Energy transition and investment arbitrage: structural tensions between international protection and state climate action

Abstract

The energy transition has intensified the discussion on the relationship between the international investment protection regime and the climate policies adopted by States. In particular, when these policies aim to progressively reduce or eliminate carbon-intensive activities, they may affect investments protected under international treaties. In this context, the article examines the extent to which the contemporary interpretation of the substantive standards of international investment law, especially fair and equitable treatment and indirect expropriation, affects the potential international responsibility of States before arbitral tribunals in disputes arising from energy transition measures.
The research adopts a doctrinal and analytical legal approach based on the examination of specialized scholarship and relevant arbitral jurisprudence. From this analysis, it is argued that potential State responsibility does not depend solely on the existence of a regulatory change, but also on how such change interacts with the investor’s legitimate expectations, the regulatory context of the energy sector, and the public purpose pursued by the measure. Consequently, the analysis of these disputes requires a contextualized interpretation of the traditional standards of investment protection.