The latest round of Energy Charter Treaty modernisation negotiations ended on Tuesday (14 June), after an extension from three days of talks held last week. There is no final agreement yet in sight on some of the most sensitive files.
The more than 50 ECT members are hoping to announce an agreement in principle at a ministerial meeting on 24 June in Brussels. Until then negotiations will enter a ‘tunnel’ phase on an ongoing basis.
The ECT talks aim at introducing environmental – notably climate – provisions into an energy trade and investment agreement covering the Eurasian landmass that dates back to the 1990s.
The EU, who is the leading demandeur in these ‘modernisation’ discussions wants to introduce new rules for investor-state dispute settlement that narrow the scope of investor rights, in line with its latest investor protection agreements.
Brussels has also asked for fossil fuels to be excluded from investor-protection rights and wants a special carve-out for this.
The talks have pitched the EU against countries such as Japan – a major energy investor – and Turkey on both the new investor protection goals and the scope and depth of environmental provisions.
Meaningful progress in range of topics
Negotiators have now agreed on treaty language in nine out of around 25 negotiation topics: “definition of investor”, “definition of investment”, “definition of indirect expropriation”, “transfers related to investments”, “frivolous claims”, “valuation of damages”, “third party funding”, “security for costs” and transit.
The ECT secretariat reported that “good progress was made on outstanding details regarding the right to regulate, the MFN clause, the “Definition of Economic Activity in the Energy Sector” and Sustainable Development and Corporate Social Responsibility” on Tuesday.
The ECT secretariat also announced that the parties to the talks “tentatively agreed” to introduce provisions from a 2014 United Nations Commission International Trade Law agreement on rules for transparency in treaty-based investor-state arbitration – “with some additions”.
Outstanding issues include whether to keep an ‘umbrella clause’ that significantly extends the investment protection provisions to a range of contracts and the precise definition of the ‘Fair and Equitable Treatment’ standard for investors.
The EU stands under strong political pressure from some powerful member states, political groups on the centre-left and NGOs to pull out of the ECT should negotiations fail to reach Brussels’s stated goals.
The dilemma the EU faces under such a scenario is that the treaty includes so-called sunset provisions that would allow its provisions as they stand today, i.e., unreformed, to remain in force twenty years after termination.
More background on these negotiations is available here.