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Two decades ago, and without significant public debate, an obscure international agreement entered into force, the Energy Charter Treaty (ECT). It acts like the secret magical “One Ring to rule them all” from the Lord of the Rings trilogy, granting corporations enormous powers over our energy systems including the ability to sue governments, as well as to obstruct the transition from climate-wrecking fossil fuels towards renewable energy. And the ECT is in the process of expansion, threatening to bind yet more countries to corporate-friendly energy policies.
Today the ECT applies to nearly 50 countries stretching from Western Europe through Central Asia to Japan. Among its many provisions, those regarding foreign investments in the energy sector – also known under the infamous acronym ISDS or investor-state dispute settlement – are the ECT’s cornerstone.
The ECT’s ISDS provisions give foreign investors in the energy sector sweeping rights to directly sue states in international tribunals of three private lawyers, the arbitrators. Companies can be awarded dizzying sums in compensation for government actions that have allegedly damaged their investments, either directly through ‘expropriation’ or indirectly through regulations of virtually any kind. Energy giant Vattenfall, for example, has sued Germany over environmental restrictions on a coal-fired power plant and for phasing out nuclear power. Oil and gas company Rockhopper is suing Italy over a ban on offshore oil drilling. Several utility companies are pursuing the EU’s poorest member state, Bulgaria, after the government reduced soaring electricity costs for consumers.
Yet the ECT and its profiteers have largely escaped public attention. While the past decade has seen a storm of opposition to ISDS in other international trade and investment deals the ECT has managed to steer surprisingly clear of this public outrage. Many investor lawsuits under the treaty remain secret. For others, there is only scant information available. And in countries in the process of acceding to the ECT, hardly anyone seems to have even heard of the agreement, let alone have thoroughly examined its political, legal, and financial risks.
This report shines a light on the “one ring” of the ECT, which will greatly influence the battle over our future energy systems, as well as the corporations and lawyers, to which it grants enormous powers.