Italy no longer member of Energy Charter Treaty, hopes to avoid more arbitrations

As of 1 January 2016, Italy has withdrawn from the Energy Charter Treaty (ECT). This means any new investments in the energy sector in Italy are not protected anymore by the ECT, while existing investments will remain protected until 2036. The withdrawal of Italy must be considered a significant setback to the relevancy of the ECT, in particular since also Russia withdrew from the ECT some years ago. The reason for Italy’s withdrawal from the ECT must be found in the rising number of arbitrations that Italy is facing because of its retroactive measures, which it adopted in the renewable energy sector. Apparently, Italy hopes to avoid new disputes by stepping out of the ECT, despite the fact that, as mentioned above, existing investments continue to be protected and allow investors to use the ISDS provisions of the ECT.

An additional reason for Italy’s move can be found by the fact that the European Commission is aiming to prevent European investors from using the ECT against EU Member States, i.e. to prevent intra-ECT disputes. It is for this reason that in the past years the European Commission is actively pushing EU Member States to step out of the ECT. In other words, as is the case with intra-EU BITs, the European Commission wants to make sure that no new intra-ECT cases can be lodged.

GIP can advise you on the optimal investment protection in Italy and many other countries using existing BITs.