Negotiations to reform Energy Charter Treaty (ECT) fail to end fossil fuel protections

June 27, 2022: After two years of negotiations, members of the Energy Charter Treaty (ECT) have arrived at an ‘Agreement in Principle’ which fails to end special protections for fossil fuel investments through Investor-State Dispute Settlement mechanisms (ISDS).

The ECT is an international investment treaty that allows energy companies to sue governments in international tribunals for policy changes which may affect their expected investment returns. After having signed (but not ratified) the agreement in 1994, Australia withdrew from the treaty in 2021.

Instead of a wholesale exclusion of fossil fuels from ISDS protections, the ‘Agreement in Principle’ allows signatory countries to opt out of protection for fossil fuel investments over a period of ten years. The agreement also includes some procedural and other changes that it claims will make it easier for governments to defend against compensation claims, but do not prevent claims being made. So far, only the UK and the EU have chosen to gradually end fossil fuel investment protections.

Trade justice campaigners argue that signatory countries must reject the ‘Agreement in Principle’ and instead coordinate a joint withdrawal, as proposed by Spain and supported by the Netherlands, Belgium, and Germany.

Cornelia Maarfield, Trade and Investment Policy Expert at Climate Action Network (CAN) Europe, said:

“It’s unbelievable the EU [and UK] agreed to lock in fossil protection for at least another decade. This means countries will continue to spend taxpayers’ money in compensating fossil fuel companies rather than fighting climate change and moving to a renewable energy system.”

“This disastrous agreement must not be ratified. We expect Spain, The Netherlands and Germany to take on a leadership role and propose a coordinated withdrawal now.”

The ‘Agreement in Principle’ will be sent to signatory countries for consideration, followed by ratification later this year.

  • To read the full statement from Climate Action Network (CAN) Europe, click here.
  • To read the full statement from Global Justice Now, click here.
  • To read the ECT ‘Agreement In Principle’, click here.