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Rule of law | 4th October 2021

Letter to the European Commission: Implications of Komstroy ruling on the Energy Charter Treaty
Rule of law
European Green Deal
Trade

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Letter to the European Commission: Implications of Komstroy ruling on the Energy Charter Treaty

Following a seminal ruling by the EU’s top court, ClientEarth lawyers have today warned the European Commission in a letter that the EU and its Member States must exit the climate-sabotaging Energy Charter Treaty (ECT) or miss its climate goals.

The ECT is an outdated investment treaty which contains a controversial “investor-state dispute settlement” mechanism – a tool which allows companies to bypass national courts and sue states for billions in compensation in secretive tribunals, notably when environmental or climate action affects their economic interests.

A ruling by EU Court of Justice on 2 September 2021 confirmed that using the Treaty’s mechanism for intra-EU investment disputes is not compatible with EU law. But lawyers say this judgment may not stop EU investors and companies from pursuing billions in ‘compensation’ before arbitral tribunals for legitimate regulatory changes, like coal phase-outs, that are urgently needed to meet EU climate targets.

In the letter, ClientEarth lawyers explain why the only solution is for the EU to withdraw from the ECT. The letter is supported by a group of civil society organisations and think thanks: Climate Action Network Europe, Friends of the Earth Europe, International Institute for Sustainable Development, PowerShift, SOMO, Transnational Institute and Veblen Institute.

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