ISDS, Climate Change provoke push to end the Energy Charter Treaty

September 10, 2020: The Energy Charter Treaty with its Investor-State Dispute Settlement provisions has become a major obstacle to the Paris Climate Agreement, and current European efforts to reform it appear unlikely to succeed. EU parliamentarians are now calling for states to withdraw from it by the end of 2020.

On September 8, 2020, 97 European Parliament MPs and another 49 MPs from national parliaments in Europe called for the “EU negotiators to ensure that the provisions in the ECT that protect foreign investment in fossil fuels are deleted and thus removed from the ECT. Similarly, ISDS provisions need to be scrapped or fundamentally reformed and limited. If this is not achieved at the end of the 3rd negotiation round planned for the autumn, we ask EU Member States to explore pathways to jointly withdraw from the ECT by the end of 2020”.

This follows an open letter from 278 civil society groups, including AFTINET, that made similar demands.

The treaty’s initial objective was to shield oil and gas companies from “political risk” when investing in the former Soviet bloc countries in the early 1990s. It came into force in 1998. It received a major blow in 2009 when Russia withdrew from the Treaty. Now it has transformed into a platform for western corporations to sue European governments who have moved against nuclear and fossil fuel energy systems in favour of renewables.

Last year EU countries directed the European Commission to revise the ECT, saying the treaty must reinstate Europe’s “right to regulate” in areas like climate change and labour rights. But so far the Commission has only put forward ideas on the ISDS provisions, and there is widespread scepticism that the necessary unanimous vote for change from all 53 signatory countries can be achieved.

In September 2019, Nord Stream 2, the Swiss company building a gas pipeline from Russia to Germany through the Baltic Sea, launched an ISDS claim against the European Union, after the EU gas directive was altered to encompass the project. The claim is based on the Energy Charter Treaty.

In the same month, German company Uniper brought an ISDS case using the treaty against the Netherlands for its proposal to phase out coal as a source of electricity by 2030.

German energy giant RWE is reportedly also asking for compensation for the expected closure of two coal-based plants in the Netherlands, one of which started operating in 2015 at a cost of €2.8 billion.

“These cases prove that the Energy Charter Treaty impedes the EU and its Member States from complying with the Paris Agreement,” said Lora Verheecke, trade campaigner with Friends of the Earth Europe. “The Energy Charter Treaty is a clear and present danger to the urgently needed fossil fuel phase-out.”