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Energy Charter Treaty Withdrawal Announcements Reflect Reform Outcome is Insufficient for Climate Ambition

November 7, 2022

The Spanish government has formally informed the European Commission of its intent to withdraw from the Energy Charter Treaty (ECT), confirming that it would start the process to do so imminently. This announcement, which follows earlier public comments from Madrid and statements by Polish, Dutch, and French officials of their own plans to do the same, reinforce that efforts to reform the controversial treaty have been insufficient to support ambitious climate action. 

With the recent indication from Belgian and Slovenian officials that their countries may soon follow suit, and with Italy already having withdrawn in 2016, the message is clear that withdrawal is the preferred pathway of several EU member states out of a treaty that has stymied governments’ efforts at ambitious climate mitigation. 

When announcing the decision, governments have overwhelmingly named the reform proposal’s lack of clarity and legal certainty as a continued hurdle to their respective abilities to respond to the climate crisis. They have also indicated that the reform proposal’s substantive changes do not go far enough to enable them to achieve either global climate action goals nor national and EU-wide objectives on sustainability.

"The modernized ECT has not achieved a successful alignment with the Paris Agreement objectives and the European Green Deal, in order to fulfil our solid commitment to become climate neutral by 2050," said Spanish officials in a joint letter to the EU Commission Vice-Presidents and the European Commissioner for Energy. The letter was co-signed by Spanish Minister for Foreign Affairs, European Union, and Cooperation José Manuel Albares Bueno, Spanish Minister for Industry, Trade, and Tourism Reyes Maroto Illera, and Spanish Vice-President and Minister for the Ecological Transition and the Demographic Challenge Teresa Ribera Rodríguez.

Days later, Dutch Minister for Climate and Energy Policy Rob Jetten, in a November 2 government letter outlining the rationale behind The Netherlands’ plans to exit the treaty, stated that "the [Dutch] Cabinet is of the opinion that the result achieved does insufficient justice to the sustainability objectives and, for the Netherlands, is insufficiently in line with the Dutch and European goals arising from the Paris Climate Agreement," according to an informal translation of the document.

Similarly, French President Emmanuel Macron stated in October that ECT withdrawal was consistent with France’s climate policy and in particular with the Paris Agreement. "It is clear from several recent cases that this treaty led to mechanisms that were speculative and resulted in significant compensation for certain actors," he said, according to an informal translation of his remarks. 

The growing number of withdrawal announcements follows widespread criticism of the reform proposals, which IISD analysis confirms leave too many open questions over the "modernized" ECT’s climate impacts. Recent arbitration cases based on the existing treaty have only served to underscore the problems inherent in the ECT’s design, such as the claims brought by energy giants RWE and Uniper against The Netherlands contesting the Dutch decision to phase out coal-fired power generation by 2030. 

"The announcements by several EU member states of their ECT withdrawal plans reflect the increased concern and recognition that companies will continue to use investment arbitration to undermine ambitious climate policy, even under the modernized ECT," said Nathalie Bernasconi-Osterwalder, Executive Director at IISD Europe and Senior Director of IISD’s Economic Law and Policy program. "We need an energy treaty with climate action and cooperation as its primary goal from the outset, not reworked after the fact just to make it less damaging." 

"Withdrawal is explicitly permitted under the ECT and is entirely in line with international law," said Lukas Schaugg, International Law Advisor at IISD. "Alongside these withdrawals, EU member states will need to ensure that investment arbitration will no longer be possible among themselves, as required by EU law, and should craft an inter se agreement."

As earlier analysis by IISD and ClientEarth shows, withdrawal could be accompanied with an inter se agreement among EU member states and any other interested contracting parties to ensure investor-state dispute settlement (ISDS) is no longer possible among them. This approach has a strong and unequivocal basis in public international law and would provide states with a clean slate to develop a future-proof investment policy in line with the objectives of the Paris Agreement.