The Energy Charter Treaty (ECT) is an international agreement originally created with a focus on growing fossil fuel energy cooperation after the Cold War.
This treaty promotes, protects, and locks in environmentally harmful investments, such as fossil fuel investments, and blocks climate mitigation obligations and measures. In addition, by including the investor-State dispute settlement (ISDS) as a way to solve disputes between investors and States, the Energy Charter Treaty allows corporations, such as fossil fuel investors, to sue States for millions — even billions — of dollars when they act to protect the climate.
For five years, CIEL and other organizations across Europe have worked tirelessly to educate European decision-makers about the dangers of the ECT. Together, we proved how the treaty prevents effective climate action and is fundamentally incompatible with EU law and international climate obligations, leading to unprecedented decisions by European States and the United Kingdom to withdraw from the ECT.
This historic win in Europe is a milestone in the fight against international trade and investment deals that include ISDS and limit climate action. It demonstrates to States that they have the power, if not also the obligation, to address this issue and ultimately withdraw from agreements that include ISDS. Failure to do so means that States could be squeezed from both sides: sued by communities for their climate inaction with ever greater frequency and sued by investors when they do act to phase out the drivers of the climate crisis and accelerate the energy transition.
This year we also developed a comprehensive and robust legal toolkit to provide legal pathways to States to address some of those fundamental issues.
In the next year, our toolkit, along with our experts, will empower States and decision-makers who are still in the binds of ISDS investment agreements and contracts to find legal options to defang ISDS.
Case study: Roșia Montană
Supporting Community Engagement in ISDS Arbitration
In the rolling hills of Romania, the Roșia Montană Mining Landscape serves as a testament to ancient history, housing the most significant, extensive, and technically diverse underground Ancient Roman gold mining complex in the world, designated a UNESCO World Heritage site. But for over two decades, this site has been under threat from a modern challenge: the proposed Gabriel Resources’ development of Europe’s largest open-pit gold and silver mine.
Since 1999, the community of Roșia Montană has advocated tirelessly to protect their homeland. When Romania suspended Gabriel Resources’ environmental permits in 2015, the company sued the country for $4 billion under ISDS. CIEL supported local communities’ efforts to intervene in the secretive tribunal through the submission of an amicus brief with partners.
In March, the World Back tribunal that hears trade-related disputes between companies and governments rejected Gabriel Resources’ damage claim against Romania and ordered the company to reimburse Romania for the cost of arbitration. While this decision is a victory for the people of Roșia Montană, it comes at a high price. Since this mining project was announced, the community has suffered deeply — its social fabric has frayed, and many residents abandoned the area in anticipation of forced relocation.
This case is yet another example of the flaws of the ISDS system, which allowed Gabriel Resources to sue Romania in the first place simply for attempting to fulfill its obligations to protect the environment and the Roșia Montană community. For decades, extractive companies have used ISDS arbitration to their advantage, based on provisions in trade and investment agreements. And now, fossil fuel companies are following suit, creating a chilling effect on government officials who wish to phase out fossil fuels.