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France puts EU withdrawal from Energy Charter Treaty on the table

Euractiv | 3 February 2021

France puts EU withdrawal from Energy Charter Treaty on the table

By Frédéric Simon

The European Union and its member states should draw the consequences of the current stalemate in multilateral talks aimed at reforming the Energy Charter Treaty and consider a coordinated withdrawal, Paris has said in a letter seen by EURACTIV.

Signed in the early 1990s to protect oil and gas companies from political risk when investing in the former USSR, the treaty has since been decried as outdated by the EU, which wants to reinstate its “right to regulate” and align the treaty with its international climate obligations.

However, negotiations have been slowed down by the treaty’s requirement to take decisions by unanimity. And despite three rounds of talks held last year among the 54 signatories, not much progress has been made.

“In the absence of decisive progress on the reform of the Energy Charter Treaty in 2021, all consequences should be drawn,” says the letter, sent to the European Commission in December, ahead of the third round of talks.

“The option of a coordinated withdrawal of the European Union and its member states should be raised publicly from now on, while its legal, institutional and budgetary modalities should be assessed,” it adds.

The missive – showing France’s growing impatience with the slow progress in the reform talks – was signed by four French ministers and state secretaries involved in the Energy Charter Treaty negotiation: Bruno Le Maire (economy and finance), Barbara Pompili (ecological transition), Franck Riester (external trade) and Clément Beaune (European affairs).

“After two years of preparatory discussions, between 2017 and 2019, and three formal rounds of negotiations in 2020, it is clear that the process of modernising the ECT is not on track,” the ministers write.

“The current dynamics of the discussions are not likely to produce results for several years” and the EU’s objectives in the talks are “far from being achieved,” the letter states.

In 2019, EU countries gave the European Commission a mandate to revise the treaty, saying it must reinstate Europe’s “right to regulate” in areas like climate change and workers’ rights.

But those objectives are not shared by all the 54 signatories to the Energy Charter Treaty, which includes countries like Azerbaijan, Turkmenistan, Kazakhstan, Mongolia, and Uzbekistan, all highly reliant on fossil fuels.

“Not all Contracting Parties seem to share European ambitions in the field of the fight against climate change,” the four French ministers wrote, pointing out that the EU’s willingness to “exclude fossil fuels from the scope of the modernised ECT” is currently opposed by countries whose economies remain dependent oil, gas and coal.

Other aspects of the reform also appear to be in a dead end. At the last negotiation round in December, Japan refused to revise the most controversial aspect of the treaty – the investor-state dispute settlement mechanism – which refers litigations to private tribunals where judges are nominated by the parties in the dispute.

Instead, the EU has proposed to refer cases to a future “Multilateral Investment Court”, which is currently being negotiated at UN level.

In their letter, the French ministers found it “regrettable” that no progress has been made on reforming the ECT’s arbitration system. Talks at UN level are likely to drag on for many more years, the letter said, calling this prospect “unsatisfactory”.

Together, the EU and its 27 member states account for more than half of the 54 contracting parties to the ECT, the ministers underlined, saying this is “a considerable lever that should be exploited now by sending a strong political signal to the other states” in the treaty.

“At the next Energy Charter Conference, the European Union and the member states should collectively express their serious concerns about the conduct of the modernisation process and indicate that, in the absence of decisive progress in 2021, all consequences should be drawn.”

> Read the full letter here.

 source: Euractiv