International Investment Treaties as a Possible Shield Against Government Cutbacks in Subsidies for the Green Energy Sector

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A number of governments around the world have recently curtailed their incentive schemes for green energy producers. These measures have often led to disruption of the basic economic assumptions of many ongoing or newly completed projects, and have severely impacted the volume of new investments, particularly in the solar energy sector. The deepening of the economic crisis in a few of these countries and their commitments to comply with their respective austerity plans is likely to lead to more governmental interference into the pre-existing aid schemes.

The type of the risk involved in these measures, i.e. political and legislative risk, is typically considered to be immune from standard legal actions available to aggrieved business, at least on a domestic level. International investment treaties may however provide an option for certain parties adversely affected.

International Investment Treaties -

Investments treaties are multilateral or bilateral international agreements, entered into by states to foster the influx of investments. There are currently more than 2500 bilateral investment treaties worldwide, and a number of important multilateral investment treaties, including the North American Free Trade Agreement, the Energy Charter Treaty or the Central American Free Trade Agreement.

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