Thank you to all those who contacted me about the Energy Charter Treaty (ECT).
It is clear that the ECT in its current form is a major barrier to effective international action to tackle the climate crisis, with energy companies using the treaty’s investor-state dispute settlement (ISDS) provisions to challenge plans to move to net zero.
In particular, where companies are able to claim their investments in fossil fuel extraction are being damaged by government intervention, they can use the ECT to sue for damages or use the threat of lawsuits to deter governments from acting. We see, for example, the case of RWE suing the Netherlands for €1.4 billion over the phase-out of coal and of UK oil company Rockhopper, which is suing Italy over a ban on offshore drilling.
In June 2022, members of the ECT reached agreement in principle for reforms to the treaty, including a “flexibility mechanism” allowing signatories to exclude fossil fuels from investment protection in their territories. However, following the announced withdrawal of several EU states from the treaty, these reforms have been put on hold. The European Commission is now recommending that the EU exit the treaty.
I know that campaigners are concerned that even a reformed treaty would protect fossil fuel projects that need to be cancelled and allow UK fossil fuel companies to continue to sue governments who choose not to exclude fossil fuel investments from protection. Furthermore, given that the UK Government is approving new licences for oil and gas projects, I am concerned at the possibility of the UK being sued later over projects being approved currently.
Following the decision on ECT reform being postponed, the Government says it has been closely monitoring the situation around the ECT, including the positions taken by other parties to the treaty. As it does so, I hope it gives proper consideration to the issues raised by those have contacted me, and I can assure you that I will continue to support efforts to press the Government on it.
More widely, I can also assure you that I oppose any ISDS clauses in future trade deals that deter action to protect the environment.
