Christina Eckes, professor of European law at the University of Amsterdam, spoke with IE about what the ECJ’s ruling means for EU member states, and how the ECT stands in the way of climate goals.

Investigate Europe: What does the decision of the European Court of justice in this landmark Komstroy ruling mean?

Christina Eckes: The Komstroy rulingcomes to the conclusion that the Energy Charter Treaty can no longer be applied for intra-EU disputes. In essence, it means that national courts should not give effect to awards that result from intra-EU arbitration. In my view, it should also mean that member states must facilitate the effort to either renegotiate or leave the ECT. 

IE: ECT tribunals can be set up anywhere in the world — how will they be affected?

CE: There is a lot of uncertainty on whether the ruling can be enforced. Based on how different arbitration tribunals have dealt with EU law so far, they will very likely say that the decision does not bind them. These tribunals will be established outside the EU and will come to the conclusion that they can still rule on cases. 

One of the main criticisms is that they’re not real courts. Arbitrators are not independent and they’re not embedded in the constitutional structure of any state. In fact, parties select their judges themselves. If you were taken to court, you’d certainly like to select your own judges as well. It’s a core problem.

IE: So tribunals will go abroad but EU courts won’t give effect to their awards… What happens next?

CE: What I expect is that companies will turn to non-EU courts to enforce their awards in order to track down governments’ money in third countries. We’ve seen this in the past. There was an arbitration award against Kazakhstan which was worth €500 million and the company tried to get their hands on assets in different countries. More than €5 billion were frozen as a result. 

IE: It seems like European judges haven’t solved the EU’s problems with the ECT. Can the modernisation process have a better outcome?

CE: Personally, I’m not very optimistic that these negotiations will lead to success. Since 2019, the Commission has a mandate to renegotiate the ECT, but not much has happened so far. This is for obvious reasons: it’s a multilateral treaty, including many countries with interests in fossil fuels. It actually protects the fossil fuel dependence status quo. We see this in how it’s constructed, with a “sunset clause” where parties can still face damages for 20 years after they left. 

IE: If the modernisation process fails, can the EU leave the treaty and drop the sunset clause?

CE: Both at the same time would be seen as a breach of international law. But it would of course send a strong political signal. If the EU resigns, it is half of the signatories gone and that’s a very heavy share in terms of investments. Then, member states could try to negotiate the sunset clause after leaving. Twenty years is exceptionally long for these sorts of treaties. It’s not reasonable in light of new political commitments to combat global warming.

IE: Would you say that the law is standing in the way of climate goals?

CE: The ECT is standing in the way of climate goals. But the law works on both sides. In several European countries, judges have ruled that global warming infringes fundamental rights. Germany, Ireland, France, the Netherlands, all have cases in which the state has been pushed to take greater measures. There are also clear obligations to combat climate change under the Paris Agreement and COP26. One could make the argument that international law must be read coherently, hence you cannot have the ECT stand in the way of all other commitments.

IE: Energy companies don’t necessarily deny these commitments, they’re saying they simply want to be compensated for their losses.

CE: The problem is that compensation is extremely costly and resources are limited. Here, in the Netherlands, we have RWE and Uniper (two German firms) claiming billions of Euros after the state decided to phase out coal. Since 2015, at the very latest, we’re all aware that emissions have to be reduced. So when companies are investing in coal-fired power plants, they can do the math, they know they might be a target. It’s not a legitimate expectation to be compensated. But investors know that if their investments fail, they can bring a claim under the ECT, which has no cap on the amount they can seek.