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Principle of reasonable and legitimate expectations in international law as a premise for investments in the energy sector

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  • Michał Krzykowski

    (University of Warmia and Mazury)

  • Michał Mariański

    (University of Warmia and Mazury)

  • Jakub Zięty

    (University of Warmia and Mazury)

Abstract

A stable and predictable legal environment is one of the basic factors considered in the investment process. It is of particular importance in the energy sector with its characteristically long-term investments which require substantial financial outlays. It has to be underlined that the nature of energy industry is rapidly changing both from the overall shape of the investment and regulatory models. One can observe that the model of the energy market that used to be based on state monopoly evolved into private or half private structure. However, of the particular importance is the fact that together with liberalisation and privatisation of the market the state becomes an active regulator of the market. It is especially noticeable in renewable energy sector in which governments by anticipating and incentivizing are creating conditions for new investments. Simultaneously, one cannot ignore that the state active regulatory policy may also bring a risk that support for certain investments will last as long as it is necessary to achieve its goals such as environmental protection, the need to strengthen awareness or equalise support costs. Therefore, abrupt change in the legal framework may affect the previously accepted financial set-up of the investment. In extreme cases, the change may make the investment unprofitable and thereby cause damage to the investor. This raises the question as to what legal remedies are available to foreign investors in the event of an unexpected and unjustified revision of the legal environment by the host state, provided that said revision causes damage to the investor. The authors assume the following thesis: the investor’s interests are protected under the principle of reasonable and legitimate expectations established in the framework of international law. The practical aspect of the hypothesis is also related to the question of the legal force of the arguments contained in the cases that were analysed and given as an example in the paper. As the paper analyses the principle of reasonable and legitimate expectations in the framework of international law through the prism of the investments in the energy sector, it is reasonable to verify the hypothesis regarding the effectiveness of the said principle as a legal basis for bringing claims by the investor. By analysing the doctrine itself and the related legislation and judgements, the authors shall attempt to determine when, and under what conditions, it is possible to apply the principle of reasonable and legitimate expectations in order to minimise the regulatory risk of an investment.

Suggested Citation

  • Michał Krzykowski & Michał Mariański & Jakub Zięty, 2021. "Principle of reasonable and legitimate expectations in international law as a premise for investments in the energy sector," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 21(1), pages 75-91, March.
  • Handle: RePEc:spr:ieaple:v:21:y:2021:i:1:d:10.1007_s10784-020-09471-x
    DOI: 10.1007/s10784-020-09471-x
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    References listed on IDEAS

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    1. Tudor, Ioana, 2008. "The Fair and Equitable Treatment Standard in the International Law of Foreign Investment," OUP Catalogue, Oxford University Press, number 9780199235063.
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    Cited by:

    1. Pruethsan Sutthichaimethee & Chanintorn Jittawiriyanukoon, 2022. "Analyzing the Impact of Causal Factors on Political Management to Determine Sustainability Policy under Environmental Law: Enriching the Covariance-based SEMxi Model," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 282-293, July.

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