In the previous articles, we discussed how the ECT was the fossil fuel’s industry secret weapon to prevent States from undertaking an energy transition. Subsequently, we also discussed why it was obsolete.
Today, we are going to see how they also managed to lock in states in an excessively hard to change Treaty.
To change this Dirty Treaty’s clauses, all 53 signatories must approve. 53 potential vetos is a lot – when you know how the EU struggles with “only” 27 ones. The task to green the ECT is even more difficult when you know that among the signatories, some of them have a strong interest in protecting their fossil fuel industries. This, for example, is the case with Japan, of which has heavily invested in coal factories, outside of its territory. Consequently, Japan refuses to change any clause in the ECT, despite repeated demands from the EU. As such, this simply makes the ECT unreformable.
The sunset clause: States are still bound to the ECT 20 years after withdrawal
“The provisions of this Treaty shall continue to apply to Investments made in the Area of a Contracting Party by Investors of other Contracting Parties or in the Area of other Contracting Parties by Investors of that Contracting Party as of the date when that Contracting Party’s withdrawal from the Treaty takes effect for a period of 20 years from such date” Energy Charter Treaty, Article 47 – 3
Investments in the energy sector are quite heavy, and at the time the ECT was signed, the clause may have made sense. Today, this clause is a direct threat to our ability to adapt to climate change. Italy is the only state within the European Union of which withdrew from the ECT in 2016. However, thanks to the sunset clause, it is still subject to claims being brought against the State under the ECT, until 2036.
As an example, the British oil company Rockhopper brought a claim against Italy in 2017 after the State had banned oil exploration near its coastlines. Rockhopper claims compensation for its sunk costs [investments already made in infrastructures] of about $50 million, as well as for the $300 million of which it could have made if the exploration of oil fields had not been banned.
If you have been passionate about this article and would like to dig deeper in the subject and find more resources, go have a read of our two articles “The ECT, an obstacle to the Energy Transition: how did we get there?” and “The ECT, an obstacle to the Energy Transition: the way forward”
Written by Zaraï De Pelsmacker, Alexandra Aldou and Alix Dardennes
