Article: The FET Standard between Treaty Reform and ISDS Practice: An Analysis of the Modernized ECT

Abstract

The Modernization of the Energy Charter Treaty (ECT) counts as a prominent attempt to better incorporate climate change considerations into an investment treaty that is highly impactful from a climate change perspective. Among other initiatives, reform efforts in the ECT Modernization have led to amendments of key standards of treatment providing the substantive legal basis for claims by foreign investors. Focusing on the Fair and Equitable Treatment (FET) standard, this article contrasts the new treaty provision under Article 10 of the ‘modernized’ ECT with consolidated interpretations of the FET standard in previous arbitral practice. Building on such a jurisprudential analysis, this article evaluates the extent to which reformed standards of investment protection in the Modernized ECT can lead to an increased likelihood of climate-aligned outcomes in investor-State disputes, thereby providing an analytical assessment as to the potential of the newly introduced ECT provisions on FET – which may also serve as benchmark for further reforms of international investment agreements (IIAs) – to expand regulatory space for host States and support the adoption of more stringent climate policies. Fair and Equitable Treatment, Energy Charter Treaty, Modernization, Investor-State Dispute Settlement, Climate Change, Regulatory Space, Investment Arbitration, Fossil Fuels, Legitimate Expectations, Treaty Reform