As EU member states withdraw from the Energy Charter Treaty en masse, developing economies should call for an overhaul of many more investment treaties. Unfortunately, Europe continues to pressure poor countries to sign and abide by such agreements – a double standard with grave consequences for the environment and workers.
WASHINGTON, DC – A stream of European countries have exited the controversial Energy Charter Treaty (ECT) over the past year. France, Spain, the Netherlands, Germany, Poland, Luxembourg, Slovenia, and Denmark have all withdrawn from the ECT, or announced their intention to do so, joining Italy, which left in 2016. By allowing foreign energy investors to sue national governments for losses caused by policy changes, the ECT prevents countries from delivering on their commitment to meet the Paris climate agreement’s targets and effectively neutralizes their plans to tax oil companies’ windfall profits.
If advanced economies are being cowed by large corporations and struggling to implement urgently needed reforms, developing countries are in a much worse position. Lured by the often deceptive promise of higher capital inflows, many have signed a raft of bilateral and multilateral investment treaties. Like the ECT, these agreements contain investor-state dispute settlement (ISDS) mechanisms that allow foreign investors to bring a claim against a state before a private international tribunal. Dissatisfaction with the ECT in Europe could have sparked an important debate on how ISDS affects the future of the planet; instead, many European Union member states continue to press developing countries to conclude investment treaties.
Established at the end of the Cold War, the ECT was designed to encourage Western investment in the energy sector of former Soviet bloc countries, particularly the fossil-fuel industry. To assuage concerns about expropriation, breach of contract, and other discriminatory treatment, the treaty permits investors to submit disputes to international arbitration, a supposedly neutral forum, rather than national courts. Through this system, corporations can sue governments for investment losses, including future profits, which can amount to billions of dollars. As of June 2022, at least 150 investment-arbitration cases have been brought under the ECT.
WASHINGTON, DC – A stream of European countries have exited the controversial Energy Charter Treaty (ECT) over the past year. France, Spain, the Netherlands, Germany, Poland, Luxembourg, Slovenia, and Denmark have all withdrawn from the ECT, or announced their intention to do so, joining Italy, which left in 2016. By allowing foreign energy investors to sue national governments for losses caused by policy changes, the ECT prevents countries from delivering on their commitment to meet the Paris climate agreement’s targets and effectively neutralizes their plans to tax oil companies’ windfall profits.
If advanced economies are being cowed by large corporations and struggling to implement urgently needed reforms, developing countries are in a much worse position. Lured by the often deceptive promise of higher capital inflows, many have signed a raft of bilateral and multilateral investment treaties. Like the ECT, these agreements contain investor-state dispute settlement (ISDS) mechanisms that allow foreign investors to bring a claim against a state before a private international tribunal. Dissatisfaction with the ECT in Europe could have sparked an important debate on how ISDS affects the future of the planet; instead, many European Union member states continue to press developing countries to conclude investment treaties.
Established at the end of the Cold War, the ECT was designed to encourage Western investment in the energy sector of former Soviet bloc countries, particularly the fossil-fuel industry. To assuage concerns about expropriation, breach of contract, and other discriminatory treatment, the treaty permits investors to submit disputes to international arbitration, a supposedly neutral forum, rather than national courts. Through this system, corporations can sue governments for investment losses, including future profits, which can amount to billions of dollars. As of June 2022, at least 150 investment-arbitration cases have been brought under the ECT.