Renewables projects: Should you be seeking investment treaty protection?

Ten things which indicate that you should

Cross-border investments in renewables projects are inherently exposed to political risk. Depending on the host state and the nature of the investment, these risks can be substantial. If you are investing in a renewables project outside of your home jurisdiction, you need to consider at the outset the tools available to manage political risk and optimise investment protection.

One such tool is public international law, and particular the collection of international investment treaties that various states
have signed. These treaties can provide invaluable protection for foreign investments, including direct recourse against the host state in the event of its interference with the investment. They also have value short of full blown legal proceedings.

Ensuring investment treaty coverage at the outset of a new renewables project or investment is key – restructuring the project or transaction in order to secure treaty protection at a later date could run the risk of ‘abuse of process’ type defences and ultimately be unsuccessful.

If one or more of the points below apply, investment treaty protection is a relevant concern.

1. You are investing or otherwise involved in a renewables project based outside of your home jurisdiction
2.  You are contracting with a state-owned or controlled entity
3. The project is located in an emerging market or a market in transition
4. The courts in the host state are perceived as being unfair and staffed by inexperienced or less competent judges
5. The legal process in the host state is an inefficient one and one which is potentially subject to government influence
6. The government of the host state has previously interfered with foreign investments e.g. by withdrawing subsidies or other incentives, permits or licences
7. The government of the host state has a history of levying or changing taxes in a manner that adversely impacts foreign investors
8. The host state has ‘form’ for nationalising assets
9.  Foreign investors are treated negatively compared to domestic investors, or investors from other countries
10.  You consider that it might be helpful to have a means of exerting pressure on the government of the host state should problems arise and/or to obtain government assistance if there is local opposition to the project

We can advise you on how best to secure investment treaty protection, as well as how to utilise other tools to manage political risk, including risk insurance, carefully drafted government contracts, crisis management procedures and communications strategies.

Our specialists are available to discuss any of the issues raised in this article, or more generally. See more insights on our Renewable Energy Disputes resources page here.