Europe approves plan to abandon Energy Charter Treaty. And now? | Questions and answers

The European Parliament approved the withdrawal of the European Union from the Energy Charter Treaty, an international agreement (signed in Lisbon in 1994) that protects energy investments, as it considers that it undermines efforts to combat climate change.

Portugal has already abandoned the Energy Charter Treaty, thus aligning itself with the European Commission’s position on this multilateral convention. The conclusion of the denunciation process was announced in September 2023 on the Assembly of the Republic website.

Why is it important?

The 1998 Energy Charter Treaty allows energy companies to sue governments for policies that harm their investments. In recent years, companies have used it to seek compensation for measures requiring the closure of power plants. fossil fuels.

The European Union wants to abandon the treaty, which it considers to be an obstacle to the fight against climate change and the transition to clean energy.

Brussels proposed a joint exit, after EU members such as Denmark, France, Germany, Luxembourg, Poland, Spain and the Netherlands announced their own exit plans, mainly due to concerns about the climate.

The loss of the EU would reduce the current 50 signatories to the Treaty by around half, which also include Azerbaijan, Japan and Turkey.

What has been said about abandonment?

The Energy Charter Treaty secretariat did not respond to a request for comment.

MEP Anna Cavazzini (Group of the Greens/European Free Alliance), who led the European Parliament’s work last Wednesday on leaving the treaty, stated that “this absurd treaty has delayed climate protection and cost citizens billions of euros in taxpayers’ money, in the form of legal costs before private arbitration courts and compensation payments to multinational companies”.

And now?

The European Parliament’s approval means EU countries can make the decision to exit the Treaty, which is expected to happen in May, EU officials said. Ministers gave their initial support last month.

Cyprus and Hungary wanted to stay, while the other countries feared that efforts to modernize the treaty would be wasted by their departure. To allay these concerns, EU countries are expected to agree to allow reforms to modernize the treaty to be approved before leaving.

The treaty’s signatories agreed on the reforms last year, but they had little chance of coming into force without EU support.

One of the reforms would halve the time during which third-country energy companies would continue to benefit from the pact’s protections for their investments in the EU after leaving the bloc.

What are the main problems with this treaty?

An investigation carried out by Investigate Europe in 2021 revealed several problematic aspects of the convention then subscribed to by 55 countries. Among the weaknesses of the agreement is the fact that it is unilateral and drafted in an unclear manner. An example: according to the document, companies can sue States whenever they feel they are being treated “unfairly”.

Under the title The treaty, signed in Lisbon, which encourages global warming, the journalistic work shows how investors used the agreement to intimidate European Union member states, demanding compensation in the billions. And it also reveals how the multilateral convention protects, in Europe alone, energy infrastructure worth 344.6 billion euros.