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European Commission | 14 May 2019
Energy Charter Treaty modernisation: European Commission presents draft negotiating directives
The European Commission today adopted a proposal for a Council Decision authorising negotiations to modernise the Energy Charter Treaty (ECT), to which the EU is part. These negotiations aim to revise the provisions of the ECT so that they reflect modern investment standards, such as the EU’s reformed approach on investment protection.
The proposed EU negotiating directives aim to achieve greater legal certainty and clarity of the rules applicable to the protection of foreign investments.
By way of example, the Commission recommends:
- the inclusion of a right to regulate provision
- a closed list of circumscribed cases constituting a breach of fair and equitable treatment
- more clearly defined rules on expropriation, including a clarification on indirect expropriation.
Moreover, the Commission recommends that the ECT provides stronger provisions on sustainable development, including on climate change and the clean energy transition, in line with recently concluded agreements and EU positions in ongoing negotiations. Furthermore, the Commission proposes that the ECT also contributes to the promotion of human rights and international labour standards, including through provisions on transparency and responsible business conduct.
As part of its commitment to transparency, the Commission is publishing its draft proposal, at the same time as submitting it to EU Member States for adoption.
Since its establishment in the 1990s, the ECT provisions have hardly been revised. In the area of investment protection, the ECT rules do not correspond to modern standards as reflected in the EU’s reformed approach on investment protection. Those outdated provisions are no longer sustainable or adequate for the current challenges; yet it is today the most litigated investment agreement in the world, with a total of at least 121 investment notified disputes.
The Energy Charter Secretariat proposed a modernisation of the ECT. The list of topics for modernisation covers inter alia investment protection provisions and related definitions, but also pre-investment commitments, transit, the economic integration agreements clause and some provisions related to dispute resolution. The start of the negotiations to modernise the Energy Charter Treaty will ultimately be decided by the Energy Charter Conference. It is expected that this will be still in 2019.
The ECT is a plurilateral trade and investment agreement applicable to the energy sector. It was signed by the EU in December 1994 and entered into force for the EU in April 1998. To date the ECT has been acceded to by fifty-two states, as well as the EU and EURATOM. The EU Member States represent roughly half of the Energy Charter Conference membership as well as of the Contracting Parties to the ECT.
The Commission’s recommendation for the negotiating directives reflects the EU’s reformed approach to investment as initially presented in the Commission Communication ’Towards a comprehensive European international investment policy’ of 2010 and further developed in the 2015 ’Trade for all’ strategy communication. Since then, the EU’s reformed approach has further been promoted in a number of recently concluded EU investment agreements with third country partners, including with Canada, Singapore and Vietnam.
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