'An energy investment treaty has been holding Nord Stream 2 hostage', 24 February 2022

"After Russian tanks rolled into Ukraine on Tuesday, German chancellor Olaf Scholz finally decided to halt the certification of the Nord Stream 2 gas pipeline linking Germany and Russia. But why has the German government delayed this decision for so long? And why did Scholz merely halt the certification rather than cancelling it? The words of German environment minister Svenja Schulze from last February give a clue. “We also run the risk of ending up in international arbitration courts with compensation claims if we stop the project,” she said. Her warning added to a growing list of ministers admitting that they feared investor-state-dispute settlement (ISDS) claims under the Energy Charter Treaty (ECT), of which Germany is one of 53 members.

The ECT is a binding multilateral agreement, established in the 1990s, which protects foreign investments in economic activities related to nuclear energy, fossil fuels and electricity without distinguishing between the energy sources used to produce electricity. It has been used by energy companies to sue governments whose policies damage their investments, whether fossil fuel based or renewables.

In 2019, the multinational consortium behind Nord Stream 2 used the treaty to sue the EU over the implementation the implementation of measures to separate energy supply and generation from transmission included in the 2019 revised EU gas directive. Lobbyists from one of the companies behind the pipeline, Shell, pushed for the case to be against Germany rather than the EU – which the European Commission was happy to support. Other ECT cases against Germany include Swedish company Vattenfall asking for €1.4 billion ($1.5bn) in compensation over measures to protect water from coal power plants’ pollution and €4.7bn ($5.2bn) over nuclear power phase-outs..."