Today, the energy ministers of the EU made a final decision that the EU would leave the Energy Charter Treaty (ECT). We welcome this historic decision to depart from the most invoked investment treaty. Next, the EU needs to make sure its climate ambition is consistent across its wider investment treaty networks.
The Council decision to leave the ECT came after the European Parliament voted overwhelmingly in favour of the EU’s withdrawal last month. A complex task remains for the next Commission and Member States to decide what to do with individual Member States that want to stay in the ECT after the EU withdrawal. Still, it is a big accomplishment for the Belgian Presidency to finalise the EU exit from the ECT.
The Council also decided today that the EU Member States that are contracting parties to the ECT should not prevent the adoption of the reformed ECT. The adoption of the ECT reform is essential for any Member State to remain in the ECT because no Member State can stay in the current version of the Treaty.
In 2022, the contracting parties agreed in principle to the modernised version of the ECT. However, the previous two Energy Charter Conferences failed to vote on this due to the lack of agreement within the EU. With the Council decision today, voting on the reformed ECT will likely take place this year, either at the regular Energy Charter Conference in November or in an ad-hoc manner beforehand. However, even if the modernised Treaty is adopted, it can take a while until it comes into effect due to the complexity around ratification and provisional application.
The EU’s decision to leave the ECT is an important step forward to align its climate ambition with its investment treaty policy. However, more needs to be done to make this withdrawal meaningful.
Firstly, the EU and Member States that are withdrawing from the ECT will need to initiate a process to neutralise the 20-year sunset clause with the UK, which recently notified its withdrawal. Legal risks would remain for withdrawing countries unless they address the sunset clause. The EU and its Member States are finalising an interpretation agreement to disapply the ECT to intra-EU relations, but this will not affect the UK.
Secondly, the EU and its Member States maintain countless free trade agreements and investment treaties that contain investor-state dispute settlement (ISDS) provisions, which protect fossil fuel investments in the same way as the ECT. If the EU does not address the misalignment of its wider investment treaty networks with net zero goals, fossil fuel investors will simply turn to other treaties to challenge legitimate climate measures. The EU and its Member States now need to develop a strategy to ensure its other investment treaties are aligned with net zero.
Quotes
Eunjung Lee, Senior Policy Advisor said:
“A big applause for the Belgian Presidency to seal the EU exit before the European Elections. The EU withdrawal from the Energy Charter Treaty confirms that the ECT is incompatible with the EU’s climate commitments. Regardless of the modernisation of the Treaty, it would be best for remaining EU Member States to follow suit and abandon the treaty. Without major European countries and the EU, remaining in the ECT will only give them a burden without any benefit.”
Jordan Dilworth, Researcher said:
“This decision is a resounding victory for campaigners and politicians. But the battle isn’t over yet. Fossil fuel investments made before the EU’s withdrawal are still protected through the Energy Charter Treaty’s 20-year sunset clause. As alarming, the EU and its Member States are still signed up to investment treaties containing investor-state dispute settlement (ISDS) provisions, which risk jeopardising the EU’s climate action in exactly the same way as the ECT. The EU and its Member States must now chart out a path with partners, including the UK, to ensure all of its investment treaties are aligned with net zero”.
– ENDS –
Available for comment
Eunjung Lee (EN), Senior Policy Advisor
m: +44 7935 377 622 | eunjung.lee@e3g.org
Jordan Dilworth (EN), Researcher
m: +44 7956 534 879 | jordan.dilworth@e3g.org
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