Originally from American Review of International Arbitration - ARIA

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AN INTRODUCTION TO THE ENERGY CHARTER TREATY
Matthew T. Parish and Charles B. Rosenberg∗
 

I. INTRODUCTION

Global energy demand is forecasted to "quickly resume its upward trend" in
the coming years. In fact, world primary energy demand is projected to increase
by 1.5% per year between 2007 and 2030 – an overall increase of 40%. This
steady growth in demand may translate into increased opportunities for foreign
direct investment by U.S. investors.

Before investing abroad in the energy sector, however, U.S. investors and
their counsel should be aware of the Energy Charter Treaty ("ECT" or "Charter"),
a multilateral treaty that "establishes a legal framework in order to promote longterm
cooperation in the energy field." The primary objective of the ECT is to
"strengthen the rule of law on energy issues, by creating a level playing field of
rules to be observed by all participating governments, thereby mitigating risks
associated with energy-related investment and trade." In other words, the ECT
encourages foreign direct investment in the energy sector by providing
international law protections to such investments. To date, the Charter has been
signed or acceded to by 51 states (the majority being from Europe and Eurasia),
the European Community, and the European Atomic Energy Community.

This article is intended to introduce the ECT to U.S. investors and their
counsel, who may be unaware of the Charter because the United States has not
signed, ratified, or acceded to this treaty. Despite the fact that the United
States is not an ECT member state, U.S. investors may still benefit from the
Charter's international law protections by investing in ECT member states
through foreign subsidiaries and/or joint ventures organized under the laws of
other ECT signatories. This article examines several of the most noteworthy
aspects of the ECT.