It is increasingly clear that the Energy Charter Treaty (ECT) – in its current form – has become a major barrier to effective international action to tackle the climate crisis, with energy companies using the treaty’s investor-state dispute settlement (ISDS) provisions to challenge plans to move to net zero.

In particular, where companies are able to claim their investments in fossil fuel extraction are being damaged by government intervention, they can use the ECT to sue for damages
or use the threat of lawsuits to deter governments from acting.

We see, for example, the cases of RWE and Uniper suing the Netherlands for €1.4 billion and up to €1 billion respectively over the phase-out of coal, and of UK oil company Rockhopper, which is suing Italy over a ban on offshore oil explorations.

I have therefore supported calls on the Government to fully remove the ISDS protections that fossil fuel companies enjoy in the ECT, so that the treaty puts our climate first.

On 24 June 2022, members of the ECT reached agreement in principle – to be formally approved in November – for reforms to the treaty, including a “flexibility mechanism” allowing signatories to exclude fossil fuels from investment protection in their territories.

Under the new deal, the EU and UK have opted to carve out fossil fuel-related investments from investment protection under the ECT, with new investments excluded from 15 August
2023 and existing investments excluded after ten years from the entry into force of the new provisions.

The Government says that the reformed ECT will reduce the risk of costly legal challenges as we transition to net zero. However, I share the concerns of campaigners that the ten year phase-out for existing investments will protect projects that need to be cancelled and that, since other countries can choose not to exclude fossil fuel investments from
protection, UK fossil fuel companies can continue to sue other governments over their climate policies.

I can therefore assure you that I will continue to follow developments with the ECT closely and to advocate for the ECT to be removed as a barrier to progress on climate change.

More widely, I can also assure you that I will continue to oppose the inclusion of any ISDS clauses in trade deals, as I did when ISDSs were included in the proposed TTIP and
CETA trade deals.