The European Commission proposed on Friday a coordinated withdrawal of the EU and its 27 states from the Energy Charter, an international treaty considered too protective of investments in fossil fuels, from which several countries, including France, have already announced that they want to go out. “This outdated treaty is not aligned with our climate commitments (…) It is time for Europe to take a step back and focus on building an efficient energy system that promotes and protects investments in renewable energy,” stressed the vice president of the European executive , Frans Timmermans.
The Commission proposes that the EU, together with all its Member States and Euratom (European Civil Nuclear Organisation) “withdraw from the Treaty in a coordinated and orderly manner, to ensure equal treatment of investors inside and outside the EU”. The Twenty-seven must decide by qualified majority on this proposal.
Guarantees to investors in the countries of the former Soviet bloc at origin
The Energy Charter Treaty (ECT) was signed in 1994, at the end of the Cold War, to offer guarantees to investors from Eastern European countries and the former USSR. By bringing together the EU and some fifty countries, it allows companies to claim, before a private arbitration court, compensation from a State whose decisions and regulatory environment affect the profitability of their investments, even when it comes to pro-climatic policies.
Emblematic case: Italy was sentenced in 2022 to pay compensation of about 200 million euros to the British oil company Rockhopper for having denied it a drilling permit on the high seas. The German energy company RWE claims 1,400 million euros from The Hague to compensate its losses in a thermal power plant affected by the Dutch anti-coal regulations.
Various withdrawals at the end of 2022
Faced with increasing disputes, the Europeans initially tried to modernize the text to avoid opportunistic claims and gradually exclude investments in fossil fuels, but last fall they failed to reach a compromise. After Italy in 2015, several EU states decided at the end of 2022 to withdraw from the treaty (France, Spain, the Netherlands, Germany, Luxembourg, Poland, etc.). However, they remain concerned about the ECT’s “survival clause”, which still protects for 20 years, following the withdrawal of a signatory country, fossil fuel facilities covered by the treaty.
Lawyers and NGOs believe that a coordinated withdrawal of the Europeans would partially neutralize this clause within the EU. Several countries, including Hungary, advocated remaining members of a “modernized” ECT, but for the Commission, a coordinated withdrawal of the EU and states “is the most legally and politically appropriate approach.”
Source: BFM TV
