Article 26 of the Energy Charter Treaty (ECT) – which provides, inter alia, for the possibility of resolving a dispute between an investor and an ECT signatory country via an arbitration tribunal – must be interpreted as not being applicable to disputes between an investor from an EU Member State and another Member State. This was the emphasis of the Court of Justice of the European Union (CJEU) in a judgment handed down on Thursday 2 September (case C-741/19).
In this judgment, the Court noted, firstly, that the ECT “may require Member States to comply with the arbitral mechanisms for which it provides”. But it continues to say that this applies “in their relations with investors from third States who are also Contracting Parties to that treaty as regards investments made by the latter in those Member States”.
On the other hand, “preservation of the autonomy and of the particular nature of EU law precludes the same obligations under the ECT from being imposed on Member States as between themselves”, added the CJEU.
According to the Court’s established case law, an international agreement cannot undermine the autonomy of the European Union’s legal system.
The CJEU concluded: “Article 26(2)(c) ECT must be interpreted as not being applicable to disputes between a Member State and an investor of another Member State concerning an investment made by the latter in the first Member State”.
A judgement that has been welcomed by NGOs
Having been in force since 1998, the ECT is now under fire.
According to some Member States (see EUROPE 12658/6), MEPs (see EUROPE 12594/11) and environmental NGOs, it would represent an obstacle to the ‘European Green Deal’ and, more broadly, to the transition from fossil fuels to renewable energy, by allowing investors to challenge a State who has signed a treaty through an arbitration tribunal on the grounds that environmental policies threaten one of their investments.
On 2 February, German energy giant RWE, for example, filed an arbitration claim against the Netherlands under the ECT as a result of the country’s decision to end coal-fired power generation by 2030 (see EUROPE 12651/32).
Several NGOs such as CAN Europe, Friends of the Earth Europe and ClientEarth have therefore welcomed the position of the Court.
In their opinion, this is a clear message to companies that their climate-damaging actions will not be defensible before a court.
“The tribunals should apply today’s ruling to their current decision-making, and confirm that they will not accept the use of the treaty in this way in future disputes”, said ClientEarth member Amandine Van Den Berghe, while reiterating her call for the EU to collectively get exit the ECT.
See the judgment: https://bit.ly/3mX8BWs (Original version in French by Damien Genicot)