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European Yearbook of International Economic Law 2022 pp 267–293Cite as

Making the Energy Charter Treaty Climate-Friendly: An (Almost) Impossible Leap

Part of the European Yearbook of International Economic Law book series (EUROYEAR,volume 13)

Abstract

This article provides a critical assessment of the ‘modernisation’ process of the Energy Charter Treaty (ECT). First, the research frames the ECT reform as a means for resolving the clash between the treaty and climate action, that cannot be effectively managed through conflicts rules. Consequently, the text of the ‘modernised’ ECT is analysed, with particular attention to the ‘flexibility mechanism’ for the optional progressive carve out of fossil-fuel investments, which is supposed to represent the key tool to make the ECT climate-friendly. The research shows that even this mechanism would ensure fossil-fuel investments protection at the crucial stage of energy transition. Therefore, the hypothesis of a withdrawal of the EU and its Member States is considered. Before mentioning the potential legal hurdles of this strategy, the research aims at understanding its impact on the political economy of investment law. Hence, the ‘geopolitical’ and ‘neoliberal’ drivers of the treaty are analysed through the notion of ‘institutional project’. Notwithstanding the unclear legal consequences of withdrawal, its symbolic value goes far beyond the ECT alone, certifying an unprecedented setback in the project of investment law.

This author wishes to thank Prof. Annamaria Viterbo, Prof. Stefano Saluzzo and Dr. Gustavo Minervini for their invaluable advice and suggestions.

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Notes

  1. 1.

    See Lubbers (1996).

  2. 2.

    Energy Charter Treaty (ECT), entered into force on 16 April 1998, 2080 UNTS 100.

  3. 3.

    Afghanistan, Albania, Armenia, Austria, Azerbaijan, Belarus (which applies the ECT provisionally, pending ratification), Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, European Union and Euratom, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Japan, Jordan, Kazakhstan, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Mongolia, Montenegro, The Netherlands, North Macedonia, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, Yemen. Moreover, Australia, Norway and Russia were signatory but did not ratify the treaty. Finally, Italy was also a Member State, but withdrew in 2015.

  4. 4.

    See e.g. End fossil fuel protection, available at http://www.endfossilprotection.org/ (visited 27 June 2022).

  5. 5.

    To date (23 November 2022) France, Germany, Luxemburg, Spain, the Netherlands, Poland and Slovenia. Italy has already withdrawn.

  6. 6.

    Koskenniemi (2009), p. 9. See also Crawford and Koskenniemi (2012), pp. 14–20.

  7. 7.

    Council Decision 10745/19 ADD 1.

  8. 8.

    In the Commission’s words, the promise became reality: “[T]he modernised ECT […] provides legal certainty and ensures a high level of investment protection while reflecting clean energy transition goals and contributing to the achievement of the objectives of the Paris Agreement”. See https://policy.trade.ec.europa.eu/news/agreement-principle-reached-modernised-energy-charter-treaty-2022-06-24_en (last accessed 31 August 2022).

  9. 9.

    Pörtner H O et al (eds., 2022), Summary for Policymakers in Pörtner H O et al (eds.) Climate Change 2022: Impacts, Adaptation, and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. IPCC, p. 35, https://www.ipcc.ch/report/ar6/wg2/downloads/report/IPCC_AR6_WGII_SummaryForPolicymakers.pdf (last accessed 13 June 2022).

  10. 10.

    The IPCC was established in 1988 by the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP) to assess “the scientific, technical and socioeconomic information relevant for the understanding of the risk of human-induced climate change”.

  11. 11.

    The IPCC states that “[a] large number of bilateral and multilateral agreements, including the 1994 Energy Charter Treaty, include provisions for using a system of investor-state dispute settlement (ISDS) designed to protect the interests of investors in energy projects from national policies that could lead their assets to be stranded. Numerous scholars have pointed to ISDS being able to be used by fossil-fuel companies to block national legislation aimed at phasing out the use of their assets”. See Patt et al (eds., 2022), Final Draft of Chapter XIV, in Shukla et al (eds.) Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. IPCC, p. 81, https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_Chapter14.pdf (last accessed 13 June 2022).

  12. 12.

    For scholarship on the discrepancy between the investment regime and climate change mitigation commitments see among others Tienhaara and Downie (2018); Tienhaara et al. (2022).

  13. 13.

    Conference of the Parties, Adoption of the Paris Agreement. UN Doc. FCCC/CP/2015/L.9/Rev/1, 12 December 2015.

  14. 14.

    Article 4 of the Paris Agreement establishes the goal of “[h]olding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels”.

  15. 15.

    See Tienhaara and Cotula (2020), p. 8. Recent studies find that the value of fossil fuel infrastructure protected by the ECT is EUR 344.6 billion in the EU, the UK and Switzerland. See Moldenhauer and Schmidt (2021), ECT data analysis: Results and Methods, 23 February 2021, https://www.investigate-europe.eu/en/2021/ect-data/ (last accessed 13 June 2022).

  16. 16.

    Which under the ECT expressly includes an obligation of regulatory stability, protecting in the broader possible way the ‘legitimate expectations’ of the Investor. (See Article 10 ECT).

  17. 17.

    “[…] compensation shall amount to the fair market value of the Investment expropriated at the time immediately before the Expropriation or impending Expropriation became known in such a way as to affect the value of the Investment”, Article 13(1) ECT.

  18. 18.

    For a detailed analysis of potential violations of ECT standards by States in achieving the energy transition, see Tienhaara and Cotula (2020).

  19. 19.

    An investment tribunal in a most recent award (in the case Rockhopper Italia S.p.A., Rockhopper Mediterranean Ltd, and Rockhopper Exploration Plc v. Italian Republic, ICSID Case No. ARB/17/14), had an answer to a similar question: the measure violates the ECT standards of treatment and shall be compensated. See https://www.theguardian.com/business/2022/aug/24/oil-firm-rockhopper-wins-210m-payout-after-being-banned-from-drilling (last accessed 31 August 2022).

  20. 20.

    See Koskenniemi (2006); Conforti (2011), p. 188; Von der Decken (2018a), p. 549.

  21. 21.

    The relevant provisions here are Article 30(3) and Article 30(4) VCLT, read in conjunction with Article 59 VCLT. See Sadat-Akhavi (2003), pp. 70 ff.

  22. 22.

    Specifically, Article 30(3) applies to the cases in which all the parties of the later treaty are parties to the previous one, while Article 30(4) to the cases in which the parties to the later treaty do not include all the parties to the earlier one. This latter is the situation in which the relationship between the Paris Agreement and the ECT falls, considering that Yemen is a Contracting party of the ECT and not of the Paris Agreement.

  23. 23.

    Except in the relations with Yemen, which is not a party of the Paris Agreement. In that case, according to Article 30(4) VCLT, only the ECT would apply.

  24. 24.

    Investment tribunals usually do not even hold that the EU and the applicable intra-EU investment agreement share the same subject matter. See e.g. Achmea BV v The Slovak Republic, UNCITRAL, PCA Case No 2008-13 (formerly Eureko B.V. v The Slovak Republic), Decision on Jurisdiction, Arbitrability and Suspension, 26 October 2010, para. 283; Jan Oostergetel and Theodora Laurentius v. The Slovak Republic, UNCITRAL, Decision on Jurisdiction, 30 April 2010, para. 104; Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award (25 November 2015), paras 4.174–4.176.

  25. 25.

    See Bernasconi-Osterwalder and Brauch (2019), p. 9. The only ‘hard’ provisions are the procedural obligations to report the nationally determined contributions (NDCs) every 5 years and to register these with the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat.

  26. 26.

    However, the mere possibility of this happening could be concerning. See below on ‘regulatory chill’.

  27. 27.

    On the other hand, the very wording of Article 30 VCLT seems to suggest that ultimate choice on which obligation to fulfil falls on the State, with all the consequence in terms of responsibility. See Mus (1998), pp. 227 ff; Saluzzo (2018), p. 103.

  28. 28.

    On Article 19, see Baltag (2019), p. 8.

  29. 29.

    So far the provision has been deemed to operate “not at the level of individual investors but at the interstate level”. not affecting the obligations of the States towards an investor. (See Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award of 27 December 2016, para. 274). Given that the obligations under Article 19 ECT only apply between the parties and do not directly affect investors, the article could be disregarded in evaluating the responsibility of a Contracting Party for a possible violation of the standards of treatment. The Tribunal seems to implicitly indicate that, on the contrary, the standards of treatment pertain to the category of “direct rights of individuals”, which is however far from uncontroversial. See e.g. Reinisch and Mansour Fallah (2022), p. 18.

  30. 30.

    See also Hobér (2020), pp. 351–352 “Contracting Parties shall, in pursuit of sustainable development, strive to minimize harmful environmental effects within or outside their respective Areas of all operations in the energy sector, while acting in a cost-effective manner”.

  31. 31.

    At least when the respondent State and the State in which the applicant investor is incorporated are both parties to the Paris Agreement, e.g. always except in the case of Yemen.

  32. 32.

    See ex multis McLachlan (2005), pp. 279–320.

  33. 33.

    See e.g. Dupuy (2002), p. 456.

  34. 34.

    Koskenniemi (2006), p. 211.

  35. 35.

    For a clear endorsement of the use of systemic integration to reduce the isolation of investment law see e.g. Schill and Djanic (2018), p. 45. This principle has been applied in the famous Urbaser v. Argentina case to construct investor’s obligations through the rules of the Universal Declaration of Human Rights (UNDHR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR). See Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Award of 6 December 2016, para. 1992: “[…] it can thus be retained that the BIT does not represent, in the view of the Contracting parties and its clear text, a set of rules defined in isolation without consideration given to rules of international law external to its own rules”. However, on the impossibility and indesirability of entrusting the balancing between public and private interests to investment arbitration, see Davitti (2020), p. 353.

  36. 36.

    Some sort of deference should be always accorded. Its threshold, however, is not clear. See e.g. TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/17, Award of 19 December 2013, para. 493: “although the role of an international tribunal is not to second-guess or to review decisions that have been made genuinely and in good faith by a sovereign in the normal exercise of its powers, it is up to an international arbitral tribunal to sanction decisions that amount to an abuse of power, are arbitrary, or are taken in manifest disregard of the applicable legal rules and in breach of due process in regulatory matters.” The margin of discretion of the tribunal seems immense.

  37. 37.

    The Paris Agreement was adopted during the 21st Conference of the Parties to the UNFCCC (COP21). See also the Preamble of the Paris Agreements, which recalls “the objectives of the Convention and [its] principles”.

  38. 38.

    United Nations Framework Convention on Climate Change, 9 May 1992, 1771 UNTS 107.

  39. 39.

    This ‘meanstreaming’ of environmental consideration is increasingly adopted by investment tribunals. See Dupuy and Viñuales (2018), pp. 461–469.

  40. 40.

    See, for instance, William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton, and Bilcon of Delaware, Inc. v. Government of Canada, Permanent Court of Arbitration (PCA) Case No. 2009-04, Award on Jurisdiction and Liability of 17 March 2015, paras. 595–601.

  41. 41.

    See the conclusions on the analysis on the case law of investment tribunals dealing with environmental matters in Sands et al. (2018), p. 915.

  42. 42.

    Actually, there is no case law on Article 24 ECT, probably for the limited scope of application of the provision. See Hobér (2020), p. 390.

  43. 43.

    Bamberger (1996), p. 22.

  44. 44.

    Also, under Article 24(1) the exception does not apply to Article 12 (Compensation for losses) and Article 29 (Interim Provisions on Trade-Related Matters).

  45. 45.

    The formulation of Article 24(2) is very tricky. It provides that the regulatory exception does not apply to the provisions “referred to in paragraph (1)” (i.e. expropriation, compensation for losses and interim provisions on trade-related matters) and to those of “Part III of the treaty” only “with respect to subparagraph (i)” (i.e. measures necessary to protect human, animal or plant life or health).

  46. 46.

    The literature on regulatory chill is extensive. See, among others, Tienhaara (2011); Cotula (2014); Van Harten and Scott (2016); Schram et al. (2018).

  47. 47.

    See Backman C (2020), Interview: A new Energy Charter Treaty as a complement to the Paris Agreement. Borderlex, 18 June 2020, https://www.energycharter.org/fileadmin/DocumentsMedia/Other_Publications/A_new_Energy_Charter_Treaty_as_a_complement_to_the_Paris_Agreement.pdf (last accessed 13 June 2022). However, it should be underlined that the treaty does not protect all energy investments. Some technologies, especially hydrogen, are not covered by the treaty, see Maynard and Ason (2019); Keay-Bright (2019).

  48. 48.

    The urgency of climate action is reflected in the extremely limited remaining ‘global carbon budget’ in a 1.5 °C scenario. This concept represents the total amount of CO2 that can still be emitted in the future while limiting global warming to a given temperature target. See Matthews et al. (2020).

  49. 49.

    See https://policy.trade.ec.europa.eu/news/commission-presents-eu-proposal-modernising-energy-charter-treaty-2020-05-27_en (last accessed 8 September 2022).

  50. 50.

    Council Decision 10745/19 ADD 1.

  51. 51.

    The text proposal is available at https://policy.trade.ec.europa.eu/news/commission-presents-eu-proposal-modernising-energy-charter-treaty-2020-05-27_en (last accessed 8 September 2022) and the additional submission at https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159436.pdf (last accessed 8 September 2022).

  52. 52.

    See the Public Communication explaining the main changes contained in the agreement in principle, Energy Charter Conference approved at its ad hoc meeting held on 24 June 2022, available at https://www.energycharter.org/fileadmin/DocumentsMedia/CCDECS/2022/CCDEC202210.pdf (last accessed 8 September 2022).

  53. 53.

    Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part, OJ L 11, 14.1.2017, p. 23–1079. On the impact of CETA investment chapter see e.g. Pantaleo (2017); Overduin (2021). For a discussion on the role of the CETA on the legitimacy crisis of investment arbitration see Dionysiou (2021). For a comprehensive and multi-point analysis see Mbengue and Schacherer (2019).

  54. 54.

    The following analysis is based on a ‘leaked’ text, available here: https://www.bilaterals.org/IMG/pdf/reformed_ect_text.pdf (last accessed 23 November 2022).

  55. 55.

    The new Article 1 is supposed to exclude (as with CETA) the so-called ‘mailbox companies’ from protection.

  56. 56.

    Similarly, Article 13 (Expropriation) is amended according to the CETA wording.

  57. 57.

    The most relevant amendments make Article 24 applicable to all ECT provisions and add a new article (essentially imported from CETA) on the ‘right to regulate’.

  58. 58.

    See e.g. https://borderlex.net/2022/09/19/comment-will-successful-revision-talks-save-the-energy-charter-treaty/ (last accessed 19 September 2022).

  59. 59.

    With more than 140 known cases. See below at Sect. 3.1 for further discussion.

  60. 60.

    As once explained by the former ECT General Counsel Graham Coop, the treaty has become “to a very large extent […] an intra-UE investment protection treaty” See Coop (2014), p. 518.

  61. 61.

    With concrete consequences discussed below, at Sect. 3.2. However, according to the new Annex NPT, Japan will not apply Part III with respect to European fossil-fuel investments and investors, while—according to the new Annex IA-NI—Switzerland and Turkey will not give their consent to international arbitration in disputes related to an investment in their Area by European fossil-fuel investors (in general, as provided by the complex Annexes-system established by the reformed ECT “by an Investor of another Contracting Party regarding Energy Materials and Products excluded by the latter in Annex NI”).

  62. 62.

    The relevant environmental and labour conventions are recalled, as well as the UN Guiding Principles on Business and Human Rights.

  63. 63.

    However, the above mentioned reference to ‘economic efficiency’ is maintained and reinforced with a new comma which provides that: “The Contracting Parties shall not implement their respective environmental and labour laws in a manner that would constitute a disguised restriction on trade or investment in energy between the Contracting Parties or an unjustifiable or arbitrary discrimination against other Contracting Parties”. See the new Article 19(4).

  64. 64.

    Since its 2009 FTA with South Korea, the EU has included TSD Chapters in its trade agreements, committing the parties to ratify and implement International Labour Organisation (ILO) conventions and Multilateral Environmental Agreements (MEAs), and not to lower environmental and labour standards. In the current TSD Chapters (with Central-America, Colombia, Peru, Georgia, Moldova and Ukraine) neither enforceable dispute settlement procedures nor financial sanctions for non-compliance are provided. More recently, the EU-Japan Economic Partnership Agreement included commitments to ratify and implement the Paris Agreement, while the EU-Canada Comprehensive Economic Trade Agreement (CETA) contained three different chapters covering sustainable development, labour and environment. See Communication COM(2021) 497 final from the Commission of 18 February 2021 on Trade Policy Review—An Open, Sustainable and Assertive Trade Policy.

  65. 65.

    See Harrison et al. (2019); Van 't Wout (2021).

  66. 66.

    The new Article 28bis establishes a conciliatory procedure that leads to a non-binding public report. Based on this report, the Conference is bound to discuss “actions and measures to be implemented by the Contracting Parties party to the dispute”. Consequently, each party to the dispute has the obligation to inform the Secretariat of its implementation of recommended actions or measures.

  67. 67.

    Especially through the ‘pragmatic’ approach, but arguably also via systemic integration. However, see Sect. 3.1.2 above.

  68. 68.

    As above mentioned, this definition is amended in the reformed ECT.

  69. 69.

    “Except those included in Annex NI, or concerning the distribution of heat to multiple premises”. See Article 1(5) ECT.

  70. 70.

    As disciplined by Article 1(4). These Materials and Products are divided into three main categories: (a) nuclear energy; (b) coal, natural gas, petroleum and petroleum products, electrical energy; and (c) other energy.

  71. 71.

    As the ‘modernised’ ECT does, both amending the definition of Investment and of Investor.

  72. 72.

    See the analysis of Bernasconi-Osterwalder and Brauch (2019).

  73. 73.

    The mechanism is far from linear, and it is not necessary in this contribution to outline its complex operation. See the amended Article 1 and Article 26, the related reformed Annex NI and new Annexes NPT and IA-NI, and the new article concerning the ‘non application of part III to certain investments’.

  74. 74.

    To be precise, the UK excluded the protection of existing investment regarding a number of Energy Materials and Products—coal, lignite, peat—after 01 October 2024 (or after the date of entry into force of the amendments if later).

  75. 75.

    Pat et al (eds. 2022), Summary for Policymakers. in Shukla et al (eds.) Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. IPCC, p. 21, available at https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_SPM.pdf (last accessed 13 June 2022).

  76. 76.

    Which is outside the scope of this work. It will be briefly mentioned below, from the perspective of the political economy of international investment law. For discussions from a doctrinal perspective, see e.g. Declève and Van Damme (2021). For a recent monography on the topic both from the perspective of international law and EU law, see De Boeck (2022).

  77. 77.

    See for instance, before the end of the negotiation process, the position expressed by Bernd Lange, Chairman of the Trade Committee of the European Parliament, see https://www.fr.de/meinung/gastbeitraege/die-eu-muss-die-energiecharta-reformieren-90477891.html (last accessed 13 June 2022). Moreover, a letter dated 8 September 2020—signed by 139 European and national parliamentarians—urged the EU Commission to withdraw (available at https://www.ernesturtasun.eu/ecologia/statement-the-modernisation-of-the-energy-charter-treaty/). Even after the end of the process, these voices have not ceased, see e.g. https://www.investigate-europe.eu/en/2022/ect-ecocide-treaty-puts-member-states-and-eu-commission-at-odds/.

  78. 78.

    The Energy Charter Conference met online on 22 November 2023—with “more than 33 Contracting Parties” attending (i.e. almost 20 Parties defecting)—and postponed the discussion to mid-April. See CCDEC 2022 32 NOT, Decision of The Energy Charter Conference on ‘Preliminary draft schedule of planned and proposed Energy Charter Meetings and Activities for 2023’.

  79. 79.

    Koskenniemi (2009), p. 9. See also Crawford and Koskenniemi (2012), pp. 14–20.

  80. 80.

    The debate on the fragmentation of international law is boundless, and—according to Martineau (2009)—characterised by opposing and mutual exclusive narratives. However, among many contributions on this debate, see Simma (1985); Sands (1998). As a ‘classic’ starting point for reflections on the issue see Koskenniemi (2006). Recently, see for instance Peters (2017).

  81. 81.

    Tzouvala (2020), p. 38.

  82. 82.

    Miles (2013), pp. 78–100.

  83. 83.

    Tzouvala (2020), p. 43. The definition of ‘neoliberalism’ here is adopted from Ntina Tzouvala: ‘a model of capitalist accumulation that arose as a response to the Keynesian state and to 19th century laissez-faire liberalism and […] rests upon the idea of generalized competition and state intervention for the construction, guarantee and expansion of these competitive relations in an ever increasing sphere of social co-existence, including the structure and functions of the state itself.’ See Tzouvala (2016), pp. 120–121.

  84. 84.

    See Sornarajah (2015), p. 10. Historically, the creation of ‘free markets’ has not been a peaceful process. According to Polanyi (2001), p. 257: “Economic history reveals that the emergence of national markets was in no way the result of gradual and spontaneous emancipation of the economic sphere from governmental control. On the contrary, the market has been the outcome of a conscious and often violent intervention on the part of the government, which imposed the market organization of society for noneconomic ends”. While ‘liberalisation’ is intuitively supposed to mean unimpeded trade and investment, the main focus of neoliberal theorists has been instead market protection. See Slobodian (2018), pp. 5–8. In this context, according to Pistor (2019), p. 19 “States often do not, in fact need not, control the legal coding process itself. […] But states provide the legal tools that lawyers use; and they offer their law enforcement apparatus to enforce the capital that lawyers have crafted”.

  85. 85.

    Shihata (1986), p. 4. But this narrative is widespread. See e.g. Vandevelde (1988), p. 533; Franck (2009), pp. 437–438; Schill and Djanic (2018), p. 33.

  86. 86.

    Perrone (2020), p. 119.

  87. 87.

    Schneiderman (2011), p. 714.

  88. 88.

    This was particularly clear in older cases. See e.g. Compañia del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1 (“Expropriatory environmental measures—no matter how laudable and beneficial to society as a whole—are, in this respect, similar to any other expropriatory measures that a state may take in order to implement its policies”, Award, para. 72) However, the same result can be observed in recent times. See e.g. Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41.

  89. 89.

    European Energy Charter (signed 17 December 1991).

  90. 90.

    See Hobér (2020), p. 14.

  91. 91.

    See European Energy Charter, Title I.

  92. 92.

    See Russian Federation, International Energy Charter. Moreover, it is useful to recall the missed approval of a protocol on energy transit. Indeed, in 1999 the Energy Charter Conference decided to agree on more specific rules on energy transit than those in Article 7 ECT, negotiating a separate Transit Protocol. However, negotiations were first suspended in 2003, resumed in 2007, entrusted to the Trade and Transit Group in 2009 and finally repealed by the Conference in 2011. See Stănescu (2018), p. 100.

  93. 93.

    The EU signed Memoranda of Understandings (MoUs) in the energy sector with Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan. Also, it promoted multilateral forums such as the INOGATE programme and the EU4 Energy Programme, The establishment in 2005 of the Energy Community with Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Georgia, Moldova, Montenegro, Serbia and Ukraine can be also cited.

  94. 94.

    Sovacool and Florini (2012) identify at least 42 institutions involved in global energy governance.

  95. 95.

    See e.g. the analysis of Popkostova (2022).

  96. 96.

    According to the European Commission, in 2021 the EU imported more than 40% of its total gas consumption, 27% of oil imports and 46% of coal imports from Russia. See COM(2022) 108 final of 8 March 2022, p. 1.

  97. 97.

    Birol F (2022), What does the current global energy crisis mean for energy investment?. International Energy Agency (IEA), 13 May 2022, https://www.iea.org/commentaries/what-does-the-current-global-energy-crisis-mean-for-energy-investment (last accessed 13 June 2022).

  98. 98.

    Followed by the terminated NAFTA (72 cases).

  99. 99.

    However, Australia and Japan are founding members. Seemingly, the idea of ‘expanding’ investment protection even at the cost of regional cooperation was somehow already present. The geopolitical driver was prevalent, but not exclusive.

  100. 100.

    See CCDEC 201203—Approval of Final Draft of the “Policy on Consolidation, Expansion and Outreach” (CONEXO).

  101. 101.

    After Russian termination of provisional application, Afghanistan (2013), Montenegro (2015) Yemen and Jordan (2018) acceded the Treaty. However, Italy withdrew in 2015.

  102. 102.

    On the novelty approach actually see e.g. Titi (2015); contra Paparinskis (2015).

  103. 103.

    See Brauch M D (2021), Should the European Union fix, leave or kill the Energy Charter Treaty?. Blogdroiteuropéen, https://blogdroiteuropeen.com/2021/02/09/should-the-european-union-fix-leave-or-kill-the-energy-charter-treaty-by-martin-dietrich-brauch/ (last accessed 13 June 2022) See also https://voelkerrechtsblog.org/de/mission-impossible/ (last accessed 13 June 2022).

  104. 104.

    See e.g. Villiger (2009), p. 537. However, Article 30(4) VCLT (an inter se modification theoretically falls within the scope of this provision) is without prejudice to Article 41. Therefore, if the conditions set out by Article 41 are met, Article 30(4) seems to be of no relevance. See Von der Decken (2018b), p. 779; Aust (2013), p. 242.

  105. 105.

    See Article 16 ECT. This article is abrogated in the reformed treaty.

  106. 106.

    So far, Article 41 has been discussed by investment tribunals dealing with the argument that EU law has led to an inter se modification of the ECT between EU member states. See e.g. BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Spain, ICSID Case No. ARB/15/16, para. 276. Probably, the application of Article 16 might be explicitly excluded in the modification agreement. However, the same argumentative pattern might be reproduced, providing a significant tool to make the ‘sanctity of the treaty’ prevail.

  107. 107.

    See e.g. Capotorti (1971), p. 509; Pauwelyn (2001), p. 549; Von der Decken (2018b), p. 782.

  108. 108.

    Sicilianos (2002), p. 1133.

  109. 109.

    This latter category comprises both ‘interdependent’ and ‘integral’ obligations. The former are those whose mutual respect among all parties is the indispensable condition of the legal system they establish, e.g. in a disarmament convention. The latter transcend the sphere of the bilateral relations of the States parties, promoting collective or extra-state interests, e.g. in a human rights convention. Sicilianos (2002), pp. 1134–1135.

  110. 110.

    See Von der Decken (2018b), p. 783.

  111. 111.

    Von der Decken (2018b), p. 783.

  112. 112.

    This is the position of the Court of Justice of the European Union, see CJEU, case C-741/19, République de Moldavie v Komstroy LLC, ECLI:EU:C:2021:655, para. 64.

  113. 113.

    In this direction the tribunal in BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v Spain, ICSID Case no. ARB/15/16, Decision on Jurisdiction, Liability and Directions on Quantum of 2 December 2019, para. 276: “it is very doubtful whether the abrogation inter se of the ECT as between EU Member States is compatible ‘with the effective execution of the object and purpose of the [ECT] as a whole’”.

  114. 114.

    Article 70(1)(b) VCLT provides that the termination of a treaty “does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination”. However, this provision does not refer to the rights of (private) individuals, and the doctrine of acquired rights does not seem to have a clear basis in international law. See e.g. Sornarajah (2010), p. 419; Voon et al. (2014), p. 470. See also Reinisch and Mansour Fallah (2022), pp. 15–19.

  115. 115.

    Van Harten (2012), p. 252.

  116. 116.

    Referring to mutual termination of investment agreements, see Voon et al. (2014), p. 473.

  117. 117.

    However, as of 23 November 2023 the unilateral withdrawal of France, Germany, Spain, the Netherlands, Poland and Slovenia seems the only option concretely on the table. It is hard to predict whether the Commission will shift its political stance and lead the (however legally uncertain) efforts towards a coordinated withdrawal.

  118. 118.

    There are 463 investment agreements currently overlapping with the ECT (See UNCTAD Investment Agreement Navigator). These agreement would still apply. See see e.g. Atanasova (2022), p. 23: “Maintaining the focus on the ECT alone in the circumstances significantly reduces the accuracy of the impact assessment that the investment regime can have on the regulatory activity of the Contracting Parties to it. […] [E]ven if the ECT is terminated or successfully reformed, there are 463 IIAs that would continue to provide substantially similar protection to investors in its absence”.

  119. 119.

    With reference to the new ‘flexibility mechanism’, the Commission states that “[t]his phasing out of protection for fossil fuel investments will take place within a shorter timeframe than in the case of a withdrawal from the ECT, for both existing and new investments: existing fossil fuel investments will be phased out after 10 years under modernised rules (instead of 20 years under current rules)” see https://policy.trade.ec.europa.eu/news/agreement-principle-reached-modernised-energy-charter-treaty-2022-06-24_en (last accessed 21 September 2022).

  120. 120.

    E.g. on local actors see Perrone (2020), pp. 113–131.

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  1. University of Turin, Turin, Italy

    Mattia Colli Vignarelli

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Colli Vignarelli, M. (2023). Making the Energy Charter Treaty Climate-Friendly: An (Almost) Impossible Leap. In: Bäumler, J., et al. European Yearbook of International Economic Law 2022. European Yearbook of International Economic Law, vol 13. Springer, Cham. https://doi.org/10.1007/8165_2022_102

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