Abstract
Over the last years many governments have implemented economic support mechanisms to encourage investment in renewable sources of energy. For different reasons, some of them recently decided to change or eliminate those incentives, triggering a wave of arbitral proceedings. Investors claim that such legislative changes breach the protection afforded by international investment law, namely the Energy Charter Treaty. These disputes raise a classic problem in investment arbitration: how to strike a balance between foreign investors’ reliance on the regulations that underpin their long-term investments and the host state’s right to adapt regulations to new scenarios. The outcome of these proceedings may limit the freedom of maneuver of states, affecting their ability to pursue public welfare policies. In designing new policies or adjusting existing ones, governments need to take into account that the legal framework that supports renewable energy investment is not confined to national regulations but also includes the standards of protection contained in international investment treaties. States need to adopt a holistic approach to renewable energy policymaking so as to avoid possible clashes between different sets of rules.
Full PaperFernando Dias Simões
Senior Research Associate
Professor Dias Simões is Associate Professor at the Faculty of Law of the Chinese University of Hong Kong (Hong Kong, China)
Summary
Over the last years many governments have implemented economic support mechanisms to encourage investment in renewable sources of energy. For different reasons, some of them recently decided to change or eliminate those incentives, triggering a wave of arbitral proceedings. Investors claim that such legislative changes breach the protection afforded by international investment law, namely the Energy Charter Treaty. These disputes raise a classic problem in investment arbitration: how to strike a balance between foreign investors’ reliance on the regulations that underpin their long-term investments and the host state’s right to adapt regulations to new scenarios. The outcome of these proceedings may limit the freedom of maneuver of states, affecting their ability to pursue public welfare policies. In designing new policies or adjusting existing ones, governments need to take into account that the legal framework that supports renewable energy investment is not confined to national regulations but also includes the standards of protection contained in international investment treaties. States need to adopt a holistic approach to renewable energy policymaking so as to avoid possible clashes between different sets of rules.