Italy says goodbye to the ECT

Global Arbitration Review has reported that in early January 2015 Italy has officially notified the Energy Charter Treaty’s depository in Portugal of its intention to withdraw, pursuant to article 47 of the ECT.

The official reason is budget oriented: apparently Italy would like to save costs of its membership of international organizations. The unofficial reasons is the increasing number of arbitrations started by solar power investors against the government’s retroactive cuts in government subsidies.

The impact of this decision on current investments will not be significant. At least, not for the next 20 years.

Pursuant to article 47 of the ECT, the withdrawal will be effective starting in January 2016 (one year after the notice to the ECT’s depository), unless the contracting party indicates another date in the relevant notice. So far, I have not been able to find an official release from the Italian government and verify whether or not this is actually the case. In any event, the ECT’s provisions will continue to be applied for the next 20 years from the date the withdrawal becomes effective.

This means that investors can continue to bring their claims against Italy until January 2036. In particular, Italy’s withdrawal from the ECT should not prevent investors from bringing a claim for last year’s tariff cuts in government subsidies.

Future energy investments shall find protection under the ECT if made before January 2016. Otherwise, it is advisable investors find a way to structure the investment in order to find protection under a bi-lateral investment treaty (BIT).

Same reasoning applies to Italian private investors wishing to invest in other ECT’s Contracting Parties.

There are rumors on Italy’s withdrawal from some bilateral investment treaties. Together with the withdrawal from the ECT, this does not sound promising at all: it would be the umpteenth step backwards, against Italian private investors’ protection abroad and against the opening of our country to foregin investments. Next step, what? Out of the Euro zone?

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