UNCTAD Mapping of PPP-related ISDS cases
Key findings:
Electricity is the most common economic sector in terms of number of known ISDS cases (154) and share of PPPs giving rise to ISDS claims (90%); followed by water and sanitation (36 known ISDS cases, 80% PPP-related); construction (69 ISDS cases, 30% PPP-related); transportation (37 known ISDS cases, 60% PPP-related); and health (see figure II.1).
Figure II.1: PPP-related ISDS cases per SDG sector
Source: © UNCTAD, ISDS Navigator, based on 767 known, treaty-based ISDS cases.
Note: Cases may be mapped twice if they involve two sectors (e.g. many of the power generation/renewable energy protection projects include the construction of the power generation facility).
a. Electricity
Most ISDS cases in the electricity sector arise from PPP projects: of 154 known treaty-based cases mapped in the ISDS Navigator, 139 cases (90%) are PPP-related while the remaining 15 cases (10%) are not (see figure II.2). Some of the mapped cases overlap with cases mapped under the heading of “construction” as many of the power generation/renewable energy protection projects include the construction of the power generation facility.
Figure II.2: Share of PPP-related ISDS cases in the electricity sector (based on 154 cases
Source: © UNCTAD, ISDS Navigator, based on 767 known, treaty-based ISDS cases
- Electricity is particularly relevant for PPPs and PPP-related ISDS claims. The few cases not qualifying as PPP-related are mostly claims arising out of privatization contracts.
- Of particular relevance are the renewable energy cases (investments in solar, wind, and hydropower electricity generation).
- The provision of energy is an essential public service and the generation of renewable energy is an increasingly important priority in light of climate change and the SDGs (Target 7 – Ensure access to affordable, reliable, sustainable and modern energy for all).
- The renewable energy sector typically depends on large, upfront investments, recouped over long periods of time.
- The private sector normally has both the financial capacity and technical expertise for such investments, but needs an investment-encouraging and stable regulatory framework.
- To provide investors with incentives and legal security (stable regulatory regime), many countries have been enacting special incentive or support schemes (such as feed-in tariffs or other subsidies) and usually enter into power purchase agreements with the investor to make projected revenues more predictable.
- Some countries (such as Spain, Italy and the Czech Republic) had to scale back their incentive schemes as a consequence of the global and European financial crisis.
- With some foreign investors affected by the scaling-back, these countries have been hard-hit with ISDS claims and they make up a substantive share of the (pending or concluded) ISDS cases. For more detail see UNCTAD’s ISDS Navigator.
- Most of the current ISDS cases concerning renewable energy have been brought under the Energy Charter Treaty (ECT).
- See here for more detail on the background of the renewable energy cases in Spain and Italy.
b. Construction
- Often, ISDS cases in the construction sector are not PPP-related: this is for example the case for “pure” construction projects (turnkey) where the long-term dimension and/or significant financial risk assumed by the investor may be lacking; or in the case of construction for purely commercial purposes (e.g. private real estate projects, such as construction of hotels, shopping centres, etc.).
- Cases that are PPP-related typically concern the construction of gas or power generation facilities or public infrastructure (roads, bridges, railways, airports).
- Of 69 known, treaty-based cases mapped in the ISDS Navigator, only 19 (28%) are PPP-related, while 50 (72%) are not PPP-related (see figure II.3)
Figure II.3: Share of PPP-related ISDS cases in the construction sector (based on 69 ISDS cases
Source: © UNCTAD, ISDS Navigator, based on 767 known, treaty-based ISDS cases.
c. Transportation
- ISDS cases in this economic sector concern the construction and operation of pipelines, construction, operation and/or maintenance of airports, railways and ports infrastructure.
- Of 37 known, treaty-based cases mapped in the ISDS Navigator, 16 cases (43%) are not PPP-related while 21 cases (57%) are PPP-related (see figure II.4).
Figure II.4: Share of PPP-related ISDS cases in the transportation sector (based on 37 ISDS cases
Source: © UNCTAD, ISDS Navigator, based on 767 known, treaty-based ISDS cases.
d. Water and sanitation
- PPP cases in this sector concern waste management services (waste collection, treatment and/or incineration), the building and operation of hydroelectric power plants and water supply and distribution services.
- Of 36 known, treaty-based cases mapped in the ISDS Navigator, seven are not PPP-related while 29 (80%) are PPP-related (see figure II.5).
Figure II.5: Share of PPP-related ISDS cases in the water and sanitation sector (based on 36 ISDS cases
Source: © UNCTAD, ISDS Navigator, based on 767 known, treaty-based ISDS cases.
e. Health
- Only few ISDS cases have been brought so far in this sector.
- Of three known, treaty-based cases mapped in the ISDS Navigator, two are PPP-related and one is not (see figure II.6).
Figure II.6: Share of PPP-related ISDS cases in the health sector (based on 3 ISDS cases
Source: © UNCTAD, ISDS Navigator, based on 767 known, treaty-based ISDS cases.