Energy Charter Treaty: London also considers withdrawal

The United Kingdom announced on Friday that it was considering withdrawing from the Energy Charter, pointing to a “deadlock” following the announcement by several EU member states of their withdrawal from this international treaty deemed too protective of investment in fossil fuels.

London considers withdrawing from the Energy Charter Treaty: Crucial modernization at stake by November

“The UK Government confirms that it will review its membership of the Energy Charter Treaty and consider withdrawing from it if a vital upgrade is not agreed” by November this year, the executive announced in a statement.

The UK explains that it supported an improved version of the text, more focused on promoting “clean and affordable energy”, but “several EU member states have decided to leave the treaty, leading to an impasse over its modernization”, the government points out in its statement. At the beginning of July, the European Commission proposed a coordinated withdrawal of the EU and its members from this treaty, which several countries, including France, have already announced their intention to leave.

The Twenty-Seven must vote by qualified majority on this proposal. The signatories concluded the Energy Charter Treaty (ECT) in 1994, at the end of the Cold War, with the aim of guaranteeing investors in the countries of Eastern Europe and the former USSR. Bringing together the EU and some fifty other countries, it enables companies to claim compensation from a state before a private arbitration tribunal, where the state’s decisions and regulatory environment affect the profitability of their investments – even where pro-climate policies are involved.

Costly disputes: Europe faces billions of euros in claims, leading several countries to withdraw from the treaty

Emblematic case: in 2022, Italy was ordered to pay compensation of around 200 million euros to the British oil company Rockhopper for having refused an offshore drilling permit. For its part, German energy company RWE is claiming 1.4 billion euros from The Hague to compensate for its losses on a thermal power plant affected by Dutch anti-coal regulations.

Faced with a growing number of disputes, the Europeans first tried to modernize the text to prevent opportunistic claims and gradually exclude investments in fossil fuels, but failed last autumn to agree on a compromise. After Italy in 2015, several EU countries decided to withdraw from the treaty at the end of 2022 (France, Spain, Netherlands, Germany, Luxembourg, Poland, etc.).

However, they are still covered by the ECT’s “survival clause”, which protects fossil fuel plants covered by the treaty for a further 20 years after a signatory country withdraws. Legal experts and NGOs believe that a coordinated withdrawal by the Europeans would partly neutralize this clause within the EU.