here for more information.