Should the European Union Fix, Leave or Kill the Energy Charter Treaty?

In the early 1990s, the European Economic Community – the predecessor of the European Union (EU) – spearheaded an initiative to promote international cooperation in the energy sector, particularly with post-Soviet States in Eastern Europe and Central Asia. Out of this process the Energy Charter Treaty (ECT) was born in 1994. Going much beyond international cooperation, the treaty allows foreign investors in the energy sector to sue their host States in international arbitral tribunals and claim monetary compensation when policy measures and other State action affect their interests. Fast-forward to 2021. With 135 known cases initiated to date, the ECT’s is the most frequently invoked treaty-based investor-State dispute settlement (ISDS) mechanism. As evidenced by a growing body of research, the ECT is obsolete considering not only modern tenets of international investment law, but also the objectives of the Paris Agreement on Climate Change and the Sustainable Development Goals (SDGs), both global texts 21 years younger. The special protections under international law that the ECT gives to fossil fuel investors and their investments go in the opposite direction of what is needed for the world to decarbonize its energy matrix and fight the climate emergency