Investment Law and Renewable Energy : Green Expectations in Grey Times
The last decade witnessed the emergence of an international market for renewable energy. Foreign investment is particularly important in this field. Governments around the world have implemented economic support mechanisms to encourage private investment, leading a substantial number of companies to invest in renewable energy production. However, for different reasons several countries decided to reduce or eliminate those incentives, unleashing a wave of arbitration claims. Foreign investors are challenging such measures, claiming that they reduce the profitability of their investments in a way which is contrary to the obligations borne by host states under international investment agreements. The crux of the question is whether investors can seek compensation under investment treaties when governments encourage investment via economic support schemes but decide to reduce or eliminate them after the investment is sunk. These disputes raise a classic problem in investment law: 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 circumstances