Experts have urged the UK to leave the controversial energy charter treaty (ECT), a secret court system that enables fossil fuel companies to sue governments for huge sums over policies that could affect future profits.
The European Commission said this week that remaining part of the treaty would “clearly undermine” climate targets and that an exit by EU countries appeared “inevitable”. Seven EU countries, including France, Germany, Spain and the Netherlands, have already said they will quit the ECT.
More than 100 academics have written to the UK government, stating that “continued membership of the ECT will harm our prospects of limiting global warming to 1.5C because it will prolong the UK’s dependence on fossil fuels and impede the transition to renewable energy”.
The ECT’s courts were set up in 1994 to protect energy companies working in former Soviet Union countries from government expropriation. The UK has backed “modernisation” of the treaty, which has 50 member states. But critics say the court system would remain in place for oil and gas projects for at least a decade, during which time carbon emissions must be reduced by half to keep the 1.5C goal within reach.
The academics’ letter was sent to Grant Shapps, the secretary of state for the new Department for Energy Security and Net Zero. “Investors have already brought cases against countries for phasing out coal-fired power stations, banning the exploitation of oil and gas near their coastline, and requiring environmental impact assessments,” the group said.
“There is also evidence that countries are shying away from introducing new legislation for fear of being challenged in claims under the ECT,” the academics said. “We urge you to take this opportunity to announce that the UK will withdraw.” The UK and Japan are the last large economies not to have said they will leave the ECT.
A government spokesperson said: “The UK is closely monitoring the situation surrounding the energy charter treaty’s modernisation process, including the positions taken by other [member nations]. We have been a strong advocate for updating the treaty to ensure it is aligned with modern energy priorities, modern international treaty practice, and international commitments on climate change.” Agreement on modernisation was due in November but has been delayed until at least April.
Oil, gas and coal firms have been awarded more than $100bn (£82.5bn) by ECT tribunals. The UK oil firm Rockhopper was recently awarded $190m in a case it brought against Italy, which is contesting the decision. ECT critics have estimated the final cost in compensation to fossil fuel companies could rise to more than $1tn. Some renewable energy companies have also used the ECT to sue for compensation after subsidy changes.
The Guardian revealed in November that the ECT court system was accused of institutional bias, self-regulation issues and perceived conflicts of interest. “The energy charter treaty is not consistent with the Paris climate agreement,” said Patrice Dreiski, a former ECT executive. “The main goal of the ECT is to promote and protect fossil fuel investment, which is not at all the goal of the Paris agreement.”
France announced it would withdraw from the ECT in October, with President Emmanuel Macron saying the move was coherent with the Paris climate deal.
The UK government said the modernised agreement would support the UK’s right to introduce measures for legitimate public policy objectives, such as to back climate action. However, the European Commission said that given the number of countries quitting individually, renegotiating the treaty did not seem feasible.
