Investment in international utilities: volatility, risk and public interest
Utilities are undergoing dramatic changes all over the world in response to demand fluctuations, regulations and new technology. Rapid economic growth has sparked a soaring demand for energy in emerging economies in Latin America and Asia. China has surpassed most of the industrialised countries, including the United States, to become the world’s largest energy consumer.
Meanwhile, according to the International Energy Agency, more than two-thirds of the population in sub-Saharan Africa – 620 million people – have no electricity. The International Energy Agency’s executive director has described the situation as an ‘energy poverty crisis’.
In addition to the ever-changing landscape of supply and demand, and new opportunities for investment globally, the structures underlying the utilities industries have seen fundamental transformation through privatisation programmes. Whereas in the past, large state-controlled monopolies controlled utilities from power generation to retail distribution and supply, many countries have dissolved state-controlled structures in favour of privatised services subject to government regulation. Such privatisations have been undertaken for a number of reasons: whether to swell public coffers from privatisation proceeds, increase investment and improve the quality of public services, or relieve the public purse from unsustainable debt burdens.
Foreign investors in utilities face unique problems of regulatory risk and government interference. Privatisation does not cause governments to relinquish intervention. Utilities require the long-term government administration of safety and quality standards, as well as tariff-fixing and pricing formulae that do not have a counterpart in competitive industries.
The privatisation of utilities also presents a host of challenges for governments since utilities control the public’s access to such fundamental human needs as heating, cooking and electricity. Governments must therefore grapple with a potential wave of political unrest due to concerns that private operators – who are not accountable to the public in the same way as a government – will look to their own profit rather than the public good and thus charge higher prices for public services supplied at lower standards.In these battles, a foreign investor is an easy scapegoat for a government, particularly where the privatisation programme was the project of an earlier (often politically adverse) government.
Private investors in the utilities sector normally enter into long-term contracts – indeed, it is not uncommon to see 30 or even 50-year concession contracts for transport or distribution of gas or electricity. This timescale recognises the need for long-term amortisation of heavy up-front investments often needed from private investors to bring a utility back from decades of under-investment by the state. The way in which foreign investors and host governments identify and allocate business and regulatory risk during the life of these contracts thus becomes essential, particularly where the host state of the investment faces political and economic instability.
Managing risk through contractual protections
To plan the scope and size of investments, investors need a degree of regulatory stability. They will base their investment decisions on a particular regulatory regime. Any material change to that regime can have a devastating impact on the economics of the contract. Yet governments often change their minds about the framework governing privatised utilities
The investors have usually made the heavy investment costs in the first years of a concession and are particularly vulnerable to regulatory changes once the investments have been made. Governments in turn see privatised utilities as a cheap and easy target to garner popular support from measures such as tariff freezesor reductions with limited or no cost to the state exchequer. Separately, there may be legitimate regulatory changes for environmental, public health and safety or social reasons that may impact the economics of a contract.
Ideally, to protect against regulatory interference, an investor will negotiate specific contractual protections with a government or government-owned entity known as stabilisation clauses. These will either exempt an investment from a change in the regulatory regime or, more commonly, compensate the investor for such changes so as to retain the ‘economic equilibrium’ of the contract. Investors may also negotiate the possibility of a modification to certain prices or tariffs based on an agreed formula triggered by certain events. The use of such risk allocation mechanisms for future regulatory changes is thus an important means of mitigating regulatory risk. These contractual commitments may provide the foundation for a ‘legitimate’ expectation, which, if breached, may establish the basis of a claim for breach of the ‘fair and equitable treatment’ standard present in most investment treaties.
One example of this allocation of risk is the right in certain gas supply contracts for a party to seek arbitration to establish a new gas price where certain economic changes have occurred. Other contractual arrangements may protect against devaluation of local currency by providing that tariffs are to be calculated in a hard currency such as US dollars even if charged in local currency at the applicable exchange rate.Other clauses link tariffs or prices to the periodic evolution of certain price indices thus maintaining the value of the revenue stream in real terms. Other undertakings are less precise and simply indicate that the investor will have the right to make a ‘reasonable rate of return’.
The limits of arbitrators’ authority in commercial arbitration against a state
A commercial contract between an investor and the state or a state-owned company does not always contemplate the types of measures that a government will take during periods of volatility, economic downturn or political change. While arbitrators in commercial arbitration may fill in gaps with resort to general principles of law, or apply principles of municipal law that are common to international lawthey may be constrained by the limits of the contract – and the governing law of the contract – from which they derive their authority.
The following scenario illustrates the potential limits of an arbitrator’s authority based on contract. Let us imagine that an investor has entered into a long-term commercial contract with a government or government entity that contains a tax stabilisation clause subject to the governing law of that state. The state begins imposing abusive tax audits in bad faith, claiming that the investor has been evading taxes, and demanding criminal penalties.
Arbitrators whose authority is limited to the contractual undertakings in a commercial relationship will have to determine whether their contractual authority extends to evaluating the lawfulness of a state’s use of its criminal laws. In this scenario, arbitrators will likely want to avoid injustice and will therefore apply general principles of law such as good faith, pacta sunt servanda, estoppel or unjust enrichment.
In Duke Energy v. Peru, the tribunal, whose jurisdiction derived from a contract, applied principles of estoppel and good faith in rejecting a narrow reading of a tax stability provision and concluded that not only changes in law triggered Peru’s obligations, but also, changes in the way in which a tax was calculated or applied.
Nevertheless, where the contractual bargain is governed by the law of the host state, the host state may simply change the law to avoid its contractual obligations. For example, it may pass a law holding that tax stabilisation measures are unlawful and unenforceable. In that case, while there are arguments based on legal concepts such as fait du prince that would empower a tribunal to compensate an investor for such legal changes, the arbitral tribunal may feel constrained by the provisions of domestic law. In such circumstances, reference to international law as an additional source of legal rights is helpful.
Investment treaty arbitration: ensuring a stable framework for investment under principles of international law
In contrast to this tension that exists in commercial arbitration, investment treaties provide a means for arbitrators to evaluate the sovereign acts of states through the lens of international law. The ability of investment treaty arbitral tribunals to judge the sovereign acts of states (including the modification of its own laws and regulations) is the reason why investment treaty arbitration is controversial.It is also the reason why it is critical for the protection of foreign investment.
Arbitrators examining the rights of foreign investors under investment treaties will examine the contractual bargain as well as principles of the host state’s law as a factual matrix from which the tribunal will determine whether a state has breached an applicable investment treaty. As observed by a tribunal in a dispute concerning Bolivia’s electricity sector, the issue is often to measure whether a modification of rules amounts to a breach of applicable international standards:
First, as regards the claim relating to spot price, the Tribunal is not expected to determine the price that should be applied to generators, but rather to determine whether the modification by Bolivia of the regulatory framework in relation to spot prices frustrated the Claimants’ legitimate expectations in breach of the fair and equitable treatment standard …
Determining whether a modification to a regulatory framework breaches international law requires an understanding of the way in which a foreign investor and a host state have allocated risk and the objective expectations that a government has fostered in order to obtain the foreign investment in the first place.
Material changes to the regulatory regime: undermining legitimate expectations in breach of fair and equitable treatment
The protection of legitimate expectations is often cited as a key component of fair and equitable treatment.Even under the most narrow (and controversial) view of the fair and equitable treatment standard, a violation occurs through ‘the creation by the State of objective expectations in order to induce investment and the subsequent repudiation of those expectations.’
States create objective expectations to induce investment when they seek to attract investment based on specific promises or a specific legal framework. The CMS v. Argentinatribunal considered that the embodiment of certain conditions of the Argentine legislative framework (such as the Gas Law), in the investor’s licence gave rise to a legitimate expectation on the part of the investor that those conditions would be respected. The tribunal observed that it was ‘not a question of whether the legal framework might need to be frozen as it can always evolve and be adapted to changing circumstances, but neither is it a question of whether the framework can be dispensed with altogether when specific commitments to the contrary have been made. The law of foreign investment and its protection has been developed with the specific objective of avoiding such adverse legal effects.’
Similarly, in EDF v. Argentina,the dispute concerned a regulatory framework for the electricity sector designed to attract private investment. The promises of the legislative framework were part and parcel of the contractual commitments given by the state to the investor. The EDF tribunal concluded that because Argentina enacted emergency measures that altered critical currency and cost-adjustment clauses for electricity tariff rates enshrined in the legislative framework and licence, and because Argentina failed to renegotiate or remedy these changes once the 2001–2002 economic crisis calmed, Argentina was liable for a breach of fair and equitable treatment for having fundamentally altered the legal framework upon which the investor had relied when making its investment.
The ‘roller-coaster’: failure to afford a rational or
stable investment framework
Tribunals have also found that a state’s failure to afford an investor a stable and rational framework for investment may give rise to a breach of the fair and equitable treatment standard.
PSEG v. Turkeyconcerned a failed electricity project marked by changes in the regulatory framework. As a result of the growing demand for electricity in Turkey in the 1980s, the Turkish government passed laws authorising private companies to establish facilities for the generation of electricity that they could sell to the state. Turkey provided a number of incentives, including a treasury guarantee and long-term energy sales agreements. In 1994, PSEG was granted an authorisation to conduct a feasibility study into the building of a coal-fired power plant and an adjacent coal mine. It signed an implementation contract and a concession contract with Turkey. A dispute arose between the parties as to whether the concession contract included a final agreement on key commercial terms. The parties also disagreed about the scope and content of the commercial terms, and the appropriate corporate structure for implementation of the project, a factor that carried important tax consequences. While those disagreements were brewing, changes occurred to Turkey’s legal framework, including a new law that eliminated the possibility for the investor to obtain a treasury guarantee for the project. Although construction on PSEG’s proposed coal mine and power plant never commenced, the company claimed to have expended millions of dollars on an initial feasibility study, follow-up studies and several rounds of negotiations with government agencies based upon its reasonable reliance on the regulatory framework.
The tribunal found that Turkey was responsible for breaching the fair and equitable treatment provisions of the Treaty arising from its failure to conduct negotiations in a proper way and other forms of interference by the Turkish state.The tribunal observed that ‘[s]tability cannot exist in a situation where the law kept changing continuously and endlessly, as did its interpretation and implementation. . . . In this case, it was not only the law that kept changing but notably the attitudes and policies of the administration.’ The tribunal described the legislative changes that occurred in Turkey as having a ‘roller-coaster’ effect on the investment.
In Total v. Argentina,Total argued that Argentina’s ‘abandonment of [a] uniform spot price in the electricity sector’ so altered the legal regime relating to electricity spot prices that Argentina’s conduct violated the fair and equitable treatment standard of the underlying investment treaty. The Total tribunal agreed with the investor, finding that Argentina had failed to provide a stable framework for investment with respect to power generation. While the tribunal observed that the Electricity Law did not constitute a ‘guarantee’ of stability, Argentina’s actions breached the treaty’s fair and equitable treatment standard because they were incompatible with basic principles of economic rationality, public interest, reasonableness and proportionality, and violated Total’s reasonable expectations on the system’s guiding principles.
According to the tribunal in Total, even in the absence of a specific contractual undertaking, a host state may violate fair and equitable treatment through the imposition of an unreasonable framework that undermines objective notions of fairness and rationality. Principles of the host state’s own law on utilities may also be taken into account when determining what is reasonable and fair under international law.
In Windstream v. Canadathe dispute concerned a 20-year contract for the development of an offshore wind energy project in Lake Ontario, which according to the investor was unfairly cancelled when the Ontario government announced a moratorium on offshore developments in February 2011 based on scientific concerns. The tribunal did not find that the decision to impose a moratorium on offshore wind development, or the process that led to it, were in themselves wrongful. However, the tribunal determined that the government had done ‘little to address the legal and contractual limbo in which Windstream found itself after the imposition of the moratorium’. In particular, in the tribunal’s opinion the government had failed to clarify the situation, either by promptly completing the required scientific research on offshore and establishing the appropriate regulatory framework for offshore wind and reactivating Windstream’s contract, or by amending the relevant regulations so as to exclude offshore wind altogether as a source of renewable energy and terminating Windstream’s contract in accordance with the applicable law. As a result, the tribunal found that Canada’s conduct towards Windstream during the period following the imposition of the moratorium was unfair and inequitable.
These decisions echo the observation by the late Ian Brownlie that a foreign investor ‘cannot be expected to accept a distorted and unforeseeable manipulation of the legal procedures of the host State’.Whether events may be deemed ‘foreseeable’ business risks may depend on the nature of investment and the type of commitments given by a host state. Where promises are made or objective expectations of a reasonable framework for investment are fostered by a state, they acquire a status under international law that cannot simply be extinguished through a host state’s domestic law.
Utilities face some unique problems of exposure to expropriation risk as well as challenging questions of valuation when that occurs. Investments in the utility sector require massive up-front investments usually made in the initial years of the licence or concession. This gives rise to opportunistic incentives on the part of governments to expropriate, particularly where political interests and public pressures are in play.Governments have the incentive to expropriate sunk assets because the direct costs of doing so may be offset by the short-term political benefit of reducing the costs of a public service.
As observed by Bergara, Henisz and Spiller:
[I]ncentives for expropriation of sunk assets should be expected to be largest in countries where there are no formal or informal government procedures required for regulatory decision making; where regulatory policy is centralized in the administration; where the judiciary does not have the tradition or power to review administrative decisions; and where the government’s horizon is relatively short.
A number of the factors described above were at the heart of the parties’ dispute in Guaracachi America Inc and Rurelec PLC v. Bolivia.Bolivia had argued that the expropriation of Empresa Eléctrica Guaracachi SA (EGSA) was lawful because Bolivia had assessed the value of the assets it expropriated, but had found that EGSA had a negative value. Therefore, according to Bolivia, because EGSA had a negative value at the time of the taking, no compensation was due, and the expropriation was lawful. The tribunal disagreed, finding that compensation was indeed due and Bolivia had expropriated the investment unlawfully by failing to provide ‘just and effective’ compensation as required under the UK–Bolivia BIT.
The tribunal observed that:
[A]ny State which carries out an expropriation is expected to accurately and professionally assess the true value of the expropriated assets. Bolivia did not actually compensate (or intend to compensate) Rurelec as it did not make an accurate assessment of EGSA’s value at the time. In fact, it did quite the opposite, and if the Tribunal finds the valuation to be ‘manifestly inadequate’, this is Bolivia’s responsibility. As will be explained further below, this is in fact the case, and the expropriation was therefore illegal.
The Rurelec case thus stands for the notion that an uncompensated expropriation is per se illegal where it is objectively clear that compensation is owed. It also demonstrates the critical need for independent valuation of expropriated assets by neutral arbitral tribunals in the context of foreign investment disputes.
What the future holds for utilities arbitrations: greater regulatory scrutiny and concern over the public interest
Utilities necessarily implicate the public interest and government regulation. They raise concerns over safety, the environment and national security. Nuclear plants still operate under the shadow of the Three Mile Island, Chernobyl and more recently, the Fukushima nuclear disasters. Japan, Germany and Switzerland have recently called for a phase-out of nuclear power. The European Council agreed in October 2014 to commit the EU to a target of 27 per cent of energy consumed by 2030 to come from renewables.Cases in these new sectors are already being decided. For example, government incentives to encourage the installation of renewable energy sources such as solar power in Spain, Italy and the Czech Republic recently backfired when they resulted in oversupply and cost overruns that had to be picked up by the state. Subsequent retroactive withdrawal of the incentives that had underpinned the investments has given rise to a wave of investment claims. Notably, several arbitral tribunals dealing with this particular issue held that, despite the fact that states have a broad legitimate power to regulate, they cannot ‘drastically’ or ‘fundamentally’ change the resulting regulation so as to deprive the investors of the value of their investment. As remarked by the Eiser v. Spain tribunal:
[T]he Tribunal does not question Respondent’s sovereign right to take appropriate regulatory measures to meet public needs [such as a tariff deficit]. However, it must do so within the international legal framework it accepted when it adhered to the [Energy Charter Treaty] including the obligation to provide compensation for any breach of its commitments under the Treaty.
In addition to an increased focus on cleaner energy and the environment, governments throughout the world are concerned over the possibility of cyberattacks on energy grids.Questions of how private investors will remain accountable to the public will thus continue to be critical for utilities investments.
All of these developments will result in new technology, regulations, players and risks in an already complex landscape. International arbitration will continue to play an important role in settling complex utilities disputes peacefully under contracts and investment treaties. Nevertheless, international arbitration is at a critical juncture. The backlash against investment treaty arbitration, arising out of concerns over the potential chilling effect that international arbitration has on the regulatory state,are likely to result in changes to arbitration procedure. We are already seeing an increased focus on the ethics of arbitrators through soft law, amendments to arbitration rules as well as significant changes to the standards of investment treaties.
Demands for greater transparency are particularly acute when public services are in question. These demands have already resulted in a number of important developments, including the amended ICSID Rules of 2006, which provide for the possibility of amicus curiae participation. More recently, UNCITRAL’s 2013 Transparency Rules and the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (New York, 2014) (the Mauritius Convention on Transparency)together allow states to opt in to apply rules of greater transparency, including public access to pleadings and hearings in investment treaty arbitration. In some cases, the investor and the state have voluntarily agreed to apply best practice transparency standards irrespective of the terms of the underlying treaty. This type of agreement on transparent practice occurred in Rurelec v. Bolivia, where all pleadings were published on the website of the Permanent Court of Arbitration.
Calls for increased transparency in investment arbitration are spilling over into commercial arbitration. At a recent ICCA conference in Hong Kong, participants discussed the need for commercial arbitration to follow investment arbitration’s lead by becoming more transparent and publicly accessible.
In today’s modern age of rapid access to information, the decentralised and confidential nature of international arbitration creates concern. The concerns over a democracy deficit in international arbitrationare particularly relevant for utilities disputes in light of their impact on public needs and the environment.
In this respect, it is noteworthy that Urbaser v. Argentina decided to hear human rights issues in a counterclaim brought by Argentina for the alleged violation of non-investment international law norms. In determining that it had jurisdiction, and prior to dismissing the counterclaim, the tribunal reasoned that the mere fact that the cause of action for the counterclaim was the alleged violation of human rights norms, did not, prima facie, entail that it was not related to the investment under dispute.
Determining whether a government’s regulatory exercise is abusive or legitimate is a significant challenge for all arbitral tribunals. The new generation of investment treaties, in addition to providing for more public access to the arbitration procedure itself, establish more reservations and exclusions that purport to limit the types of claims that may be arbitrated. For example, many modern treaties exclude the possibility that good faith environmental measures constitute an indirect expropriation.These exclusions will result in unique fact-finding challenges to determine a state’s motive in regulating utilities.
 Nigel Blackaby is a partner at Freshfields Bruckhaus Deringer US LLP. The author would like to thank Nicolás Córdoba, who assisted with this revised version.
 BP Statistical Review of World Energy 2018, p. 8 (www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review/bp-stats-review-2018-full-report.pdf). Total primary energy consumption of China was 3132 million tonnes of oil equivalent compared with 2235 million tonnes of oil equivalent for the United States.
 H. Woss, A. San Román Rivera, S. Dellepiane, ‘Damages in International Arbitration Under Complex Long-Term Contracts’ (2014), Chapter 3, The Nature of Complex Long-Term Contracts, p. 37.
 See, e.g., Ben Holland & Phillip Spencer Ashley, ‘National Gas Price Reviews: Past, Present and Future, Journal of Energy’, Natural Resources & Environmental Law, 30 (No. 1), 2012, p. 29. See also, William W. Park, ‘The Predictability Paradox: Arbitrators and Applicable Law, in the Application of Substantive Law by International Arbitrators’, Dossier XI of the ICC Institute of World Business Law (ICC Publication No. 753E), p. 67.
 As was the case in Argentina for over a decade.
 This was the case in electricity and gas distribution contracts signed by Argentina following privatisation of those utilities in the early 1990s..
 In the BP arbitration, Judge Lagergren applied a detached system of general principles of law. BP Exploration Company (Libya) Limited v. The Government of the Libyan Arab Republic, Award dated 10 October 1973, 53 ILR 297 (1973). In the TOPCO and LIAMCO arbitrations, sole arbitrators Dupuy and Mahmassani applied a system of municipal law, i.e., principles of Libyan law on the basis of their commonality with principles of international law. Texaco Overseas Petroleum & California Asiatic Oil Co. (TOPCO) v. The Government of the Libyan Arab Republic, Award dated 19 January 1977, 17 ILM 1 (1978) and Libyan American Oil Company (LIAMCO) v. The Government of the Libyan Arab Republic, Award dated 12 April 1977, 20 ILM 1 (1978).
 In the Lena Goldfields case, where the arbitrators derived their jurisdiction from a mining concession between a British investor and the Soviet Union, the tribunal applied principles of unjust enrichment to award damages for what was an unlawful confiscation. The Arbitration between the Lena Goldfields, Ltd and the Soviet Government, Award dated 3 September 1930, 36 Cornell Law Quarterly 31, 51 to 52 (1950).
 Duke Energy v. Peru, ICSID Case No. ARB/03/28, Award dated 18 August 2008, para. 227. In particular, the tribunal found that Peruvian law encompassed obligations of good faith, which had not been met by Peru in this case.
 See, e.g., The Backlash Against Investment Arbitration, Balchin, Chung, Kaushal, Waibel, 2010; see also Gus Van Harten, Investment Treaty Arbitration and Public Law, Oxford University Press, 2007.
 See Michael Reisman, ‘Fifteenth Annual Grotius Lecture Response’, American University International Law Review 29 no. 5 (2014): 1003- 1008 at 1004. Professor Reisman observed that interference with sovereignty is the reason why international tribunals such as investment treaty tribunals and human rights tribunals exist.
 Guaracachi America Inc. and Rurelec PLC v. Bolivia, UNCITRAL Award dated 31 January 2014, para. 253. Available at www.italaw.com/cases/518. (dictum).
 According to the Generation Ukraine tribunal, ‘the protection of [legitimate expectations] is a major concern of the minimum standards of treatment contained in bilateral investments treaties.’ Generation Ukraine v. Ukraine, ICSID Case No. ARB/00/9, Award dated 16 September 2003, para. 20.37, 44 I LM 404 (2005). Also available at: www.italaw.com/cases/482. See also, Saluka v. Czech Republic, Partial Award dated 17 March 2006, para. 309, available at www.italaw.com/cases/documents/963. The International Court of Justice, in deciding whether states can be responsible for breach of legitimate expectations of another state, noted that ‘references to legitimate expectations may be found in arbitral awards concerning disputes between a foreign investor and the host State that apply treaty clauses providing for fair and equitable treatment.’ Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile), International Court of Justice, Judgment, 1 October 2018, para. 162. Available at https://www.icj-cij.org/en/case/153/judgments.
 See, Michael Reisman, ‘“Case Specific Mandates” versus “Systemic Implications”: How Should Investment Tribunals Decide? – The Freshfields Arbitration Lecture’, 29(2) Arb. Int’l 131 (2013).
 Glamis Gold, Ltd. v. United States of America, Award dated 8 June 2009 at para. 22. Available at www.state.gov/
 CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award dated 12 May 2005, 44 I LM 1205. Also available at www.italaw.com/cases/288.
 Id, para. 277.
 EDF International S.A. et al. v. Argentina, ICSID Case No. ARB/03/23, Award dated 11 June 2012, available at www.italaw.com/cases/372.
 PSEG Global et al v. Republic of Turkey, ICSID Case No. ARB/02/5, Award dated 4 June 2004, 44 I LM 465 (2005).
 Id., para. 254.
 Id., para. 250.
 Total S.A. v. The Argentine Republic (ICSID Case No. ARB/04/1), Decision on Liability, 27 December 2010. Available at www.italaw.com/cases/documents/1106.
 Id., paras. 325–327.
 Id., para. 333.
 Windstream Energy LLC v. Government of Canada (PCA Case No. 2013-22), Award, 27 September 2016, available at: http://www.italaw.com/cases/1585#sthash.T3MS2aJz.dpuf.
 Id, para. 376.
 Id, para. 379.
 Ian Brownlie, Treatment of Aliens: Assumption of Risk and the International Standard in International Law and Economic Order: Essays in Honour of F.A. Mann on the Occasion of his 70th Birthday on August 11, 1977 at 319. Professor Brownlie made this statement as a ‘provisional expression of view’ in the context of an essay concerning whether aliens may be said to assume certain risks under international law. He observed that ‘[i]t may be the case – this is a very provisional expression of view – that the principle of assumption of risk does not apply to cases of dolus or abuse of rights.’ Id.
 It should be noted, however, that tribunals also expect investors to exhaustively analyse the applicable framework before they make their investment as part of their due diligence in a highly regulated industry such as energy. Charanne BV and Construction Investments SARL v. the Kingdom of Spain, SCC Arbitration No. 062/2012, Award dated 21 January 2016, para. 507, available at http://www.italaw.com/sites/default/files/case-documents/italaw7047.pdf.
 Mario E. Bergara, Witold J. Henisz and Pablo T. Spiller, Political Institutions and Electricity Investment: A Cross Nation Analysis, California Management Review, Vol. 40, No. 2, Winter 1998, pp. 19-20.
 Id, p. 20.
 Id, p. 20, citing D. Salant, ‘Behind the Revolving Door: A New View of Public Utility Regulation’, Rand Journal of Economics, 26/3 (1995), inter alia.
 Guaracachi America Inc. and Rurelec PLC v. Bolivia, UNCITRAL Award dated 31 January 2014, para. 441, available at www.italaw.com/cases/518.
 Id, para. 441.
 European Council, Conclusions 23 and 24 2 014, EUCO 169/14, CO EUR 13 C OCL 6, www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145397.pdf; See also Editorial, ‘Looking Ahead: The Top Ten Energy and Natural Resources Issues in 2015’, Journal of Energy & Natural Resources Law, Vol. 33, No. 1, 1-9, p. 2.
 See, e.g., Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain (ICSID Case No. ARB/14/1), case details available on ICSID’s website at https://icsid.worldbank.org/apps/icsidweb/cases/Pages/casedetail.aspx?caseno=ARB/14/1. See also, Leo Szolnoki, ‘Spain sees new solar claim at ICSID’, Global Arbitration Review, 27 May 2014, available at http://globalarbitrationreview.com/article/1033418/spain-sees-new-solar-claim-at-icsid.
 See, e.g. Antin Infrastructure Services Luxembourg sàrl and Antin Energia Termosolar BV v. Kingdom of Spain (ICSID Case No. ARB/13/31), Award, 15 June 2018, para. 637: Masdar Solar &Wind Cooperatief u.a. v. Kingdom of Spain (ICSID Case No. ARB/14/1), Award, 16 May 2018. paras . 562-563; Antaris Gmbh and Dr Michael Göde v. Czech Republic (PCA Case No. 2014-01), Award, 2 May 2018, para. 437; Novenergia II – Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Kingdom of Spain (SCC Case No. 2015/063) Award, 15 February 2018, para. 654; Eiser Infrastructure Ltd and Energía Solar Luxembourg Sàrl.v. Kingdom of Spain (ICSID Case No. ARB/13/36) Award, 4 May 2017, paras. 362, 425; Blusun SA, Jean-Pierre Lecorcier and Michael Stein v. Italian Republic (ICSID Case No. ARB/14/3), Award, 27 December 2016, para 373; Isolux Infrastructure Netherlands, BV v. Kingdom of Spain (SCC Case No. V2013/153) Award, 12 July 2016, para. 788.
 All these cases were decided upon ‘legitimate expectations’ created by the host in favour of the investor. See, Novenergia II – Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Kingdom of Spain (SCC Case No. 2015/063) Award, 15 February 2018, paras. 652, 654; Eiser Infrastructure Ltd and Energía Solar Luxembourg Sàrl v. Kingdom of Spain (ICSID Case No. ARB/13/36) Award, 4 May 2017, para. 382. See also, Antin Infrastructure Services Luxembourg Sàrl and Antin Energia Termosolar BV v. Kingdom of Spain (ICSID Case No. ARB/13/31), Award, 15 June 2018, paras. 568, 572: Masdar Solar &Wind Cooperatief u.a. v. Kingdom of Spain (ICSID Case No. ARB/14/1), Award, 16 May 2018, para. 521; Antaris Gmbh and Dr Michael Göde v. Czech Republic (PCA Case No. 2014-01), Award, 2 May 2018, para. 437. For an account on lack of responsibility due to the foreseeability of the change, and the non-arbitrary, reasonable, proportionate and ‘in the public interest’ nature of the regulations, see, Charanne BV and Construction Investments SARL v. Kingdom of Spain (SCC Case No. 062/2012) Award, 21 January 2016, paras. 505, 536-539.
 Eiser Infrastructure Ltd and Energía Solar Luxembourg Sàrl v. Kingdom of Spain (ICSID Case No. ARB/13/36) Award, 4 May 2017, para. 425, available at https://www.italaw.com/sites/default/files/case-documents/italaw9050.pdf
 See, e.g., Stephen Heifetz and Michael Gershberg, ‘Why Are Foreign Investments in Domestic Energy Projects Now Under CFIUS Scrutiny?’ Harvard Business Law Review OnLine, Volume 3 (2013), available at http://www.hblr.org/2013/05/why-are-foreign-investments-in-domestic-energy-projects-now-under-cfius-scrutiny/ discussing the United States’ regulation of Chinese investment in U.S. utilities and concerns over cyber-security.
 See, e.g., The Backlash Against Investment Arbitration, Balchin, Chung, Kaushal, Waibel, 2010; see also, Gus Van Harten, Investment Treaty Arbitration and Public Law, Oxford University Press, 2007.
 See, e.g., IBA Guidelines on Conflicts of Interest in International Arbitration (2014), available at http://www.ibanet.org/Publications/publications_IBA_guides_and_free_materials.aspx. The IBA Arbitration Committee is soon to launch a committee on soft law, to regulate all the Guidelines and Rules promulgated by the IBA.
 The United Nations Convention on Transparency in Treaty-based Investor-State Arbitration has only been ratified by Mauritius and Canada so far. It will enter into force once it has been ratified by three signatory states. See the list of states that have signed and ratified this Convention at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2014Transparency_Convention_status.html.
 See Kyriaki Karadelis, ‘Hong Kong summit focuses on south-south trade’, Global Arbitration Review, 14 May 2015, available at http://globalarbitrationreview.com/article/1034459/hong-kong-summit-focuses-on-south-south-trade.
 See, e.g., letter dated 30 April 2015 by Professor Laurence Tribe, Nobel Laureate Joseph Stiglitz and others to Majority Leader McConnell, Minority Leader Reid, Speaker Boehner, and Minority Leader Pelosi concerning the dangers of investor-state arbitration, available at www.citizen.org/documents/letter-senior-legal-experts-oppose-isds.pdf.
 Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Bizkaia Ur Partuzergoa v. Argentine Republic (ICSID Case No. ARB/07/26), Award, 8 December 2016, Para. 1154.
 See, e.g., Annex 10. 11 of the Canada–Honduras Free Trade Agreement concerning indirect expropriation, which provides in section (c) that ‘except in rare circumstances, such as when a measure or series of measures is so severe in light of its purpose that it cannot be reasonably viewed to have been adopted and applied in good faith, a non-discriminatory measure of a Party that is designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, does not constitute an indirect expropriation.’
 One of the best-known investment arbitrations concerning the motive of a state when issuing a regulatory measure is the Methanex case. There the tribunal explored whether the claimant’s inferences could be reasonably supported by testing the claimant’s theory against concrete facts, including scientific expert reports. The tribunal found that the expert testimony went to the heart of the question of whether the USA’s measures, as alleged by Methanex, constitute[d] a ‘sham environmental protection in order to cater to local political interests or in order to protect a domestic industry’. Methanex v. USA, Final award on jurisdiction and merits dated 3 August 2005, para. 41, 44 I.L.M. 1345.