Council adopts negotiation directives for modernisation of Energy Charter Treaty
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The Council has today given a mandate to the European Commission to begin negotiations on the modernisation of the Energy Charter Treaty (ECT). It also adopted corresponding negotiating directives.
The aim of the negotiations is to modernise the provisions of the ECT so that it takes account of sustainable development and climate goals, as well as modern standards of investment protection and investor-to-state dispute settlement. The objective of the modernised ECT should be to facilitate investment in the energy sector in a sustainable way, provide for legal certainty and ensure a high level of investment protection.
Among the main elements of the EU’s negotiating directives is a focus on ensuring that climate change and clean energy transition goals are reflected in the modernised ECT. This includes a clarification that the EU can require market participants from third countries to comply with applicable EU and member states’ laws, including those concerning environmental and safety policy.
The EU will aim to bring the provisions on investment protection in line with the modern standards of agreements recently concluded by the EU and its member states. It will also look to ensure that the modernised ECT continues to aim at a high level of investment protection. The modernised ECT should explicitly reaffirm the so-called “right to regulate”, i.e. the right of the contracting parties to take measures for the protection of health, safety, the environment and other public policy objectives. The EU also aims to clarify that investment protection provisions cannot be interpreted as a commitment by the contracting parties not to change their laws. Investor-to-state dispute settlement provisions should reflect the EU approach in its investment protection agreements and the position taken by the EU in ongoing multilateral reforms.
Procedure
On 14 May 2019, the Commission submitted to the Council a recommendation for a Council decision authorising it to enter into negotiations on the modernisation of the Energy Charter Treaty. As this matter touches on both EU and member states’ competences, two separate decisions were necessary. At its meeting on 15 July 2019, the Council therefore adopted a decision authorising the Commission to enter into negotiations for the matters that fall under EU competence. At the same time, representatives of the governments of the member states that are parties to the Energy Charter Treaty meeting within the Council adopted a decision for the elements falling under member states’ competence.
Background
The Energy Charter Treaty is a multilateral agreement that provides a framework for trade and investment in the energy area. It was signed in December 1994 and entered into force in April 1998. Currently there are 53 signatories and contracting parties to the ECT, including most EU member states, the EU and Euratom.
The key provisions of the ECT concern the protection of investment, trade in energy materials and products, transit and dispute settlement. Most of its provisions have not been revised since the 1990s. This created problems especially in the area of investment protection, which no longer correspond to modern standards.
The list of topics for modernisation that will be negotiated was approved on 27 November 2018 by the Energy Charter Ministerial Conference. It covers provisions on investment protection, sustainable development and corporate social responsibility, regional economic integration organisation (“REIO”), pre-investment and transit, as well as certain definitions and the deletion of obsolete provisions.
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