Strategic Priorities After UK Withdrawal From the Energy Charter Treaty

Amidst heated discussions on climate finance, an international legal mechanism that protects fossil fuel investments remains largely unknown. This event will shed light on investment treaties, which protect foreign fossil fuel investments via a special dispute settlement mechanism called investor-state dispute settlement (ISDS). Investment treaties with ISDS as act as a de facto public subsidy given to fossil fuel investments to de-risk them against new government measures at no cost.

In February 2024, the UK announced that it would withdraw from the Energy Charter Treaty. The Energy Charter Treaty (ECT) is an example of investment treaties with ISDS that has historically protected and benefited fossil fuel investments. It poses challenges to ambitious climate action, including hindering the phase-out of fossil fuels.

Increasingly, countries are coming to understand that the current investment regime based on ISDS is incompatible with addressing the climate crisis. Since 2022, nine other European countries have already left or decided to leave the ECT, with the EU recently announcing its decision to withdraw too.

The UK’s exit from the ECT is a meaningful step forward but challenges remain. The ECT has a sunset clause which gives protection to investments made prior to the withdrawal date for another twenty years. In addition, the UK still has over 80 investment treaties with investor-state dispute settlement (ISDS) provisions, which protect fossil fuel investments in the same way as the ECT. E3G’s upcoming report finds that the UK is highly exposed to potential legal claims from its fossil fuel assets, particularly for oil and gas fields.

Discussions are moving to how we mitigate the continued impact of the ECT and what to do with other investment treaties. One option is to negotiate an agreement between withdrawing parties to nullify the sunset clause, but legal experts differ on the likely success of this approach. More broadly, there are discussions about carving-out fossil fuel investments or climate measures from investor-state dispute settlement (ISDS). However, a wide consensus on how to amend these treaties does not exist yet.

This event aims to consider these challenges and explore collaborative strategies for civil society organisations, the UK government, and businesses to effectively navigate reforming the investment treaty regime beyond ECT withdrawal.

Panellists

• (Moderator) Eunjung Lee, Senior Policy Advisor, E3G
• Beverley Cornaby, Director, UK Corporate Leaders Group
• Sarah Williams, Head of Strategic Partnerships, Green Alliance
• Lukas Schaugg, Policy Advisor, International Institute for Sustainable Development (IISD)
• Jordan Dilworth, Researcher, E3G

There will be the opportunity to network after the event. Refreshments will be provided.

Host or Publisher E3G