'Brussels pleads with countries to stay in the Energy Charter Treaty', 4 November 2022

These days, it is hard to find anyone arguing with a straight face that the Energy Charter Treaty (ECT) has been a good thing for the climate. It is variously described as a “relic”, a “dirty energy club” or a “climate roadblock” in the service of greedy companies. However, those same voices decrying it have now been put in the awkward position of having to defend it, and are begging countries like France, Spain, Poland, Italy and the Netherlands to reverse their withdrawal decisions.

The treaty was devised in the early 1990s at the end of the Cold War to give investors confidence in the new democracies in eastern Europe, whose previous Communist governments had a habit of suddenly nationalising industries or cancelling projects. The treaty empowers investors to transcend domestic courts and sue their host nations for policy changes that threaten their investments via special international tribunals. However, it has morphed into something far beyond its original intention, and is now being used by companies to sue the 52 member governments for energy policy changes that have been taken for climate reasons.

he treaty has become the most-used treaty in investor-state dispute settlement (ISDS), leading to record-breaking awards of damages that have cost governments millions of dollars, according to the International Institute for Sustainable Development. One notable example has been the Netherlands being sued by energy companies RWE and Uniper under the ECT over its plans to take coal power plants offline. Legal claims by oil and gas investors against states imposing laws to limit fossil fuel activities could reach a total cost of $340bn for governments – more than the $321bn spent globally on public climate finance in 2020 – according to research published in the journal Science in May 2022. Worse than the actual lawsuits is the so-called “regulatory chill”, where governments back off phasing out fossil fuels because they are afraid of being sued...