Malta called to leave treaty that punishes climate action

Climate activists have called on Malta’s minister for the environment to withdraw the island from its membership of the Energy Charter Treaty (ECT), an investor protection pact seen as inimical to Europe’s decarbonisation efforts.

Friends of the Earth Malta director Martin Galea De Giovanni and climate coordinator Suzanne Maas wrote to Miriam Dalli saying the ECT was blocking countries’ ability to accelerate their energy transition.

The multilateral treaty allows fossil fuel companies to sue over changes in policy like banning offshore drilling or coal phase-outs that affect their investments.

It has allowed investors to make high claims for damages in response to domestic energy and climate policies: in August 2022, the ECT forced Italy to pay €240 million to the British oil and gas company Rockhopper; and the Netherlands was targeted by claims of allegedly €2.4 billion from German energy giants RWE and Uniper in response to its policy to phase out the use of coal.

Germany, France, and Poland have officially notified their withdrawal from the Treaty. The Netherlands, Spain, Slovenia, and Luxembourg have committed to do so this year.

The European Parliament also voted in favour of a coordinated EU withdrawal, and the European Commission also now supports this option.

“It is obvious that reforming the Energy Charter Treaty is not a viable option, and thus the European Commission has concluded an EU withdrawal is ‘unavoidable’,” Galea de Giovanni said.

“Malta should support a full and coordinated EU withdrawal. This approach is the safest and most comprehensive solution to the ECT impasse. EU member states need to recover their full regulatory space to deal with the ongoing energy crisis and manage a swift and just transition away from fossil fuels.”

FOE said that ahead of the next discussions at the Energy Working Party of the Council of the EU in March, Malta can demonstrate climate leadership by taking steps to support a coordinated EU withdrawal from the Treaty.

Some EU member states fear that withdrawal may not end future claims if the EU remained a party to the agreement: leaving the pact is not easy because of a sunset clause allowing lawsuits to be filed for 20 years after a member leaves.

If EU countries leave together, that lowers the risk of governments being sued, green alliance CAN Europe says.

The three-decade-old ECT is the world’s most-used investment treaty. It was originally designed to protect energy investments in post-communist countries. Investigate Europe estimates €344.6 billion of investments are protected under the ECT.

But the pact has turned into a straitjacket for countries seeking to decarbonise, as they can be hit with hefty lawsuits from firms claiming damages for lost profits. Some 158 ECT signatories have faced lawsuits since 2001, with a surge in cases starting in 2015 following the Paris climate agreement that committed countries to faster efforts to cut greenhouse gas emissions.