Originally from Investment Treaty Arbitration and International Law Volume 17

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I. INTRODUCTION

Following five years of discussion and an agreement in principle in June, 2022  to modernize the Energy Charter Treaty (ECT), the future of the Treaty remains uncertain.  In the year since the Energy Charter Conference announced the modernization agreement of its member states, several states have made official written notifications of withdrawal from the ECT,    and other states have declared their intention to follow suit.  Notably, on July 7, 2023, the European Commission published a proposal for the coordinated withdrawal of the European Union (EU), EU Member States, and Euratom  from the ECT.  Member States have cited climate change and a desire to move away from investment protection for fossil-fuel companies and into alignment with commitments made under the Paris Climate Accord, along with the high costs of defending against claims made by investors under the treaty as the driving factors behind their decision to abandon the ECT as it nears the thirtieth year since its drafting. While the development and proliferation of clean energy investments should be supported, this paper argues that such a goal does not correctly justify a withdrawal from the ECT. A combined reading of Rule 47 and 62 of the text of the ECT does not support this justification. The goals supported by the creation of the ECT, such as the protection of foreign investments into energy production and the non-discriminatory trade of resources designed to develop cross-border energy infrastructure, continue to deserve treaty protection, even as the ECT’s modernization process seeks to tackle climate-forward objectives. Rather than a coordinated withdrawal based on an insufficient justification for backing out of their legal obligations that has backed Member States into a stalemate over the stalled adoption of a modernized ECT, States should instead focus on using existing ECT frameworks to support these environmental goals.