The United Kingdom has signalled its intention to “review” its membership of the Energy Charter Treaty, placing the continuing existence of the ill-fated agreement in further jeopardy.
The UK’s department for ‘energy security and net zero’ – or DESNZ – announced late last week that Britain would leave the ECT if member countries “do not reach agreement on modernised terms by November 2023”.
Following on from the European Commission’s announcement in July that the EU and its member states would withdraw from the ECT, the UK’s move casts further doubt on whether the ECT has a viable future.
UK and EU withdrawal from the ECT would reduce the number of participant members from 53 to 25. The EU is currently a contracting party along with each of its member states – except Italy, which withdrew in 2016. A range of other EU member states are in the process of withdrawing individually.
ECT ‘does not support energy transition’ in current form
The UK said its membership review was dependent primarily on whether or not ECT member countries ratified the modernisation of the treaty which was agreed in June 2022.
“Rather than being stuck indefinitely with an outdated treaty, the UK wants to see an agreement on a modernised treaty as quickly as possible,” said Graham Stuart, minister of state for energy security and net zero.
“In its current form, the Energy Charter Treaty will not support those countries looking to make the transition to cleaner, cheaper energy sources such as renewables – and could even penalise our country for being at the forefront of those efforts.
“Governments around the world are looking to boost their sources of home-grown energy, including with new clean technologies – and that is why the Energy Charter Treaty must be modernised. It is also why we are reviewing our membership, and will consider withdrawal, if that vital modernisation is not agreed.”
The ECT, first signed in 1994, is intended to stimulate international investment in energy projects by offering investors protection against changes in government policy which could damage their interests.
But the treaty’s provisions have been characterised by some campaigners as a disincentive for countries to withdraw from fossil fuel investment projects.
The 2022 update of the text was designed to address these concerns with language that clarifies that states may regulate to reach emissions reductions targets. But analysts believe that the EU’s pending withdrawal makes it unlikely that the modernised text will be ratified.
UK sets November ECT conference as deadline
“The UK’s future membership will depend on whether proposals for the treaty’s modernisation are adopted in November,” said the statement by DESNZ.
“Several EU member states have decided to leave the treaty, leading to an impasse on modernisation. Ministers are therefore reviewing the UK’s membership of the Energy Charter Treaty to support the transition to cleaner, cheaper and home-grown energy sources, in a mission to bolster energy security.”
DESNZ stressed that the UK had never faced an investor-state dispute under the ECT that had proceeded to arbitration.
The ECT is due to hold its next annual conference in Tashkent, Uzbekistan, in November 2023.
Commenting on the European Commission’s announcement of an EU depature from the agreement earlier this year, Borderlex contributor Nikos Lavranos said:
“This move probably heralds the end of the ECT and will leave a legal and political mess behind”.