Energy Charter Treaty and Investor-State Dispute Settlement: Legal Challenges in Energy Transition

Investor-state dispute settlement under scrutiny. In its World Investment Report 2003, the United Nations Conference on Trade and Development (UNCTAD) raised the issue of the tension between the investor-state dispute settlement regime and national policy space. The International Monetary Fund’s Staff Climate Note 2022/007 also pointed out that this regime can act as a brake on the energy transition in the form of regulatory chill or regulatory paralysis. What are the legal challenges of foreign investment in the energy transition? What is the role of regulatory sovereignty in this scenario? This chapter argues that the modernisation of the Energy Charter Treaty highlights the need to redress the tensions between climate change, energy transition, investment protection and investor-state arbitration. It also examines the legal and political context that has led to a subsequent domino effect within the European Union to meet the commitments of the Paris Agreement and the European Green Deal.