ECT Arbitration Update: Warning, Restrictions Ahead

Key takeaways:

• An agreement in principle for the modernization of the Energy Charter Treaty ("ECT") and the first arbitral decision to deny tribunal jurisdiction in an intra-EU ECT case have added to the uncertainty about intra-EU ECT arbitration.
• Green Power v. Spain is the first time, in over 60 reported decisions, that a treaty tribunal has unanimously declined jurisdiction in an intra-EU investor-State arbitration on the basis that the arbitration clause is incompatible with EU law. It is too early to tell if this isolated decision announces a shift in arbitral jurisprudence, but it will no doubt create additional uncertainty.
• The recently announced agreement in principle to amend the ECT would further narrow ECT protection. The draft agreement is reported to ban intra-EU ECT arbitration, allow the EU to carve out certain fossil fuel investments from the modernized ECT, and otherwise restrict the ECT's substantive coverage.