Press release: 24 June 2022
Energy Charter Treaty reforms will see fossil fuel companies obstruct climate action for years to come
Members of the Energy Charter Treaty (ECT) today released a short communication on the agreement to modernise the international investment agreement after four years of negotiation.
Amandine Van Den Berghe, ClientEarth lawyer, said: “The EU commission’s modernisation efforts were flawed from the start. Even from the little detail we have on the outcome it is clear the EU commission has failed to bring the ECT in line with the Paris Agreement.
“With a 10-year phase out period for fossil fuel investments, EU countries could still be sued for putting in place progressive climate policies for at least another decade – the key window for action if humanity is to avoid climate catastrophe.
“And even then, the question of when the new treaty will be applied will depend on uncertain and fragile politics.
“The new treaty will also open the door to a wave of financial compensation claims protecting investments in energy sources and technologies raising significant sustainability concerns, such as biomass, hydrogen and carbon capture storage.
The reformed ECT will still contain the old-style investor state dispute settlement (ISDS) system, with no limitations on the amount of compensation companies can be awarded when policies are put in place that impact their profits.
Van Den Berghe added: “While the treaty aims to clarify that the ISDS mechanism cannot be used in disputes between investors seated within the union and member states, it remains to be determined whether the modernised treaty is compatible with EU law.
“The European Parliament and member states should consider seeking the opinion of the top European court on the lawfulness of the new treaty.
“The bottom line is we are still left with a dangerous agreement that will obstruct urgent action to tackle the climate crisis for years to come. The EU must finally do what is necessary for climate and legally right: walk away.”
Notes to editors:
- Next steps: the text of the new ECT still needs to be adopted unanimously by the Contracting at the next Conference of the Parties, and then be ratified by three quarters of the parties before the new treaty enters into force.
- Yesterday the European Parliament voted its report on the future of EU investment policy in which they urge the European Commission to ensure the future ECT immediately prohibits fossil fuel investors from suing EU countries.
- On Wednesday, Spain publicly called for an exit from the ECT over the threat it posed to EU’s climate goals.
- The Dutch parliament also passed a motion Wednesday to withdraw from the treaty.
- A recent legal analysis into the ECT’s compatibility with EU law found that the only way forward for the EU to address the treaty’s legal flaws is to withdraw from it. That study can be found here
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