EU Exits Treaty Allowing Fossils to Sue Over Climate Policy

European Union lawmakers have voted to withdraw from an international agreement protecting energy investment and trade, paving the way for other signatory states to follow suit.

Following the EU’s example, a wave of countries that had signed on to the Energy Charter Treaty (ECT) are expected to leave “the sinking ship,” said Audrey Changoe, trade and investment coordinator at Climate Action Network Europe. “Even a modernized version of the treaty would put climate action in the remaining countries in grave danger.”

On April 24, the EU Parliament voted 560-43 with 27 abstentions to withdraw from the treaty, reports The Financial Times. The ECT had 53 signatories, so the EU’s exit will roughly halve that number. Countries like Germany, France, and Poland have already formally left the treaty, and several others like the United Kingdom have announced plans to do so. Last week’s vote follows nearly 10 months of negotiations around the withdrawal, which resulted in a compromise allowing EU countries wishing to modernize the treaty—including Cyprus and Hungary—to stay in.

In force since 1998, the treaty had been originally drafted to protect European countries’ investments in former Soviet Union countries after the Cold War. But it has been used by fossil fuel companies to sue countries that pass laws that hurt their profits, using a mechanism known as investor–state dispute settlement (ISDS), writes the International Institute for Sustainable Development (IISD).

Using ISDS, fossil fuel investors have been able to challenge government climate measures under the ECT more frequently than any other investment treaty, said IISD international law analyst Lukas Schaugg.

“With its vote for the EU to leave the ECT, the European parliament underlines that granting fossil fuel companies privileged access to ISDS is fundamentally incompatible with climate mitigation,” he said.

Now backed by Parliament’s approval, EU countries can make a final decision to leave the treaty and will likely start doing so in May, reports Reuters. But before that happens, they will let modernizing reforms to the treaty pass, to quell the fears of those who want to stay in.

The ECT does include a sunset clause allowing fossil fuel companies to bring cases against countries for 20 years after countries withdraw. Countries are therefore seeking to secure international agreements to offset that risk.

“It took years of campaigning by activists across the world to get us to this point, and it will take some more effort to guard against the negative effects of the ECT,” said Irish Senator Lynn Boylan, climate spokesperson on climate justice for Sinn Féin.