In force since 1998 to promote international cooperation in the field of energy and thus ensure the security of energy supplies, the Energy Charter Treaty (ECT) now has 56 Contracting Parties, including 26 EU Member States and the European Commission. As the second round of discussions on its modernisation ended on Friday 11 September, EUROPE met with Maria Arena MEP (S&D, Belgium), who, together with her colleagues Manon Aubry (GUE/NGL, France), Saskia Bricmont (Greens/EFA, Belgium), Anna Cavazzini (Greens/EFA, Germany), Pascal Durand (Renew Europe, France), Aurore Lalucq (S&D, France) and Helmut Scholz (GUE/NGL, Germany) mobilised MEPs and national MPs around a joint declaration calling this treaty a ”serious threat” to the European Union’s climate objectives (EUROPE 12555/13) [Interview by Damien Genicot].
Agence Europe - What exactly do you have against this Treaty?
Maria Arena - It represents a brake on climate ambitions for two reasons.
Firstly, because the climate issue is only addressed in a very minor way, given that its objective was to guarantee access to energy and that it was negotiated in the 1990s, when climate challenges were not as high a priority as they are today.
The second main reason is that the Treaty is primarily intended to protect investments in energy production. In the 1990s, energy production was largely dominated by fossil fuels. It therefore protects investments in fossil fuels, which obviously represents a brake on the transition to renewable energies.
How exactly does it protect these investments?
Via the ISDS mechanism [Editor’s note: ISDS – ‘investor-state dispute settlement’] which allows investors to sue a State party to the Treaty, not in public courts, but before a private arbitration tribunal.
When we look at the type of prosecutions that have taken place through the ISDS mechanism included in the Treaty, we see that it is a money-making machine for fossil fuel companies.
In the end, this mechanism leads either to Member States paying considerable sums of money to fossil fuel companies when they decide to abandon these energy sources, or to convincing states not to move away from fossil fuels for fear of prosecution.
Either way, it’s a hindrance to the transition. In the first, States are losing money that could be invested in the transition. In the second one, they don’t make that transition.
Spain, for example, has spent billions of euros to defend itself in arbitration tribunals, while the Swedish company Vattenfall attacked Germany when it tried to switch to renewable energy.
The ECT is at the opposite end of the spectrum from the transition to renewable energies.
ECT Secretary General Urban Rusnák, on the contrary, believes that the Treaty is neutral as it protects all energy investments. He argues that, apart from the Yukos case, damages awarded in arbitrations are twice as high in the renewable energy sector than in the fossil fuel sector.
Mr Rusnák’s argument takes into account only public cases. However, not all agreements under the ISDS mechanism are public agreements. There are a lot of cases of attacks by fossil fuel companies on climate transition legislation that are not put on the public record because they are dealt with out of court.
Furthermore, this calculation does not take into account the demotivating effect on States, i.e. the fact that the mere threat of a complaint may be enough to make them give up measures for the energy transition.
Negotiations are under way to modernise this Treaty. Japan would be particularly opposed to an in-depth review. Why?
Japan is very committed to investment protection. We saw this during the negotiations of the EU/Japan free trade agreement, during which it insisted on maintaining a pure and simple ISDS mechanism.
But I believe that many European countries have the same position as Japan and are hiding behind this country. A number of Member States are now focused on fossil fuels and have exactly the same reluctance to switch to renewables because of short-term economic competitiveness considerations.
Negotiations between Member States on the ‘Climate Law’, for example, are very difficult, even though this is a specific EU issue which does not concern Japan.
Moreover, quite a few complaints under the ECT involve two European countries. In the case of Vattenfall, for example, it was Sweden that attacked Germany.
What precisely are the positions of the various Member States on the modernisation of the treaty?
There is a strong opacity in the negotiation process. The positions of the Member States are therefore not exactly known.
The negotiating mandate [Editor’s note: https://bit.ly/3k0HSDw ] given to the European Commission is extremely vague.
It appears that after the first round of discussions [editor’s note: 6-9 July], Japan expressed its opposition to the amendment of the ISDS investment protection.
This does not seem to make the Commission really react, as it continues the discussions, even though the most important element of the modernisation of this Treaty, that is to say, revising the ISDS clause, is rejected.
What should Member States do if the modernisation of the Treaty does not lead to a revision of the ISDS clause? Get out, as Italy did in January 2016?
It would be interesting to be able to get out of it collectively.
Indeed, if unilateral withdrawal from the Treaty means that you no longer have to participate financially in its management, you remain subject to the rules of the Treaty for 20 years [Editor’s note: a clause in the ECT stipulates that a signatory leaving the Treaty remains subject to investment protection rules for 20 years from the effective date of its withdrawal. This concerns only investments made before the date of exit from the Treaty].
The European States represent a significant proportion of the signatories to the Treaty. Apart from Japan, the other contracting countries are not really in a position to put pressure on the EU.
I therefore believe that, if the EU were to collectively exit from this Treaty, we could redefine a new ‘Energy’ Treaty aimed at ensuring energy supply while respecting the Paris Climate Agreement.
Moreover, the mere expression of European unity to get out of the Treaty could lead Japan to reconsider its position in the current discussions on the modernisation of the Treaty, as it has no interest in the EU getting out of it.
The worst thing would be the status quo, as attacks on fossil industries are likely to grow as legislation in favour of energy transition increases.
What is the power of the European Parliament in relation to this Treaty?
The modernisation part of the ISDS must go through the Parliament, but it only has the possibility of accepting or rejecting this type of treaty. It doesn’t have the power to change it.
Therefore, the Parliament can let the Commission know that a majority in the European Parliament will vote against a modernised Treaty that still includes the ISDS mechanism. It is only with such political pressure that the Commission will set in motion mechanisms for real ‘progressive’ changes to the Treaty.
In the case of the CETA [Editor’s note: the EU/Canada Free Trade Agreement], the Commission did not change the ISDS because it was convinced that it had to be done, but because it knew that if it did not, Parliament would reject the mechanism.
Is this political pressure growing within the European Parliament?
Today, the debate on the ECT in Parliament takes place only in the Committee on International Trade (INTA).
However, this is not a problem of international trade, but of the environment and energy self-sufficiency, which is a matter for the Committee on the Environment and Public Health (ENVI) and the Committee on Industry and Energy (ITRE).
There is a tendency to relay these treaties to the technical sphere. However, these are political decisions that must be taken while taking into account both industrial and energy considerations as well as environmental considerations.
We cannot make environmental commitments on the one hand and, on the other hand, sign treaties that provide tools that jeopardise those commitments.
I would like the Committee on the Environment to take up this subject, in order to increase the pressure. It is best placed to demand that treaties such as the ECT are in line with the ‘Climate Law’, for example [Editor’s note: a few days after this interview, the president of the ENVI committee, Pascal Canfin, announced that he was working on an initiative of his committee on the subject - see EUROPE 12556/27].