The “Green Tariff” Case: Why Ukraine Won the Arbitration Against Modus Energy — and What It Means for the Future of Renewable Energy Investment

In January 2026, Ukraine won an international investment arbitration case against the Lithuanian investor Modus Energy, which had sought €22 million in compensation over the reduction of “green tariffs.”

This ruling became one of the most significant legal signals for the renewable energy market in recent years — not only for Ukraine, but also for investors operating in economies undergoing structural transformation.

Why did the state prevail in a case type it had previously lost? Does this decision signal the end of investment disputes in renewables? And what message does it really send to international investors?

How Ukraine Reached Arbitration: A Brief History of the “Green Tariff”

The renewable energy support model introduced by Ukraine in 2009–2010 was among the most generous in Europe. A fixed “green tariff” denominated in euros and guaranteed until 2030 had one core objective: to rapidly attract capital into a new sector.

This strategy worked:

• thousands of megawatts of solar and wind capacity were built within a few years;

• international funds, banks, and strategic investors entered the market;

• Ukraine became one of the fastest-growing renewable energy markets in Eastern Europe.

However, by 2019 the system began to crack from within:

• payments under the green tariff exceeded the market’s financial capacity;

• the state-backed offtaker accumulated multi-billion-hryvnia debts;

• the power system was not prepared for such a high share of variable generation.

In 2020, the government opted for a retrospective reduction of tariffs — a forced but legally risky decision.

Who Is Modus Energy and Why This Case Matters

Modus Energy is an international investor of Lithuanian origin that owned solar power plants in Ukraine.

The company argued that:

• investments were made based on the expectation of unchanged tariffs until 2030;

• tariff reductions violated the principle of “legitimate expectations”;

• the state breached its obligations under the Energy Charter Treaty.

The €22 million claim became part of a broader wave of renewable-energy arbitration cases against Ukraine.

Why Ukraine Won This Time

1. The Tribunal Recognized the State’s Right to Change Policy

A key shift in the tribunal’s reasoning was the acknowledgment that:

• the green tariff is not an unconditional financial guarantee;

• the state has the right to adjust its regulatory framework in the event of a systemic crisis;

• investment protection does not mean freezing regulation indefinitely.

This approach increasingly appears in modern investment arbitration practice.

2. A Professional Investor Is Not a Naïve Investor

The tribunal paid close attention to the claimant’s profile:

• Modus Energy is a professional energy market participant;

• the company was aware of political and regulatory risks;

• expectations of complete regulatory immutability were deemed economically and legally unjustified.

3. Proportionality of the Measures

The tariff reduction:

• did not destroy the investor’s business;

• did not amount to expropriation of assets;

• formed part of a negotiated compromise aimed at preserving the system’s solvency.

Proportionality became the decisive argument.

What the Arbitration Actually Decided

The international tribunal:

• rejected all key claims brought by Modus Energy;

• did not order Ukraine to pay any compensation;

• confirmed that the state acted within the bounds of permissible regulatory discretion.

As a result, Ukraine is not required to pay €22 million and has significantly strengthened its position in other pending cases.

Why This Decision Matters More Than It Seems

For the State

• a positive arbitration track record is taking shape;

• the risk of cascading compensation claims is reduced;

• room emerges for a transition to market-based renewable support mechanisms (auctions, PPAs, CfDs).

For Investors

• fixed tariffs are not equivalent to “government bonds”;

• contracts, balancing responsibility, and market integration will play a decisive role;

• risk management becomes more important than political promises.

For Ukraine’s Renewable Energy Market

• the era of ultra-high green tariffs is coming to an end;

• focus is shifting toward flexibility, energy storage, and system-level solutions;

• institutional maturity is becoming increasingly important.

Key Takeaway

This case is not about a conflict between “the state and the investor.”
It is about market maturation.

Ukraine has demonstrated that it:

• can acknowledge the shortcomings of earlier policy models;

• is capable of defending its decisions in the international legal arena;

• remains open to investment — but on new, more balanced terms.