Clémentine Baldon
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In 2024, the EU formally decided to withdraw from the ECT following mounting pressure from civil society and activists, who argued that the treaty obstructed efforts to combat climate change. This decision came after several high-profile withdrawals by individual member states that began as early as 2021. The European Parliament’s overwhelming vote in early 2024 in favour of exiting the ECT was a decisive moment, leading to the EU’s official withdrawal in May 2024. Meanwhile, in February 2024, the United Kingdom had also declared its intention to exit the ECT.
Despite such developments, the treaty continues to exert significant influence. Its ISDS mechanism allows investors to claim (often considerable) compensation for regulations they claim undermine their investments, which can include crucial measures aimed at addressing climate change or promoting social welfare. Compounding this issue is the ECT’s sunset clause contained in Article 47(3), which enables investors to initiate proceedings up to 20 years post-withdrawal. This means that states remain vulnerable to costly arbitration long after their exit.
Clémentine Baldon and Rosanne Craveia have compiled an overview of recent publicly available fossil fuel cases based on the ECT, highlighting the persistent risks ECT state parties face even as they strive to implement policies in the public interest.
Read the full article (free access) on Investment Treaty News
