EU countries, green light to withdrawal from Energy Charter Treaty

Brussels – The EU Council of Ministers has approved the coordinated withdrawal of the European Union from the international Energy Charter Treaty, which is considered too protective of fossil fuel investments and from which many countries, including France, have already announced they will exit. In July, the European Commission proposed that the EU, together with its member states and Euratom (the European Civil Nuclear Organization), “withdraw in a coordinated and orderly manner” from a treaty deemed “incompatible with Europe’s climate ambitions.”

EU ministers meeting in Brussels today approved this proposal, which had already been endorsed yesterday by member state ambassadors, according to a European source. The final green light from MEPs is still needed. Another jointly adopted proposal, however, leaves open the possibility for states that wish to do so to approve the “modernization” of the treaty at a future conference of the organization and remain members of the amended treaty—a request made in particular by Hungary and Cyprus.

The Energy Charter Treaty (ECT) was signed in 1994, at the end of the Cold War, to provide guarantees to investors from Eastern European countries and the former USSR. Bringing together the EU and some 50 other countries, it allows companies to seek redress from a state before a private arbitration tribunal if its decisions and regulatory framework affect the profitability of their investments, even if the policies in question are climate-friendly.

Case in point: in 2022, Italy was ordered to pay compensation of about €200 million to oil company Rockhopper for refusing an offshore drilling permit. German energy company Rwe demanded—before withdrawing its claim—€1.4 billion from The Hague to compensate for losses suffered by a thermal power plant affected by Dutch anti-coal regulations.

Faced with a growing number of disputes, the Europeans initially sought to modernize the text to avoid opportunistic claims and gradually exclude fossil fuels. However, in the absence of a quick compromise, by the end of 2022, nearly a dozen EU countries (France, Spain, the Netherlands, Germany, Luxembourg, Poland, etc.) decided to withdraw from the treaty. Italy left the treaty in 2015. Outside the EU, the United Kingdom announced its withdrawal on February 22.

The NGO Can Europe welcomed the “derailment of a treaty that protects corporate polluters,” which allows them “to sue governments for their climate action and disrupt a just energy transition.” However, Green MEP Anna Cavazzini regretted that “there was not a majority in favour of all member states” withdrawing individually from the agreement, “which would have meant more legal certainty.”

All countries are still subject to the ECT’s “survival clause,” which protects fossil fuel plants covered by the treaty for several years after a signatory country withdraws.

(Article drafted in collaboration with GEA/AFP)