President Trump's Executive Order on Unleashing American Energy: Potential Foreign Investors' Claims Against the United States

On January 20, 2025, President Donald Trump issued an Executive Order on Unleashing American Energy (the "Energy Order"), which pauses the disbursement of funds allocated through the IRA and IIJA. Below, we outline how this order may impact non-U.S. companies holding investments in the United States and could potentially lead to the initiation of investor-state arbitration claims against the United States. 

The IRA and IIJA established various federal grant and loan programs for developers of green energy-related projects. The Energy Order, which purports to pause funding for such programs, may affect the economic viability of projects that rely on these programs.

Impact on Investors

Multinationals negatively affected by the suspension of IRA and IIJA grants, loans, or other benefits may be able to rely on substantive protections guaranteed to them through bilateral and multilateral investment treaties ("BITs" and "MITs") between sovereign states, which apply, in certain circumstances. Foreign companies that have made investments in the United States, in reliance on IRA and IIJA grant programs, may have a claim under certain BITs and MITs, depending on their nationalities. The United States is a party to more than 50 BITs and MITs in force, including ones with Korea, Singapore, Australia, and many others. 

It is not clear what actions the Trump administration will ultimately take, or what substantive changes may occur, but depending on how the situation develops, foreign investors may be able to initiate international legal proceedings directly against the United States through the investment protection clauses contained in these international treaties. 

If the Trump administration pursues a policy of limiting or curtailing IRA and IIJA benefits, it may give rise to claims for expropriation under such treaties. The loss of such benefits could also contravene the investor's legitimate expectations to a stable legal environment, giving rise to a claim that the United States' treaty obligations to grant investors "fair and equitable treatment" has been breached. And, if such measures were to be applied disproportionately to foreign and domestic investors, this could be deemed a breach of the United States' national treatment and most-favored-nation treatment obligations.

Similar renewable energy incentives were repealed by Spain, Italy, and the Czech Republic (specifically, Spain and Italy reduced feed-in tariffs, while the Czech Republic imposed a new levy and applied faster reductions to feed-in tariffs). Various aggrieved investors have since filed investment treaty arbitration claims against these countries seeking compensation, including:

• 47 claims against Spain;
• 13 claims against Italy; and
• 7 claims against the Czech Republic.

Although many of these proceedings are ongoing, some arbitral tribunals have already rendered substantial awards in favor of investors bringing such claims, although not all claims have been successful and are dependent on the relevant facts.

In addition to providing for grants and loans, the IRA established or expanded tax credits for, among other things, investing in clean energy projects, producing hydrogen and certain clean fuels, and producing batteries, battery-related minerals, and wind and solar power equipment. While these tax credits are not understood to be a subject of the Energy Order, Republicans in Congress have proposed limiting or eliminating them. Depending on the circumstances, any future limitation or elimination of IRA tax credits may also give rise to claims for expropriation under certain BITs and MITs, as discussed above.

In sum, foreign investors that could be negatively affected by President Trump's Energy Order and the policies it represents may be protected by various international treaties with robust substantive investor protections. Foreign investors should therefore analyze their investment's existing corporate structure to determine whether it is protected by an applicable investment treaty. A detailed analysis would be necessary in any such review, as the availability of international law protections and the strength of such protections vary widely from treaty to treaty, with some treaties containing less favorable jurisdictional and/or substantive protections. 

Foreign investors are able to restructure their investments to maximize protections under existing BITs or MITs. While the act of restructuring an investment after it has been made to gain treaty protection is not prohibited, several arbitral tribunals have held that investors cannot gain treaty protection if they restructure their investment after a dispute has become foreseeable. Thus, restructuring has the best chance of being recognized as legitimate if it takes place before any alleged breach occurs or becomes foreseeable.

Whether a valid claim exists is a fact-intensive exercise and depends on the exact language of the particular investment treaty as applied to the investor's particular circumstances. This remedy may be an investor's only recourse, depending on the nature of its injury under the Energy Order, other executive actions, or any other measures ultimately adopted.