The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies

ClientEarth and IISD Europe argue that the Energy Charter Treaty (ECT) acts as an obstacle to climate action due to its investor-state dispute settlement (ISDS) mechanism, which allows energy companies to challenge environmental regulations. They contend that the European Commission's current modernisation proposal is insufficient because it maintains the ability for investors to bypass national courts and seek high damages awards. The authors propose a specific ISDS carve-out for climate measures, a requirement for investors to exhaust domestic legal remedies first, and a redesign of the treaty to differentiate between low-carbon and carbon-intensive energy investments.

• The Energy Charter Treaty (ECT) is viewed as an obstacle to climate action because its investor-state dispute settlement (ISDS) mechanism allows foreign investors to seek compensation for government measures that affect their investments, potentially discouraging states from enacting stringent environmental regulations.
• There have been 129 known claims by energy companies under the ECT, which have been used to challenge energy and environment measures or as lobbying tools to pressure governments against new regulations.
• The European Commission's draft proposal for ECT modernisation is criticized for being 'cosmetic' because it continues to allow investors to access international arbitration without first using national court systems and does not address the disparity between compensable acts under national law versus the ECT.
• To protect climate action, the authors recommend that the EU propose a specific carve-out from the scope of ISDS for climate response measures, while potentially retaining the State-to-State dispute settlement mechanism under Article 27.

APA

Thornton, J., & Bernasconi-Osterwalder, N. (2020). The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies. ClientEarth. https://www.clientearth.org/media/xxwbrk32/clientearth-and-iisd-letter-on-ect-modernisation-230420.pdf

Chicago

Thornton, James, and Nathalie Bernasconi-Osterwalder. The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies. ClientEarth, 2020. https://www.clientearth.org/media/xxwbrk32/clientearth-and-iisd-letter-on-ect-modernisation-230420.pdf.

Wikipedia

{{cite press release |last1=Thornton |first1=James |last2=Bernasconi-Osterwalder |first2=Nathalie |title=The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies |publisher=ClientEarth |date=23 April 2020 |url=https://www.clientearth.org/media/xxwbrk32/clientearth-and-iisd-letter-on-ect-modernisation-230420.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{thornton2020modernisation, author = {Thornton, James and Bernasconi-Osterwalder, Nathalie}, title = {{The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies}}, publisher = {ClientEarth}, year = {2020}, month = apr, url = {https://www.clientearth.org/media/xxwbrk32/clientearth-and-iisd-letter-on-ect-modernisation-230420.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }