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

A joint statement from the International Institute for Sustainable Development (IISD) and ClientEarth addressed to the European Commission, arguing that the Energy Charter Treaty (ECT) is an obstacle to the EU's climate goals and requires fundamental redesign rather than cosmetic modernisation.

• The Energy Charter Treaty (ECT), signed in 1994, is described as outdated and unfit for current climate challenges because it allows foreign investors to use the investor-state dispute settlement (ISDS) mechanism to seek compensation for government measures, including environmental and energy policies.
• The ECT has been used by energy companies to challenge government measures, with 129 known claims to date. These claims can lead to damages awards in the hundreds of millions or billions of EUR, creating a 'chilling effect' where governments may avoid enacting stringent environmental regulations to prevent costly arbitration.
• The authors argue that the European Commission's current draft proposal for ECT modernisation is insufficient because it continues to allow investors to bypass national courts and does not address the fact that acts not compensable under national law remain compensable under the ECT.
• The statement urges the European Commission to align the ECT with the European Green Deal and the proposed Climate Law by implementing specific reforms: carving out climate response measures from ISDS, differentiating between low-carbon and carbon-intensive investments, requiring investors to first seek redress in domestic legal systems, and establishing an accountability mechanism for investors.

APA

International Institute for Sustainable Development (2020). The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies. https://www.iisd.org/system/files/uploads/documents/ect-modernisation-letter-iisd-client-earth.pdf

Chicago

International Institute for Sustainable Development. The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies. 2020. https://www.iisd.org/system/files/uploads/documents/ect-modernisation-letter-iisd-client-earth.pdf.

Wikipedia

{{cite press release |author=International Institute for Sustainable Development |title=The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies |date=23 April 2020 |url=https://www.iisd.org/system/files/uploads/documents/ect-modernisation-letter-iisd-client-earth.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@misc{internationalinstituteforsustainabledevelopment2020modernisation, author = {{International Institute for Sustainable Development}}, title = {{The modernisation of the Energy Charter Treaty - ensuring consistency and mutual supportiveness between climate, energy and investment policies}}, publisher = {International Institute for Sustainable Development}, year = {2020}, month = apr, url = {https://www.iisd.org/system/files/uploads/documents/ect-modernisation-letter-iisd-client-earth.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }