Brussels France’s decision to withdraw from the Energy Charter has been around for around two weeks. According to climate protectors, the investment protection agreement makes switching to wind and solar power expensive and complicated.
The French government turned to Berlin and wanted to organize a joint appearance by President Emmanuel Macron and Chancellor Olaf Scholz. But the federal government was not ready yet.
The French felt stalled. “We were waiting for the Germans, but it was becoming increasingly silly to delay the announcement of the decision,” Macron confidante Pascal Canfin told Handelsblatt. Canfin is the Chair of the Environment Committee in the European Parliament.
It is further evidence of the currently very cool relationship between Germany and France after a ministerial meeting in Paris was canceled by Germany at short notice and Macron criticized the go-it-yourself of the German government in European energy policy. It is not just Macron who is putting pressure on the federal government.
This demand is also being made from within the ranks: “Germany should now leave the Energy Charter Treaty,” says Bernd Lange (SPD), Chairman of the Trade Committee of the European Parliament. “There’s no reason not to.”
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The Chair of the Internal Market Committee, Anna Cavazzini (Greens), has long been opposed to the Energy Charter: “It’s a shackle contract that prevents us from accelerating the energy transition,” she says.
Energy companies like to sue because of the charter
The Energy Charter is an investment protection treaty from 1994 that was agreed to by 52 countries at the time. The purpose was to build power plants and power grids in Eastern European and Central Asian countries and to mine the raw materials there. The charter guarantees energy companies compensation if their investments lose value as a result of arbitrary government decisions such as expropriations.
Such provisions also exist in trade agreements such as Ceta. In the Energy Charter, however, these compensations can be claimed before privately run arbitration courts, which climate protectionists criticize for being opaque and where the independence of the judges is difficult to guarantee.
That is why energy companies prefer to sue established constitutional states on the basis of the Energy Charter rather than in ordinary courts. So far, there have been 68 lawsuits filed by EU companies against EU states.
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In order not to be sued more often, Germany has promised the energy companies large sums of compensation for the nuclear and coal phase-out. In the Netherlands, where the amounts were lower, RWE is currently suing the government.
If oil and gas are no longer to play a role in energy supply in the future, the next lawsuits are imminent. The currently planned interventions in the electricity market and the solidarity levy for energy companies with high random profits could also have repercussions before arbitral tribunals.
The EU wants to modernize the charter
In order to avoid being sued in this way in the future, Italy withdrew from the contract a few years ago. Poland, the Netherlands, Spain and last Friday France followed.
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So far, the federal government has only said that the decision-making process has not yet been completed. “We need a signal from Berlin soon,” says SPD politician Lange.
The withdrawal would have to be decided by November 22nd. Then the contracting parties will meet in Mongolia to seal a reform of the charter.
The reform aims to modernize the agreement. The EU Commission was able to assert itself in tough negotiations with many of its positions: the arbitral tribunals should meet higher requirements, the principle of sustainability is mentioned, and there is a “right to regulation”. This is to prevent that practically every government decision that results in the loss of corporate profits can be a cause of action.
The European Union wants to reform the charter.
(Photo: dpa)
The reform in the summer of this year seemed like a great success for the climate movement. But that’s not enough for the critics. “We took a close look at the reform proposals and came to the conclusion that a withdrawal has significantly more advantages,” says Green party member Cavazzini.
The charter remains a problem even after the reform
An important point here is that investments in fossil fuels should no longer be protected in the future. But that won’t happen until three quarters of the states have ratified the changes. Anyone who builds a new gas-fired power plant by then will still benefit from the protection of the contract. When the treaty was last amended, ratification took twelve years.
Even if Germany should now terminate the contract, it can still be sued: A transitional period protects investments for up to 20 years after exit. But at least that would no longer apply to post-exit investments.
For energy companies, the exit would be bad news – and not just for companies operating in the fossil sector. Huge investments will be needed in the coming years to convert the energy supply to clean technologies.
The EU charter should be fit for the energy transition.
(Photo: dpa)
The contract is important for the expected wave of green investments, said a spokeswoman for the EU Commission. And after the reform, the charter is in line with the energy transition.
The wind farms, solar power plants and hydrogen electrolysers for this energy transition should not only be built in the EU. Production conditions are often better outside of Europe, but investment security is not. The exit from the Energy Charter Treaty could exacerbate this problem.
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