The European Union’s attempt to reform the controversial Energy Charter Treaty failed after four EU countries abstained from voting in an important vote, effectively blocking the entire process.
The Energy Charter Treaty (ECT) signed in 1994 promotes cross-border cooperation in the energy sector and protects investors from unexpected circumstances that could impact their profit expectations.
With 53 signatories, it is considered the most targeted investment agreement in the world.
Germany, France, Spain and the Netherlands, which had previously announced a full withdrawal from the ECT, chose to abstain during an ambassadors meeting on Friday because they feared the deal would curtail their climate ambitions, an EU diplomat told CNNBreakingNews.net.
“Even if we were to modernize the treaty, it is difficult to say how long that would take,” said the diplomat, speaking on condition of anonymity.
This move prevented the European Commission from receiving the required mandate to lead the negotiations on behalf of all 27 Member States.
As a result, the Commission called on the Energy Charter Conference, the governing body of the Treaty, to remove the proposed reform from the agenda of a high-level meeting to be held in Mongolia on Tuesday.
“We need to talk to Member States about the next steps, but at this stage we won’t speculate about what will happen,” a Commission spokesperson said on Monday.
At the heart of the current controversy is ECT’s obscure system of private arbitration.
This allows investors and companies to sue governments and claim compensation for policy changes, such as net zero goals, that jeopardize their business plans and revenue.
To date, parties withdrawing from ECT have faced legal disputes for 20 years.
Critics say this provision provides disproportionate protection for fossil fuels at a critical time when they must expire to combat the climate crisis.
The journal Investigate Europe estimates the value of fossil fuel infrastructure in the EU, Great Britain and Switzerland, which fall under the Treaty, at 344.6 billion euros.
To adapt the treaty to the EU’s green agenda, the European Commission proposed a reformed text that would have reduced the controversial sunset clause to ten years for old investments and to just nine months for new energy projects.
The executive had firmly defended the reform and argued that Member States were better off within a modernized ECT than outside.
However, this was not enough to convince the skeptics.
In fact, the four countries that abstained from voting on Friday are not alone: Poland, Luxembourg, Belgium and Austria are considering withdrawing from the decades-long treaty.
In view of the increasingly negative perception of ECT, it is unclear when, how or whether the reform process would be restarted. A spokesperson for the Commission refused to give an estimated timetable.
A senior EU diplomat said Member States needed “more time” to formulate a common position.
“I would suggest thinking more carefully about the future and the upcoming process,” said the diplomat.