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The UK and EU must leave the Energy Charter Treaty together [1]
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Date: 2023-03
The European Union’s exit from the controversial Energy Charter Treaty (ECT) now appears to be a matter of when, not if.
In a leaked document, the European Commission informed member countries last month that a coordinated withdrawal from the treaty is “unavoidable”. France, Germany, Luxembourg, the Netherlands, Poland, Slovenia, and Spain have already announced their intentions to withdraw unilaterally.
The ECT, signed in 1994 and ratified by 50 predominantly European countries, is increasingly being used by fossil fuel companies to sue governments for introducing climate policies.
The European Parliament has called for an exit from the treaty, noting among other concerns that it is incompatible with the landmark 2015 Paris Agreement by 196 countries to set ambitious emissions-reductions targets.
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The UK government has expressed similar concerns about the ECT. But last year, it committed to new terms to “limit costly legal challenges from fossil fuel investors” in a proposed ‘modernised’ version of the treaty. This position must be reconsidered now that the EU seems poised to abandon the modernisation process.
Experts in the UK support withdrawal and polling indicates that the British public does too.
Chris Skidmore, a former UK energy minister and chair of the Net Zero Review to help map out a transition plan for UK climate targets, has called the ECT “a threat to the UK’s net zero ambitions at home and its credibility abroad.”
Research conducted by the Global Development Policy Center at Boston University finds that the UK working with the EU on a coordinated withdrawal from the ECT could avoid potential liability for about £4.4bn worth of oil and gas projects by reducing the risk of legal challenges far more than the planned modernised agreement.
In order to understand why the ECT is just not suited to 21st-century challenges, let us examine what it is.
What is the Energy Charter Treaty?
The ECT requires countries to compensate foreign investors when new laws significantly interfere with the value of their investments or undermine their “legitimate expectations”.
To enforce this, it allows a process known as investor-state dispute settlement in which corporations bring complaints against governments before private tribunals. Last year, a tribunal ordered Italy to pay a UK oil and gas company £210m in “lost future profits” after the government banned offshore drilling to protect the Italian coastline.
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[1] Url:
https://www.opendemocracy.net/en/oureconomy/the-uk-and-eu-must-leave-the-energy-charter-treaty-together/
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