International Arbitration in Energy and Mining Disputes: Protection of Foreign Investments in Turkey

Licensing Disputes, State Intervention, Contractual Breaches and Investor-State Arbitration

Turkey occupies a strategically important position in international energy and natural resources markets. Its location between major energy-producing regions and European markets, substantial renewable energy potential, mining reserves, electricity infrastructure, natural gas network and growing demand for energy have attracted significant foreign investment.

Foreign investors may participate in Turkish energy and mining projects through project companies, joint ventures, share acquisitions, concession arrangements, construction and operation contracts, energy-generation projects, mining licences, petroleum exploration rights and various other investment structures.

These investments, however, operate within heavily regulated sectors.

Electricity generation may require licences or pre-licences issued by the Energy Market Regulatory Authority (“EMRA” or “EPDK”). Mining activities are subject to licences, operational requirements and supervision under the Mining Law and the authority of the General Directorate of Mining and Petroleum Affairs (“MAPEG”). Petroleum operations are principally regulated under the Turkish Petroleum Law No. 6491. Mining projects may additionally require environmental approvals, forestry permits, land-use permissions and other governmental authorisations.

This regulatory intensity creates a particular category of legal risk.

A foreign investor may face:

• cancellation or non-renewal of a licence;
• revocation of a mining permit;
• refusal of an operational authorisation;
• changes in tariffs or energy-market regulations;
• government interference with a project;
• suspension of construction or production;
• environmental or forestry restrictions;
• termination of investment or concession agreements;
• discriminatory regulatory measures;
• restrictions on transfers or project revenues;
• government failure to honour contractual commitments; or
• measures that substantially deprive the investor of the economic value of its investment.

Not every regulatory dispute, however, constitutes an international investment dispute.

The critical legal question is whether the investor possesses a valid international legal basis for protection and whether the conduct complained of amounts to a breach of that protection.

Turkey’s investment protection framework therefore needs to be examined at three different levels:

1. Turkish domestic law;
2. contractual arbitration mechanisms; and
3. international investment treaties, including bilateral investment treaties (“BITs”) and the Energy Charter Treaty (“ECT”).

Understanding the distinction between these mechanisms is fundamental for foreign investors operating in the Turkish energy and mining sectors.

1. Foreign Investment Protection Under Turkish Law

The principal general legislation governing foreign investment is the Foreign Direct Investment Law No. 4875.

The Law adopts several core principles relevant to foreign investors. Unless otherwise provided by international treaties or special legislation, foreign investors may invest freely in Turkey and are generally subject to equal treatment with domestic investors.

Law No. 4875 also provides protection against expropriation and nationalisation except where required by public interest and accompanied by compensation in accordance with due process.

Foreign investors are additionally permitted to transfer abroad profits, dividends, proceeds from the sale or liquidation of investments, compensation payments and certain other investment-related funds through banks and financial institutions.

Importantly, Article 3 of Law No. 4875 also recognises arbitration as a possible dispute-resolution mechanism. For disputes arising from private-law investment agreements and investment disputes arising from public-service concession agreements concluded with foreign investors, the parties may, subject to the applicable legal requirements, agree on domestic or international arbitration or other dispute-resolution mechanisms.

Foreign investment legislation therefore creates an important domestic framework, but it should not be confused with treaty-based investor protection.

An investor seeking international arbitration against Turkey must generally identify an independent legal source establishing Turkey’s consent to arbitration.

That consent may arise from:

• a bilateral investment treaty;
• the Energy Charter Treaty;
• another international agreement containing investment protections; or
• an arbitration clause contained directly in an investment or concession agreement.

Without valid consent, international arbitration cannot normally proceed.

2. Turkey’s Bilateral Investment Treaty Network

Turkey has developed a substantial network of bilateral investment treaties.

UNCTAD’s Investment Policy Hub records a large number of Turkish BITs and treaties containing investment provisions, although their status differs considerably: some are in force, some have been signed but have not entered into force, and some older treaties have been replaced or terminated.

This distinction is critical.

The existence of a treaty signed between Turkey and the investor’s home state does not automatically mean that the treaty is legally operative.

Before commencing arbitration, counsel must determine:

• whether the treaty has entered into force;
• whether it was in force when the investment was made;
• whether it remained in force when the alleged state measure occurred;
• whether a survival or “sunset” clause applies following termination;
• whether the claimant qualifies as an “investor” under the treaty;
• whether the relevant assets constitute a protected “investment”; and
• whether the treaty contains valid investor-State arbitration consent.

BIT protections vary from treaty to treaty.

Common protections may include:

Fair and Equitable Treatment (“FET”)

This may protect investors from seriously arbitrary, inconsistent or procedurally unfair governmental conduct. Depending on the wording of the treaty and applicable jurisprudence, issues involving transparency, due process and legitimate expectations may arise under the FET standard.

Protection Against Expropriation

Treaties commonly protect against unlawful direct and indirect expropriation.

Direct expropriation ordinarily involves a formal transfer or taking of property.

Indirect expropriation is more complex. Government ownership may not formally change, but governmental measures may allegedly deprive the investor of substantially all meaningful economic use or value of its investment.

National Treatment

A foreign investor may be protected from being treated less favourably than comparable domestic investors in circumstances covered by the treaty.

Most-Favoured-Nation Treatment

Depending on treaty language, investors may receive protection against less favourable treatment compared with investors from third states.

Free Transfer of Funds

Many investment treaties protect the ability to transfer investment-related funds, profits and compensation.

Protection Against Arbitrary or Discriminatory Measures

Certain treaties expressly prohibit unreasonable, arbitrary or discriminatory interference with protected investments.

Umbrella Clauses

Some treaties provide additional protection for specific obligations assumed by the host state in relation to an investment.

However, none of these standards should be assumed to exist without examining the actual treaty applicable to the investor.

3. Energy Charter Treaty Protection

For foreign investment in the energy sector, the Energy Charter Treaty may create an additional layer of protection.

Turkey signed the ECT in 1994, ratified it in 2001, and the Treaty entered into force for Turkey on 4 July 2001. Turkey remains listed by the Energy Charter Secretariat among the Contracting Parties.

The ECT establishes an international legal framework specifically addressing energy investment, energy trade and related matters.

Its investment provisions address risks including discrimination, expropriation and nationalisation, certain breaches concerning investments, restrictions on transfers and other forms of governmental interference.

Article 26 of the ECT provides a mechanism for resolving disputes between qualifying investors and Contracting Parties. Subject to the applicable conditions, international arbitration mechanisms may include ICSID arbitration, UNCITRAL arbitration and arbitration under the Stockholm Chamber of Commerce framework.

The ECT is particularly relevant to projects involving activities within the energy sector.

It must not, however, be treated as a general treaty protecting every mining project.

A conventional gold, silver or metal-mining investment, for example, may principally depend upon a relevant BIT rather than the ECT. By contrast, investments concerning energy resources and activities falling within the Treaty’s energy-sector definitions may potentially benefit from ECT protection.

The classification of the investment must therefore be examined carefully before relying on Article 26.

4. ICSID Arbitration and Turkey

Turkey is a Contracting State to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, commonly known as the ICSID Convention.

The Convention entered into force for Turkey on 2 April 1989.

ICSID has become one of the most important forums for investment disputes involving Turkey, including disputes relating to electricity, renewable energy, mining, natural gas and infrastructure projects.

ICSID jurisdiction, however, does not arise merely because Turkey and the investor’s home country are ICSID Contracting States.

There must still be valid consent to ICSID arbitration.

This consent may be contained in:

• a BIT;
• the Energy Charter Treaty;
• another investment agreement; or
• a direct arbitration agreement between the investor and the Turkish State or relevant entity.

Jurisdiction also requires a qualifying legal dispute arising directly out of an investment and satisfaction of the nationality requirements under the Convention.

Investor nationality therefore becomes strategically important.

Corporate structure should be reviewed before the dispute arises. Restructuring an investment after a dispute has become foreseeable merely to gain access to treaty protection may create serious jurisdictional objections and potential allegations of abuse of process.

5. Licence Cancellation in the Turkish Energy Sector

Electricity generation in Turkey is heavily dependent on regulatory authorisations.

EPDK explains that an investor intending to conduct electricity-generation activities generally obtains a pre-licence, during which the investor completes the approvals, permits and other requirements needed before investment construction proceeds, and subsequently obtains a generation licence allowing generation activities under Electricity Market Law No. 6446.

Consequently, regulatory problems concerning pre-licences and generation licences can have substantial financial consequences.

A project may already have involved:

• acquisition of project rights;
• land expenditure;
• engineering costs;
• financing commitments;
• equipment orders;
• grid-connection arrangements;
• shareholder funding;
• environmental expenditure; and
• construction preparations.

The loss of a regulatory authorisation can therefore impair a project worth many millions of dollars.

From a Turkish public-law perspective, an EPDK decision is an administrative measure and may, subject to the applicable rules, be challenged before the Turkish administrative judiciary. Article 125 of the Turkish Constitution establishes the general principle that judicial review is available against administrative actions and acts.

Investment arbitration asks a different question.

The tribunal does not ordinarily sit as an appellate administrative court deciding whether an EPDK licence should simply be reinstated under Turkish administrative law.

Instead, the tribunal examines whether the State’s conduct breached an international obligation owed to the investor.

A licence cancellation can therefore be:

• lawful under Turkish law and lawful under international law;
• unlawful under Turkish law without amounting to a treaty breach;
• or potentially capable of constituting both a domestic-law violation and an international treaty violation.

The distinction is fundamental.

6. Enel v. Turkey: Regulatory Cancellation Does Not Automatically Equal a Treaty Violation

A highly relevant modern example is Enel, S.p.A. v. Republic of Türkiye, ICSID Case No. ARB/21/61.

The case concerned an Italian investor’s investment in a renewable-energy generation enterprise and claims arising from EPDK’s allegedly unlawful cancellation of a pre-licence for a solar-power project.

The arbitration was brought under the Italy–Turkey BIT.

The tribunal issued its award on 22 July 2025. UNCTAD records that the case was decided in favour of Turkey and that the investor’s treaty claims were dismissed on the merits.

The case illustrates a crucial principle for investors:

the cancellation of an energy licence does not by itself establish international liability.

An investor must prove the specific requirements of the relevant investment treaty.

The existence of commercial loss, regulatory frustration or even disagreement with the regulator’s interpretation of Turkish law is not automatically sufficient.

This is why investment arbitration must be analysed independently from the underlying administrative dispute.

7. Mining Licence Disputes

Mining investments raise similar but often even more complex issues.

The core regulatory framework includes Mining Law No. 3213, regulations implementing that law and MAPEG’s administrative practice. MAPEG identifies Law No. 3213 as the central legislation governing mining activities.

Mining licences do not exist in isolation.

A mining project may also depend upon:

• environmental impact assessment approvals;
• forestry permissions;
• land-access rights;
• operational permits;
• workplace permits;
• rehabilitation obligations;
• royalties;
• licence fees;
• production obligations; and
• other project-specific governmental approvals.

Failure to satisfy statutory obligations may result in serious consequences.

For example, MAPEG announced in June 2026 that, following legislative amendments, certain licence and rehabilitation payments for existing licences had to be paid by the end of June 2026 and warned that failure to make the required payments could result in licence cancellation under Article 13 of the Mining Law.

This demonstrates why regulatory compliance remains critical even for treaty-protected investors.

Investment treaties protect investors against internationally unlawful State conduct; they generally do not exempt foreign investors from complying with valid and non-discriminatory domestic regulation.

8. Alamos Gold v. Turkey: Mining Licences and Investment Arbitration

One of the most significant current examples involving Turkey’s mining sector is Alamos Gold Holdings Coöperatief U.A. and Alamos Gold Holdings B.V. v. Republic of Türkiye, ICSID Case No. ARB/21/33.

The dispute concerns investments in the Kirazlı gold mine project in Çanakkale.

According to UNCTAD, the investors’ claims arose from the alleged non-renewal of mining licences and related permits, which allegedly resulted in suspension of construction activities.

The claim was brought under the Netherlands–Turkey BIT and includes allegations concerning fair and equitable treatment and indirect expropriation. The claimed amount reported by UNCTAD is approximately USD 1 billion.

ICSID currently records the proceeding as pending, with the proceeding having been suspended pursuant to the parties’ agreement on 2 July 2025.

The case is particularly instructive because it demonstrates how a dispute that begins with mining licences and permits under Turkish administrative law may develop into a major international investment arbitration.

It also illustrates why mining investors should examine investment treaty protection long before a regulatory dispute becomes acute.

9. Indirect Expropriation

One of the most significant claims in energy and mining arbitration is indirect expropriation.

Suppose a foreign investor retains formal ownership of its Turkish subsidiary and mining assets.

The State does not physically seize the shares or machinery.

However, a combination of regulatory measures permanently prevents the mine from operating and allegedly destroys the economic value of the investment.

The investor may argue that the effect of the measures is equivalent to expropriation.

International tribunals normally examine factors including:

• the economic impact of the measure;
• the duration of the interference;
• the degree of deprivation;
• the nature and purpose of governmental action;
• the investor’s rights and expectations; and
• the exact wording of the applicable treaty.

The Energy Charter Secretariat itself recognises both direct and indirect expropriation as significant issues under the ECT investment-protection framework.

Nevertheless, ordinary regulation does not automatically constitute expropriation.

States retain sovereign authority to regulate areas including environmental protection, public health, energy security, mining safety and natural-resource management.

The legal issue is therefore usually whether the regulatory action crossed the line from legitimate regulation into conduct for which international law requires compensation.

10. Fair and Equitable Treatment and Legitimate Expectations

In practice, FET claims may be even more important than expropriation claims.

Foreign investors often structure long-term energy projects based on:

• licences;
• government approvals;
• tariff regimes;
• investment agreements;
• official representations;
• concession terms;
• regulatory correspondence; and
• other governmental commitments.

If the governmental framework later changes, the investor may argue that Turkey frustrated legitimate expectations.

However, legitimate expectations should not be understood as a guarantee that the regulatory system will never change.

International investment law does not generally freeze a state’s legislation at the date of investment.

The strength of an investor’s claim may depend heavily on whether the State provided specific assurances directed to the particular investor or investment, rather than merely maintaining a general regulatory regime.

The distinction is especially important in renewable energy, mining and petroleum projects, where investors operate in sectors that are inherently subject to evolving regulatory, environmental and economic policies.

11. PSEG v. Turkey and Regulatory Conduct

An important historical Turkish energy case is PSEG Global Inc. and Konya Ilgın Elektrik Üretim ve Ticaret Limited Şirketi v. Republic of Turkey, ICSID Case No. ARB/02/5.

The dispute concerned a concession arrangement for the construction of a thermal power plant and associated project rights, licences and permits.

UNCTAD records that the tribunal found Turkey in breach of the applicable fair and equitable treatment standard under the Turkey–United States BIT.

The investors reportedly claimed approximately USD 224 million, while the tribunal awarded approximately USD 9 million.

The case remains relevant because it demonstrates that governmental conduct surrounding an energy project may create international liability even where the project is deeply embedded in domestic regulatory and contractual arrangements.

At the same time, the difference between the amount claimed and the amount ultimately awarded demonstrates another recurring feature of investment arbitration:

proving liability does not automatically prove the investor’s valuation of damages.

12. Breach of Contract Versus Breach of Treaty

Energy and mining projects frequently involve contracts with ministries, public authorities, State-owned enterprises or other public entities.

Disputes may arise from:

• payment obligations;
• supply agreements;
• project-development agreements;
• power purchase arrangements;
• concession agreements;
• construction contracts;
• gas supply contracts;
• transportation agreements; or
• government guarantees.

A contractual breach by a State entity is not automatically a breach of international investment law.

The investor must distinguish between:

Contract Claims

These are based upon rights created by the relevant commercial or investment agreement.

and

Treaty Claims

These arise from independent international obligations contained in the applicable investment treaty.

The same underlying factual conduct may potentially generate both types of claims, but the jurisdictional basis, applicable law, remedies and parties may differ.

A contract may designate ICC, ISTAC, LCIA, SCC or ad hoc arbitration, while the investor may separately possess rights under a BIT providing for ICSID arbitration.

Careful coordination is therefore necessary.

13. International Arbitration Law No. 4686

Where international arbitration is seated in Turkey and the dispute contains a foreign element, International Arbitration Law No. 4686 is particularly important.

Article 1 provides that the Law applies where a dispute has a foreign element and the seat of arbitration is Turkey, or where the parties or tribunal have selected the Law to apply.

It also expressly addresses certain arbitration proceedings arising from public-service concession agreements containing a foreign element.

The Law therefore provides the procedural framework for many international commercial arbitrations seated in Turkey.

It should nevertheless be distinguished from ICSID arbitration.

ICSID proceedings derive from the ICSID Convention and operate within a largely self-contained international system rather than as ordinary Turkey-seated arbitration under Law No. 4686.

14. Turkish Administrative Litigation or Investment Arbitration?

When a licence is cancelled, foreign investors often face a strategic question:

Should they immediately commence proceedings before the Turkish administrative courts, initiate treaty arbitration, or pursue both?

There is no universal answer.

Domestic litigation may seek annulment of the regulatory decision itself.

Investment arbitration generally seeks international remedies for breach of the relevant treaty, most commonly compensation.

The applicable BIT may contain provisions concerning:

• cooling-off periods;
• mandatory negotiations;
• local remedies;
• fork-in-the-road clauses;
• waiver provisions; or
• election of remedies.

Accordingly, initiating Turkish litigation without first examining the applicable treaty may create complications.

A foreign investor facing a serious regulatory dispute should therefore conduct a treaty analysis before selecting the first forum.

15. Cooling-Off Periods and Pre-Arbitration Negotiations

Many investment treaties require investors to notify the State of the dispute and attempt an amicable settlement for a specified period before arbitration can be commenced.

These provisions should not be treated as procedural formalities.

An effective notice of dispute should clearly identify:

• the investor;
• the investment;
• the governmental measures challenged;
• the treaty provisions potentially breached;
• the losses suffered;
• the remedy sought; and
• the investor’s willingness to negotiate.

Early dispute strategy may also create an opportunity to resolve licensing or regulatory problems without destroying an operating investment.

The Energy Charter framework similarly encourages amicable resolution and permits mechanisms including negotiation, mediation, conciliation and good offices.

For an operating mine or energy facility, restoring the project may sometimes be economically preferable to obtaining damages years later.

16. Enforcement of International Arbitration Awards

The enforceability of an eventual award is another major consideration.

ICSID Convention awards benefit from a distinctive enforcement regime.

Under Articles 53 and 54 of the ICSID Convention, an award is binding on the parties and its pecuniary obligations must be recognised and enforced by ICSID Contracting States as if the award were a final judgment of their own courts. ICSID awards are subject to the specific post-award remedies contained within the Convention rather than ordinary appeals before national courts.

Sovereign immunity from execution nevertheless remains relevant under Article 55 of the Convention.

Non-ICSID awards operate differently.

Awards rendered under UNCITRAL rules or international commercial arbitration mechanisms generally depend upon domestic recognition and enforcement procedures and applicable treaties.

Turkey is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which entered into force for Turkey on 30 September 1992.

The New York Convention therefore plays a central role in the recognition and enforcement of qualifying foreign arbitral awards.

UNCITRAL arbitration itself does not contain an autonomous enforcement system comparable with ICSID; enforcement generally occurs through national courts under applicable law and treaties such as the New York Convention.

17. Practical Risk Management for Foreign Energy and Mining Investors

International arbitration strategy should begin before a dispute exists.

Foreign investors considering substantial investments in Turkey should conduct a treaty-protection review at the investment structuring stage.

Particular attention should be paid to:

1. the nationality of the investing entity;
2. applicable BITs and multilateral treaties;
3. whether those treaties are currently in force;
4. the definition of protected investment;
5. dispute-resolution provisions;
6. cooling-off requirements;
7. fork-in-the-road provisions;
8. limitation periods;
9. corporate restructuring;
10. contractual arbitration clauses;
11. stabilisation or government-support provisions;
12. licence and permit requirements;
13. environmental compliance;
14. documentary preservation; and
15. enforcement strategy.

The investor should also maintain a complete documentary record of interactions with regulators.

In major disputes, correspondence demonstrating what the regulator promised, required, approved or refused may later become critical evidence.

Board minutes, investment models, financing documents and contemporaneous valuations are equally important for establishing causation and damages.

18. The Most Important Question: Does the Investor Have a Treaty Claim?

When a foreign-owned energy or mining project suffers governmental interference, management understandably focuses first on the economic loss.

Investment arbitration begins elsewhere.

The first legal questions are:

Who is the protected investor?

What is the protected investment?

Which treaty applies?

Was the treaty in force at the relevant time?

Has Turkey consented to arbitration for this category of dispute?

Have all procedural conditions been satisfied?

Only after jurisdiction has been established does the analysis move to substantive questions such as expropriation, FET, discrimination or treaty-protected contractual obligations.

This sequence is crucial.

Even a commercially devastating governmental measure cannot produce a successful investment arbitration if the tribunal lacks jurisdiction.

Conversely, a project structured within an effective investment treaty framework may possess remedies unavailable to a purely domestic investor.

Conclusion

Foreign investment in Turkey’s energy and mining industries operates at the intersection of commercial contracts, Turkish administrative law and public international law.

Licence cancellations, mining-right disputes, regulatory intervention and contractual breaches may initially appear to be domestic Turkish legal problems.

In certain circumstances, however, those measures can also engage Turkey’s international obligations toward foreign investors.

Turkey is a party to the ICSID Convention, the Energy Charter Treaty and an extensive network of bilateral investment treaties. Turkish domestic legislation also recognises international arbitration in appropriate foreign-investment and concession disputes.

Yet international arbitration is not an automatic remedy whenever a foreign investor suffers loss.

A licence cancellation does not automatically amount to expropriation.

A change in regulation does not automatically violate legitimate expectations.

A breach of contract does not automatically become a treaty breach.

And the existence of foreign ownership does not automatically establish ICSID jurisdiction.

Successful investment protection therefore depends on a detailed examination of the applicable treaty, corporate structure, investment history, governmental conduct, domestic regulatory framework and dispute-resolution clauses.

The recent Turkish cases illustrate both sides of the equation.

In Enel v. Türkiye, claims relating to the cancellation of a renewable-energy pre-licence were dismissed in Turkey’s favour in 2025.

In the earlier PSEG v. Turkey arbitration, the tribunal found a breach of the fair and equitable treatment standard in connection with an energy project.

Meanwhile, Alamos Gold v. Türkiye demonstrates how disputes concerning mining licences and governmental permits can develop into billion-dollar-scale investment treaty proceedings.

For foreign investors, the practical lesson is therefore clear:

investment protection should be structured before the investment is made, monitored while the project is operating, and reassessed immediately when serious regulatory intervention occurs.

In energy and mining projects, where licences and governmental permissions may determine the entire economic value of an investment, early treaty planning can be as important as the commercial terms of the investment itself.

This article is intended for general informational purposes regarding Turkish energy, mining and international investment law. It does not constitute legal advice. The availability of investment arbitration depends on the investor’s nationality, corporate structure, applicable treaty, timing of the investment, nature of the governmental measure and the specific dispute-resolution provisions applicable to each case.