Originally from Investment Treaty Arbitration and International Law Volume 7

I. INTRODUCTION

The scope and content of investment protection treaties have evolved significantly over the past 50 years. However, the entirety of this evolution has been characterized by two overriding purposes: to promote investment while protecting investors. The proposal of an exclusive treaty regime for energy investments – one where an investment is protected under a bilateral investment treaty, or BIT, only if it is not an energy sector investment, which would be subject to a distinct set of protections – is contrary to these fundamental purposes.

This paper will address that proposal through three sections. First, this paper will examine briefly the history of BITs, as well as of the Energy Charter Treaty, or ECT, which is the only energy sector treaty available for comparison, or to act as a model. Notably, while the ECT emerged from a unique and highly politicized set of events, the driving purposes behind the investment protection provisions of the ECT are the same purposes that support all BITs – namely, the promotion of investments, and the protection of investors. This is evident in the fact that the investment protection provisions in the ECT largely mirror those found in various BITs. The significance of such investment protection provisions should not be underestimated: a study conducted in 2007 found that 67% of respondents were influenced either “to a very great extent” (19%) or “to a limited extent” (48%) by “the existence of an international investment agreement (for example, a bilateral investment treaty)” on a company’s decision of where to invest.1 However, as noted below, whether the investment protection is contained in a BIT or the ECT (or another energy sector agreement) seems to make no practical difference.

Second, this paper will demonstrate that the proposed regime – essentially bifurcated investment protection where “energy” and “not energy” investments are addressed under parallel treaty systems – does not make sense, for several reasons. BITs are sufficient to protect investments, and to resolve related disputes, in the energy sector. This fact is observable in two ways: first, energy disputes have in fact been resolved under BITs in the past without difficulty; and second, when tribunals interpret the substantive protections provided to investors through the ECT, they refer (either expressly or by implication) to existing interpretations of similar provisions under BITs, the North American Free Trade Agreement, or NAFTA, and other investment and trade agreements.