EU Observer | 23 March 2022
Calls to ditch ’ecocide treaty’ after failed reform efforts
By Elena Sánchez Nicolás
Environmentalists and energy experts have been warning for years over an obscure trade deal that could lock Europe into decades of fossil fuel use.
One called it an "ecocide treaty" while others described it as "the world’s most dangerous investment agreement."
This little-known international agreement, officially known as the Energy Charter Treaty, deals with cross-border investments in the energy industry — and it was signed by 50 countries, including all EU member states, back in 1994.
Initially, it was set up to protect investments in post-Soviet countries. But concern has been mounting in recent years because EU countries are facing legal challenges over their climate policies.
Yamina Saheb, who calls it "ecocide treaty," says it’s time for the EU to withdraw.
Saheb knows the treaty well since she formerly worked at the body overseeing it — and she nowadays leads opposition against the treaty at the Paris-based think-tank OpenExp.
"It is impossible to make this treaty climate-friendly," said Saheb told EUobserver in an interview.
EU countries cannot comply with the EU climate law and international commitments and, at the same time, ECT obligations, she said.
"This treaty is a threat to our democratic system," she said, referring to how countries carefully assess climate policies taking into consideration the risk of litigation under this treaty.
The Energy Charter Secretariat did not respond to EUobserver when asked if this treaty poses a threat to climate action.
The majority of ECT disputes are internal EU rows, where, for example, claims against an EU country are brought by an investor from another EU member state. Spain has the biggest number of lawsuits related to ECT, followed by Italy and the Czech Republic.
And the treaty has been used on many occasions to challenge a climate measure.
Italy withdrew from the ECT in 2016, but it is still involved in an arbitration case for banning oil and gas project exploration in the Adriatic Sea.
The Netherlands has been sued by the German companies RWE and Uniper over its coal phase-out law. The case is still ongoing.
In 2020, British onshore company Ascent Resources made a claim against Slovenia for being barred from drilling hydraulically-fractured wells in the east of the country. But a complete ban on fracking in Slovenia, which is currently being discussed in the parliament, could push up damages in the case.
Likely ’weak’ agreement
On the face of things, the treaty is completely at odds with Europe’s climate goals — and that’s what has prompted calls to update it and make it compatible with the 2015 Paris agreement.
The European Commission has been trying to convince EU member states that treaty modernisation is the best way forward.
But the only proposal on the table right now is some kind of reform of the way the treaty works.
Under that proposal, new fossil fuel investment would no longer be protected, but gas and nuclear would be sheltered for decades to come — and investments in new technologies such as hydrogen and biomass would be also protected.
The EU insists that will bring change. But experts argue that the EU should walk away from the negotiation and withdraw from the treaty as soon as possible on the grounds that loopholes will remain and that polluting projects will continue to have the upper hand when governments try to crack down.
The EU will reach a "weak" agreement and then will try to sell it as "climate-friendly," warned Saheb.
The former ECT secretariat employee said the EU is currently at a crossroads. "Either you become a climate-neutral region and you withdraw from the treaty or you become a greenwashing region," said Saheb.
Lukas Schaugg, a law analyst at the International Institute for Sustainable Development, a think tank based in Canada, sees no legal or politically viable solution that would be aligned with the 2015 Paris Agreement.
The treaty, he said, is inherently "problematic" and can undermine the regulatory measures needed to tackle the climate crisis.
Following eleven rounds of unsuccessful negotiations among the 54 parties to the treaty, "I cannot see why the European Union would not explore the possibility of a coordinated withdrawal" of the bloc’s 27 member states, said Schaugg.
Schaugg said a full, coordinated departure of all EU members could offer legal certainty within two years — insulating them from further cases brought by fossil fuel companies and interests — and even create a "political momentum" for non-EU countries to follow, he said.
The commission, which negotiates on behalf of member states, has warned that existing investments still would remain protected for 20 years — even if there is a coordinated EU withdrawal.
But Amandine Van den Berghe, a lawyer from the environmental group ClientEarth, warned that quitting the treaty still would be better than remaining, and ultimately made sense for Europe.
"The 20-year survival clause could put the urgent action needed to achieve Paris commitments at risk … [but] spend[ing] years debating a modernised text … may lead to a similar outcome," she wrote in an article together with Schaugg.
But the EU Court of Justice recently ruled that companies cannot use this treaty for intra-EU disputes to sue EU member states — and "this could get Europe out of this Ecocide treaty," said Saheb.
The EU’s top court clarified that companies cannot use a mechanism, formally known as the Investor-State Dispute Settlement, in intra-EU disputes — an issue widely debated for years because a 2018 ruling found it incompatible with EU law.
To add to the complexities, EU member states appear to be divided over the best next steps.
Spain, France and Poland previously argued in favour of a joint withdrawal, while others such as Denmark and Greece are flexible to discussing a joint withdrawal if the ongoing attempts at modernisation fail.
Austria and Luxembourg still preferred modernising the treaty rather than walking away, EU diplomats told EUobserver — though that should be no surprise.
Luxembourgish Guy Lentz is the ECT secretary-general while Austrian Lukas Stifter leads the ECT modernisation group.
But critics of the treaty are unrelenting — and insist the only reasonable option for the EU is a full withdrawal
As for modernization, said Saheb, there "is no hope."