Energy Charter Treaty, Latest news

Energy Charter Treaty modernisation in limbo amidst EU member state deadlock

It had become abundantly clear that there would be no ad hoc ministerial conference in April this year as originally envisaged by the Energy Charter Treaty ministers last November when a decision to adopt a renegotiated treaty text was postponed.

Now the European Commission is hoping that the current intra-European deadlock over whether to adopt what is called the ‘modernised’ text and/or to withdraw fully or partially from the highly contested energy accord will be lifted in due time by next November, when a regular annual gathering is planned.

Last year, the more than 50 members of the Eurasian landmass trade-and-investment agreement on energy that foresees investment protection for investors as well as investor-state arbitration to resolve disputes, finalised four-year old negotiations to put the treaty into line with new climate mitigation norms and rebalance investment protection rights in favour of host states.

But the EU – which is a full member of the treaty alongside its member states – was in the end not able to agree on the new text amidst high contestation of the very treaty among climate campaigners and some EU member states.

Some EU capitals have announced their withdrawal as individual ECT member states, including large member states such as France and Germany, with Denmark being the latest country announcing its intention to leave.

Speaking to MEPs at the international trade committee, commission official Erlendas Grigorovič called on member states to end the deadlock.

“In the absence of EU and Euratom endorsement of the modernisation of the Energy Charter Treaty, the non-modernised treaty, which is not in line with the modern EU policy on investment protection and the European Green Deal, continues to apply,” said the DG Energy official.

Given that individual member states have announced their withdrawal, “it is clear that having the EU endorsing the modernisation and remaining in the modernised ECT is not a viable option”, said Grigorovič.

“The current deadlock in which the unmodernised treaty applies to the EU, Euratom and all of our member states is also not acceptable,” Grigorovič added. “It is the worst possible situation.”

“The situation is very damaging to us, because we are seen as blocking the modernisation that we asked for in the first place. Therefore we need to find an alternative way forward, and rapidly,” said the commission official.

An EU neither able to leave nor to endorse treaty reforms

The current council presidency of the EU is trying to find common ground but is struggling to reconcile various contradictions among member states.

Speaking to MEPs on behalf of the Swedish presidency, Sweden’s Alexander Meijer said: “There is at this point limited and clearly insufficient support for a coordinate withdrawal by the EU and all its member states,” which is one option the commission said was on the table in a ‘non-paper’ circulated in early 2023.

“This option was rejected by a number of member states,” said Meijer. Meijer explained that the concerns are that a withdrawal would lead to the treaty continuing to apply unreformed for another twenty years thereafter due to the text’s so-called sunset clause.

Meijer said that there is some support in council for another solution envisaged by the commission, namely the withdrawal of EU and Euratom and those member states who wish to stay can stay.

“There is some support for that,” said Meijer. “Exactly what the procedure would be for this remains to be clarified, including the appropriate legal basis”.

Meijer also pointed to contradictions in the positions of some individual member states. “A large number of member states still support the modernisation, including some member states that have announced their withdrawal from the treaty.”

“There are member states that have no plans to withdraw and wish to remain parties,” said Meijer.

MEPs in committee reiterated a position adopted by the parliament in plenary calling for a coordinated withdrawal of the EU. They also want this move to be flanked by an intra-EU member state understanding that intra-EU ISDS cases would cease to apply as these were found illegal under EU law.

How much the parliament can weigh on the process remains to be seen. The resolution was adopted by a majority of 303 MEPs, which is not an overwhelming majority, as the centre-right EPP and other parties did not sign on to this solution.

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