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S&Ds: Modernisation of the Energy Charter Treaty is insufficient - the EU should prepare a coordinated exit


09 Nov 2022



For the Socialists and Democrats it is crystal clear that the revision of the Energy Charter Treaty (ECT) is not enough. The modernised text falls short of our Group’s climate ambitions and international climate goals, and it will continue to jeopardise the fight against climate change and the green transition.

Under the ECT, companies can attempt to claim compensation from governments who thwart their investments. They do this through the so-called investor-state dispute settlement (ISDS), a private arbitration mechanism. This has allowed polluting companies to challenge climate action in secretive tribunals, creating a dangerous chilling effect on climate policies.

Regrettably, the modernised treaty leaves fossil fuel investments protected for at least a decade or longer, and fails to substantially modify the controversial ISDS mechanism. As a consequence, a number of member states have recently decided to exit the treaty, and more and more are considering it.

Today, the S&Ds deplored the shortcomings of the modernised treaty, despite the European Commission’s negotiation efforts, and underlined the need for preparing an EU coordinated exit from the Energy Charter Treaty.

Inmaculada Rodríguez-Piñero, S&D spokesperson on trade, said:

"We have been saying for a long time that the Energy Charter Treaty is a barrier for climate actions, undermining our efforts to get rid of fossil fuels. Therefore, we have been calling for its revision. Although the modernised text brings some improvements, it still falls short of our demands. It is still not compatible with the Paris Agreement objectives. For example the deadline for phasing out fossil fuel protection is still too long, if we want to limit global warming to 1.5°C. Moreover, the core of the old investment protection model (ISDS) remains unchanged and poses new risks, increasing the risk of costly arbitration cases.

“That is why we need to start the process towards the EU's coordinated exit from the Energy Charter Treaty. This is the best option if we want the Union to remain true to its climate ambitions and close the door once and for all to the dangerous system of private arbitration.”