'Why countries should scrap the Energy Charter Treaty', 13 June 2022

"Member states of the Energy Charter Treaty face a looming deadline. After two years of negotiations to ‘modernise’ the ECT, they must decide by June 24th whether to amend the treaty to align it with climate goals, leave it as is or withdraw from it entirely.

The ECT is the only international investment treaty with a sectoral focus on energy. It has been ratified by 50 countries, predominantly in Europe, since its signing in 1994, and its aim is to promote and protect energy investments among its member states.

Despite that aim, however, European Union member states are toying with the idea of negotiating a co-ordinated withdrawal from the treaty. The EU, labelled by energy firms as ‘anti oil and gas’, seems primarily to want to limit the protections it affords to fossil-fuel firms. Also at issue, however, have been workers’ rights and transparency.

For EU countries, dispute settlement under the treaty is particularly problematic. The Court of Justice of the EU recently found that investor-state disputes between EU investors and member states violated union law. At least some changes may thus be necessary from the EU perspective...

... he costs of the ECT clearly outweigh its benefits. The key claim that such treaties promote investment is not supported by the evidence. Efforts to modernise the treaty do not have substantial support among its signatories and its impact so far has been overwhelmingly to block or delay progress toward climate goals. Rather than continue with the status quo or seek reform, ECT members should simply withdraw—collectively, if possible, but individually if necessary—to decrease the future risk of ISDS claims and facilitate a sustainable energy transition for all."