MEPs vote to leave treaty used by investors to sue over climate policies

European lawmakers have voted to escape a treaty that lets investors sue governments in private courts for pursuing policies that stop the planet from heating.

Fossil fuel companies have used the energy charter treaty (ECT), an international trade agreement from the 1990s, to demand billions of euros of taxpayers’ money in opaque tribunals set up to protect investors.

Several European countries have already announced their exit from the treaty but efforts to coordinate an EU-wide withdrawal had met resistance from member states.

Anna Cavazzini, a German MEP from the Green group who was in charge of the proposal, said the “absurd” treaty had slowed down climate protection and cost billions in taxpayers’ money.

“International fossil fuel investors no longer have the option of bypassing ordinary courts and attacking climate policy with extrajudicial lawsuits,” she said.

Energy companies have sued governments for profits that they expect to have lost through decisions such as phasing out coal and banning offshore oil exploration.

Even as scientists have warned that the supply of fossil fuels must drop sharply to prevent extreme weather from growing more violent, governments seeking to curb the industry’s expansion have found themselves under attack from investors.

Lukas Schaugg, a lawyer at the International Institute for Sustainable Development, a thinktank, said: “Fossil fuel investors have used the ECT to challenge government climate measures through investor-state dispute settlement (ISDS) more frequently than any other investment treaty.

“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.”

In recent years a dozen countries including France, Germany, Italy, Poland and Spain have announced their exit from the treaty as efforts to modernise it have failed. The UK announced it would leave in February.

Audrey Changoe, a trade and investment coordinator at the European branch of the campaign group Climate Action Network, said the landmark vote was an important step in getting the EU out of a “hazardous” treaty that hindered ambitious climate action.

“Following the EU’s example, we expect to see a wave of countries still within the ECT leave the sinking ship. Even a modernised version of the treaty would put climate action in the remaining countries in grave danger,” she said.

The measure was passed on Wednesday with 560 votes in favour of leaving, 43 against and 27 abstentions, and must be approved by the Council of the European Union before it comes into force.

The compromise solution offers a coordinated withdrawal of the EU as a whole but allows member states who want to modernise the treaty freedom to stay.

Paul de Clerck, an economic justice campaigner at Friends of the Earth, said activists had lifted the “sword of Damocles” that had been threatening Europe’s climate action goals. “Today’s vote proves people power can win even over big corporations,” he said.