Environmental law expert urges EU to terminate the Energy Charter treaty

February 15, 2021: After three rounds of re-negotiation of the 1994 Energy Charter Treaty in 2020, a leading policy writer at Colombia University, Martin Dietrich Brauch, argues that the European Union member states should withdraw collectively from the Treaty.

He argues that they should agree not to use its Investor-State Dispute Settlement (ISDS) provisions among themselves, and if possible, to terminate the Treaty entirely, because of changes to EU law and they treaty's  massive blockage to rapid reduction of carbon emissions.

The treaty was designed in 1994, before emissions reduction policies, to regulate energy investments from Western Europe and other rich countries into the post-cold war states of Central and Eastern Europe and Asia. It included ISDS which enables international investors to sue governments.

There have been 135 ISDS cases launched under the Treaty, and 80 of them are between EU companies and states, including some against government moves to reduce carbon emissions. But European Law now outlaws ISDS cases between European Union member states, and it is no longer part of EU trade and investment treaties. The Treaty’s protection of fossil fuel investments makes it a massive problem for the Paris Agreement on Climate Change.

Worse, there have been determined but quiet moves to expand the Energy Charter Treaty into Africa and other regions outside Europe.

European civil society is pressing for the European Commission to get out of the Energy Charter Treaty, and the European Parliament introduced in the European Climate Law a mandate for the Union to “end the protection of investments in fossil fuels in the context of the modernization of the Energy Charter Treaty.”

Changes to the Treaty require unanimous agreement, and it is now clear that the 2020 negotiations could not achieve removal or great restriction on the ISDS provisions. Even if the EU states withdraw, they will be subject to ISDS claims from continuing Treaty state investors for the next 20 years.

Brauch concludes that the best goal now is to “terminate” the Treaty, but that requires the unlikely “consent of all the parties after consultation with the other contracting states.” The EU’s next-best strategy would be to withdraw from the Treaty and neutralise the 20-year clause through an agreement among themselves, which non-EU withdrawing states should be welcome to join.

He argues that the great advantage of termination would be that negotiating partners could start with a clean slate, asking first the fundamental question: how can international law help our countries to phase out fossil fuel investments, ramp up low-carbon energy investment, and promote a just transition, in line with the Paris Agreement and the Sustainable Development Goal target to “ensure universal access to affordable, reliable, and modern energy services” by 2030.

The substantive provisions of a new model agreement are in the model Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation, and the Framework Convention on Investment and Sustainable Development, and with background papers here and here .