Responding to a Recommendation of the European Commission of 14 May, the European Council adopted on 15 July this Directive providing the European Commission with a detailed negotiating mandate concerning the Energy Charter Treaty (ECT).
The ECT is an international agreement providing a regulatory framework to trade and investment protection in the energy field, with a total number of 55 signatory states, including the EU, Euratom and most EU Member States. It was signed in December 1994 and entered into force in April 1998. The ECT’s key provisions concern the protection of investment, trade in energy materials and products, transit and dispute settlement.
Most of the ECT provisions have not been revised since the 1990s. Whereas its initial role consisted in providing an international cooperation framework and securing energy supply, it is clear that this falls short of today’s challenges, of the pace of climate change, technological innovation or the development of international trade. Problems arose especially in the area of investment protection, which no longer matches the current standards, inter alia regarding the possibility for foreign investors to sue signatory governments at international arbitration tribunals over measures considered harmful to their business. The topics for modernisation that will be negotiated were approved in November 2018 by the Energy Charter Ministerial Conference and include investment protection, sustainable development and corporate social responsibility, regional economic integration organisation (“REIO”), pre-investment and transit.
The upcoming negotiation phase illustrates well the ambiguity of economic development. On the one side, investment protection under the future ECT can make a real contribution in tackling climate change by fostering the development of clean energy and putting pressure on the parties to maintain support for renewable energy projects. On the other side, it also presents the risk of making investments in environmentally harmful economic activities durable.
CEEP supports the EU negotiating position as defined by the Council for recognising the conditions to an effective and socially fair energy transition, for example in aiming to embed EU environment protection standards in the revised ECT (in line with European engagement in ensuring the full implementation of the Paris agreement).
Moreover, the Council’s ambition to combine high standards of investment protection and up-to-date state-investor relationships with the parties’ reaffirmed right to regulate on basis of environment protection or public health and safety is particularly welcome. This provision is very consistent with CEEP’s approach, namely that economic competitiveness should be fostered in full respect of the general (economic) interest. This negotiation process represents a first opportunity to judge the soon-to-start von der Leyen Commission by its acts and beyond its words.