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The Energy Charter Treaty

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The Energy Charter Treaty (ECT) is a 1990s-era trade and investment accord that was designed with the objective of enabling multilateral cooperation in the energy sector. However, the decades since this treaty’s signature has shown the ECT to be deeply problematic on various levels. Along with being the treaty most used in investor-state arbitration, it has also led to record-breaking damages awards and is a hindrance to ambitious climate action.

IISD has been actively engaging with governments, civil society, academia, legal experts, and other stakeholders in how to address the many flaws of the ECT. We have undertaken in-depth research and analysis on the ECT’s design, implementation, and implications for sustainable development objectives, especially as they relate to climate action and the energy transition. We have also covered investor-state arbitrations involving the ECT in detail under our flagship journal, Investment Treaty News.

Together with our partners, we urged the European Commission in April 2020 to reconsider its approach to ECT modernisation, so that the treaty undergoes the necessary reforms for achieving the bloc’s climate action objectives and those of the UN’s Paris Agreement on climate change.

We have analyzed how governments could withdraw from the ECT or terminate it outright, which was the subject of our January 2020 webinar on The Energy Charter Treaty: To "modernize" or to exit? We have also explained the dangers of the ECT’s expansion to other countries, including Africa and Asia.

 

A list of our ECT-related analysis is presented below, in reverse chronological order.

Modernizing the Energy Charter Treaty: A make-or-break moment for sustainable, climate-friendly energy policy By Martin Dietrich Brauch for IISD (November 2019)

This commentary outlines the stakes in the Energy Charter Treaty modernization negotiations, in light of their planned launch for late 2019. The author highlights some of the ECT’s main failings, as well as the importance of making sure that any modernized ECT is made fit-for-purpose for achieving the targets of the UN’s Paris Agreement on climate change.

Modernizing the Energy Charter Treaty: What about termination? By Tania Voon for Investment Treaty News (October 2019)

This piece discusses an important topic that has been omitted in the list being discussed for the ECT modernization: the possibility of terminating the treaty, or of parties withdrawing from it, and how to address the issue of the survival clause.

Spain’s Renewable Energy Saga: Lessons for international investment law and sustainable development By Isabella Reynoso for Investment Treaty News (June 2019)

This piece analyzes the various renewable energy cases that have been brought against Spain in recent years, highlighting the arbitrary nature of the ISDS regime and its application. It also notes what the ISDS regime has meant for countries’ policy space, including in the energy sector.

Redesigning the Energy Charter Treaty to Advance the Low-Carbon Transition By Nathalie Bernasconi-Osterwalder and Martin Dietrich Brauch for Transnational Dispute Management (2019).

This paper takes a deep dive into the ECT relative to the structure and targets set under the UN’s Paris Agreement on climate change, along with making related recommendations on ECT reform.

Investor Due Diligence and the Energy Charter Treaty By Yulia Levashova for Investment Treaty News (June 2019).

This article examines the ECT from the perspective of investor due diligence, focusing on how the provision on “fair and equitable treatment” is formulated in the existing treaty.

Commentary to International Energy Charter Draft Model Investment Dispute Prevention and Management Protocol By Nathalie Bernasconi-Osterwalder and Howard Mann for IISD (2018).

This commentary analyzes the draft Model Investment Dispute Prevention and Management Protocol, prepared by the International Energy Charter Secretariat.

How the Energy Charter Treaty Could Have Costly Consequences for Governments and Climate Action By Nathalie Bernasconi-Osterwalder for IISD (2018).

This blog outlines the ECT’s history and its adverse implications for the energy transition and ambitious climate action efforts by governments.

When Climate Leaders Protect Dirty Investments (in English, Project Syndicate) Quand les gouvernements protègent les investissements polluants (in French, L’orient le Jour). By Nathalie Bernasconi-Osterwalder & Jörg Haas (November 2017)

This article calls for significant reforms in global investment governance, noting that these changes will be vital ensuring that investments do not pose a hindrance to vital climate objectives. The article makes this case in relation to UN negotiations on climate action and the importance of supporting those efforts.

Expansion of the Energy Charter to Africa and Asia: Undoing Reform in International Investment Law? By Nathalie Bernasconi-Osterwalder for Investment Treaty News (June 2017)

This piece examines the prospect of African and Asian countries joining the Energy Charter Treaty, as well as its potential implications and risks, including in terms of the hard-won innovations in international investment law and governance.