The Energy Charter Treaty (ECT) is a multilateral agreement signed in 1994 by 53 countries, including the European Union, to promote and protect international energy cooperation and investment. The treaty includes provisions for protecting intellectual property rights, promoting energy efficiency and environmental protection. It aims to create a stable and predictable legal framework for energy-related activities, like the transit of energy resources across borders, the security of foreign investment in the energy sector, and the resolution of disputes between investors and host states. The treaty signatories agree not to expropriate assets without compensation, provide fair and equitable treatment to foreign investors, and allow for the free transfer of funds related to investments.
The signatories to the Energy Charter Treaty are Afghanistan, Albania, Armenia, Austria, Azerbaijan, Belarus°, 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, Norway*, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Türkiye, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, Yemen. [° did not ratify the Energy Charter Treaty, but applies it provisionally, * did not ratify the Energy Charter Treaty]
The Energy Charter Treaty is essential for several reasons, including promoting and protecting international energy cooperation, ensuring a stable legal framework, resolving disputes, protecting foreign investment, and encouraging energy efficiency and environmental protection amongst the parties. Despite the many positive impacts of the Energy Charter Treaty, a number of adverse effects have contributed to several countries announcing their intention to withdraw from the treaty or renegotiate its provisions.
These include environmental concerns, financial costs, Investor-State Dispute Settlement (ISDS) Mechanism, limited access to energy resources and lack of transparency between the host state. The Energy Charter Treaty has faced criticism and challenges in recent years. However, a few steps forward could help to address some of the concerns and strengthen the treaty’s positive impact. Reforming the ISDS mechanism will help to address these concerns and ensure that the treaty does not undermine the sovereignty of host states. Also, dispute resolution mechanisms need to be more transparent and inclusive, with increased participation from civil society groups, affected communities, and other stakeholders. In conclusion, The Energy Charter Treaty needs to be aligned with the global goal of a sustainable and just energy transition, which prioritises the needs of people and the planet and helps to reduce inequality, poverty, and environmental degradation.