It’s time to scrap the Energy Charter Treaty
(EurActiv, 30 Oct 2019) The EU taxpayer is the main loser from the continuation of the Energy Charter Treaty which locks Europe into carbon and energy injustice at a high cost to taxpayers, argues Yamina Saheb.
Dr Yamina Saheb is a senior climate and energy policy analyst at OpenExp a Paris-based global network of independent experts working on solutions for sustainable development.
According to a statement from the European Commission, Member States reached an agreement on a plurilateral treaty for the replacement of intra-EU bilateral investment treaties. However, the Energy Charter Treaty (ECT), which is the most invoked treaty in intra-EU ISDS (Investor-State-Dispute Settlement) cases, does not seem to be being considered for termination despite its high cost for the European taxpayer and its carbon lock-in effect.
The ECT is a multilateral agreement ratified by the EU and its Member States in 1998. Italy is the only EU country who withdrew from the ECT in 2015. This, however, did not prevent Italy from making an ISDS claim under the ECT regime as the provisions of this Treaty continue to apply twenty years after withdrawal.
The original objective of the ECT was to overcome the political and economic divisions between Eastern and Western Europe as well as to strengthen Europe’s energy security. To put it simply, this Treaty was designed to secure the access to fossil fuels resources of the former Soviet Union regions by protecting Western investment in these countries.
While the ECT may have made sense in a fossil-fuel world, today the Treaty is a major threat to carbon neutrality in signatory countries. Carbon emissions protected by the ECT, twenty years after its entry into force, are almost double the remaining EU carbon budget between now and 2050.
ECT obligations are on the host state only and not on the foreign investor. The Treaty privileges and over-protects the economic rights and interests of foreign investors over the societal and economic interests of the host state and national stakeholders who have no rights under the ECT regime.
Importantly, under the ECT regime, an investor is not obliged to resolve disputes based on domestic, democratically established laws before filing ISDS claims. Arbitration tribunals are composed of lawyers privately appointed by the investor and the host state and arbitrators can order remedies, usually in the form of important monetary awards, to investors if they find that states have breached the obligations of the ECT.