The Energy Charter Treaty (ECT) is an outdated investment agreement originally created to enable energy sector cooperation after the Cold War. However, today, its inclusion of investor-State dispute settlement (ISDS) is an obstacle to necessary climate action.
Fossil fuel investors have used the ECT to sue States over their climate measures, claiming a right to substantial economic compensation for alleged expenses or investment losses. Unless States curb investor access to arbitration in such “secret courts,” this trend is likely to intensify in the coming years as governments must take unprecedented steps to address the climate crisis. States could be squeezed from both sides: sued by communities for their climate inaction with ever greater frequency, and sued by investors under ISDS if and when they do act to phase out the fossil fuel drivers of the climate crisis and accelerate the energy transition.
CIEL has long worked to dismantle ISDS and ensure that the perspectives of communities inform ongoing arbitration. This year, CIEL worked tirelessly to educate European decision makers about the dangers of ISDS in the ECT, demonstrating how the treaty undermines effective climate action and is fundamentally incompatible with EU law. In an unprecedented win, the European Commission proposed a coordinated withdrawal of the EU and all of its Member States from the ECT. Now, we are leveraging this momentum for other States and clearing the way for effective climate action around the world.