Energy Charter Treaty

Europe has to cut almost all greenhouse gas emissions by 2050. That is going to be hard enough. But the little-known Energy Charter Treaty could become a massive threat to the EU and its member states in trying to achieve their climate targets.

February 2021

Europe has to cut almost all greenhouse gas emissions by 2050. That is going to be hard enough. But the little-known Energy Charter Treaty could become a massive threat to the EU and its member states in trying to achieve their climate targets.

With this treaty, the contracting parties (including all EU member states except Italy) guarantee foreign investors far-reaching rights. If, in the Energy investor's opinion, a government has violated the principle of "fair and equitable treatment", they can sue states before international arbitration courts for billions of Euros in compensation.

The treaty was signed in the 1990s to offer protection for Western companies investing in energy initiatives in former Soviet states, as many of these were deemed risky for potential investors. But today it is mainly used by European companies to sue European states. In the years to come, the threat of ECT lawsuits could prevent states from adopting ambitious climate policies – or put plainly: this is already happening.

Our investigation shows that: 
  • The fossil infrastructure protected by the Energy Charter Treaty in the EU, Great Britain and Switzerland is worth €344.6 billion. This is more than twice the total annual budget of the EU and corresponds to 660 euros per resident.
  • Three-quarters of the protected fossil infrastructure are gas and oil fields (€126 bn) and pipelines (€148 bn).
  • Since investors can sue not only for the value of their infrastructure but also for lost profit expectations, the actual sum of possible compensation claims could be even much higher.
  • To water down climate laws, companies don't even have to sue. The mere fact that they can sue can be enough to influence climate measures. Sometimes companies even openly threaten governments.
  • Although the Energy Charter Treaty was once intended to protect investments in states with uncertain legal situations, 74 per cent of the Energy Charter cases are now lawsuits brought by EU investors against EU states.
  • EU states are divided on how to deal with the Energy Charter Treaty - even if the commission has officially found a common position for a modernization push by mid-February. France and Spain had even argued for a withdrawal - and this option remains.
  • Even with a common EU line, it is unclear whether the Energy Charter Treaty could be ever modernized. This decision requires unanimity and Japan has already announced that it will block any changes.
  • Leaving isn't easy either: states can be sued up to 20 years after leaving. After Italy left the ECT in 2016, the British oil company Rockhopper sued in 2017 against the ban on producing oil and gas near the coast, claiming lost investment and future profits of 275 million US dollars. A verdict is expected to be reached in spring 2021.
  • The system of arbitration tribunals are a closed club of arbitrators that act in multiple roles in a system that allows them practically unlimited fees (paid by public money)
  • Lawyers are calling the system “a Russian roulette”, a historical mistake”, or refer to the changing roles in arbitration as a potential conflict of interest
  • Leading personnel of the Energy Charter Secretariat (the administration of the treaty), has close ties to the fossil fuel industry
  • In December 2019, the ECT members decided there would be a “temporary pause on issuing invitations to accede to the ECT” - due to the discussion about modernising the treaty. But the ECT core budget for 2021 - based on the member states contributions - still provides nearly half a million Euros to the consolidation, expansion and outreach policy. Three African countries are in the ratification process, and ten others are in different stages of the process to eventually join. They are running a high risk to get sued as soon as they are added to the treaty, critics say.

Stories

Interviews

Publications

Energia, il trattato Ect ingabbia gli Stati: guai a fermare i progetti
Energia, il trattato Ect ingabbia gli Stati: guai a fermare i progetti

Il Fatto Quotidiano, Italy

22 February 2021

Arbitrati: la roulette russa che ha privatizzato il diritto
Arbitrati: la roulette russa che ha privatizzato il diritto

Il Fatto Quotidiano, Italy

22 February 2021

How Energy Treaty ‘shadow’ courts prolong EU’s fossil age
How Energy Treaty ‘shadow’ courts prolong EU’s fossil age

EUobserver, Belgium

23 February 2021

Et våpen mot det grønne skiftet
Et våpen mot det grønne skiftet

Klassekampen, Norway

23 February 2021

Wie Schiedsgerichte Europas Klimaziele bedrohen
Wie Schiedsgerichte Europas Klimaziele bedrohen

BuzzFeed, Germany

23 February 2021

Wie Schattengerichte Europas Klimaziele bedrohen
Wie Schattengerichte Europas Klimaziele bedrohen

Reporter

23 February 2021

Cet obscur traité qui menace les objectifs climatiques européens et pourrait rapporter gros aux pétroliers
Cet obscur traité qui menace les objectifs climatiques européens et pourrait rapporter gros aux pétroliers

Basta!, France, Basta!

23 February 2021

Kto trzyma w szachu klimat? Polska może zapłacić nawet 14 mld zł odszkodowania Australijczykom
Kto trzyma w szachu klimat? Polska może zapłacić nawet 14 mld zł odszkodowania Australijczykom

Gazeta Wyborcza, Poland

23 February 2021

Verver verdens fattige land
Verver verdens fattige land

Klassekampen, Norway

24 February 2021

Kohle für die Ölfirmen
Kohle für die Ölfirmen

Falter, Austria

24 February 2021

Energy Charter Treaty: How arbitration tribunals threaten Europe’s climate goals
Energy Charter Treaty: How arbitration tribunals threaten Europe’s climate goals

Frankfurter Rundschau, Germany

24 February 2021

Energy Charter Treaty: How arbitration tribunals threaten Europe’s climate goals
Energy Charter Treaty: How arbitration tribunals threaten Europe’s climate goals

Merkur, Germany

24 February 2021

Het Energy Charter Treaty: hoe een vvag verdrag de energietransitie tegenwerkt
Het Energy Charter Treaty: hoe een vvag verdrag de energietransitie tegenwerkt

Trends, Belgium

24 February 2021

Secret, opacité et conflits d’intérêts règnent au sein du Traité sur la charte de l’énergie
Secret, opacité et conflits d’intérêts règnent au sein du Traité sur la charte de l’énergie

Basta!, France, Basta!

25 February 2021

Хартата, която може да застраши зеленото бъдеще на Европа
Хартата, която може да застраши зеленото бъдеще на Европа

Capital, Bulgaria

26 February 2021

På innsida av skjult rett
På innsida av skjult rett

Klassekampen, Norway

26 February 2021

Hot om miljardstämningar kan stoppa grön energi i EU
Hot om miljardstämningar kan stoppa grön energi i EU

Dagens Nyheter, Sweden

28 February 2021

O tratado, assinado em Lisboa, que incentiva o aquecimento global
O tratado, assinado em Lisboa, que incentiva o aquecimento global

Público, Portugal

28 February 2021

The treaty that threatens to derail Europe’s Green Deal
The treaty that threatens to derail Europe’s Green Deal

International Politics and Society, Belgium

1 April 2021

¿Por qué el Tratado sobre la Carta de la Energía obstaculiza la descarbonización?
¿Por qué el Tratado sobre la Carta de la Energía obstaculiza la descarbonización?

Voxeurop, France

15 April 2021

How shadow courts threaten the climate
How shadow courts threaten the climate

New Internationalist, United Kingdom

13 July 2021

Klima: Reform des umstrittenen Energiecharta-Vertrags droht zu scheitern
Klima: Reform des umstrittenen Energiecharta-Vertrags droht zu scheitern

BuzzFeed, Germany

14 December 2021

Klima: Reform des umstrittenen Energiecharta-Vertrags droht zu scheitern
Klima: Reform des umstrittenen Energiecharta-Vertrags droht zu scheitern

Frankfurter Rundschau, Germany

14 December 2021

Fliehkräfte in Energiecharta wachsen
Fliehkräfte in Energiecharta wachsen

Der Tagesspiegel, Germany

18 August 2022

Deutschland erwägt Ausstieg aus Energiecharta
Deutschland erwägt Ausstieg aus Energiecharta

Der Tagesspiegel, Germany

20 October 2022

Wie die EU sich selbst eine Falle grub
Wie die EU sich selbst eine Falle grub

Frankfurter Rundschau, Germany

15 June 2022