Fossil fuel giants seek billions from European countries under secretive treaty

"It is literally insane that the global fossil fuel phase-out is being actively sabotaged by antiquated treaties and corporate greed," said one critic.

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SOURCECommon Dreams

Fossil fuel companies in Europe are using an international treaty signed nearly three decades ago to challenge several governments’ ability to take climate action—exemplifying why, critics said Monday, the 1994 Energy Charter Treaty is a major impediment to transitioning away from planet-heating fossil fuels and toward renewable energy.

“Time to throw this treaty out.”

Under the treaty, companies including RWE and Uniper in Germany and Rockhopper in the United Kingdom are suing the governments of Italy, the Netherlands, Poland, and other countries over their phasing out of coal power plants, requirements for environmental impact assessments, and blocking of extraction projects.

The Energy Charter Treaty was signed by more than 50 countries with the intention of protecting energy investments by individuals and foreign companies in former Soviet states.

Since 2014, when investors in the Moscow-based energy Yukos were awarded $50 billion under the treaty after it was found that Russian President Vladimir Putin had seized their assets, more than two-thirds of cases using the treaty have involved companies suing European Union governments.

The trend, and cases like those currently being argued by the German and British fossil fuel companies, has made the ECT “a major blocker to the shift from fossil fuels,” tweeted Climate Action Network Europe.

“It is literally insane that the global fossil fuel phase-out is being actively sabotaged by antiquated treaties and corporate greed,” Romain Ioualalen, global policy campaign manager for Oil Change International, said Monday.

The companies are seeking more than $4 billion. RWE’s and Uniper’s lawsuits center around the Dutch government’s decision to phase out the use of coal power by 2030.

A lawyer representing Italy in the case brought by Rockhopper told the Financial Times that a legal victory for the companies would have “extremely serious” consequences and could encourage other companies to “emulate” the oil firm. Italy has stopped Rockhopper from developing an oil field in the Adriatic Sea.

Court hearings under the ECT are kept confidential, and according to the International Institute for Sustainable Development, “the majority of known fossil fuel [investor-state dispute] cases are decided in favor of investors.” In investor-state disputes, fossil fuel companies have been awarded an average sum nearly five times more than the amount awarded in non-fossil fuel cases.

The European Commission has proposed a phase-out of ECT protections for fossil fuel firms, but signatories have thus far rejected the idea. 

By allowing companies to seek often-secret awards as they challenge governments’ right to protect public health and the planet, the ECT undermines “environmental protection and climate” as well as “democracy,” said Daniel Lutaaya, a journalist in Uganda.

“Time to throw this treaty out,” said Mark Campanale, founder and executive chair of the Carbon Tracker Initiative.

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