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Clarifications on the resolution of the European Parliament on the outcome of the modernisation of the Energy Charter Treaty

On 14 February 2023, the Secretary-General communicated to the European Parliament several clarifications to the resolution of the Parliament on the outcome of the modernisation of the Energy Charter Treaty (ECT). The original letter can be found in English, as well as in French and German (unofficial translations). Among other aspects, the communication clarifies that: 

-       The Intergovernmental Panel on Climate Change did not mention in its 2022 report on climate change mitigation that the ECT is ‘a serious obstacle to climate change mitigation’. On the contrary, the report considers the modernisation of the ECT as part of the ongoing reform processes incorporating climate change. The modernised ECT introduces a stand-alone provision on the Paris Agreement (reaffirming the respective rights and obligations) and a flexibility mechanism based on the principle of ‘Common But Differentiated Responsibilities’ underpinning the Paris Agreement.

-        The European Commission acknowledged in October 2022 that the amendments will effectively bring the ECT in line with EU’s modern standards of investment protection and energy and climate objectives, including the Paris Agreement.

-        As mentioned in the resolution, EU Member States have many bilateral investment treaties (BITs) that protect fossil fuels and include investment arbitration (ISDS); also, the new international investment agreements of the EU (such as CETA) do not exclude fossil fuels and do not contain a provision on the Paris Agreement. If, for coherence purposes, the EU and its Member States have to withdraw from those agreements instead of reviewing them, how will the ‘acceleration of global investments in clean energy’ be protected?

-       The ECT is not only an investment protection agreement but contains trade provisions with some non-WTO members, such as Azerbaijan and Turkmenistan, as well as relevant transit provisions (which are reflected in the Association Agreement with Ukraine and the Partnership Agreement with Azerbaijan)

-        The postponement by the EU of the adoption of the modernised ECT results in (i) no express confirmation that the ECT does not apply intra-EU (express disconnecting clause included in the modernised ECT); (ii) the prohibition to non-EU Contracting Parties from better aligning their ECT obligations with the Paris Agreement and (ii) the extension of the investment protection to new fossil fuels investments in the EU (while the modernised ECT would not protect fossil fuels investments made after 15 August 2023).