Image, Cari Green, US Forest Service, CC 2.0.Twenty years ago, and without any public debate, an arcane international agreement entered into force. The Energy Charter Treaty (ECT) gives sweeping powers to foreign investors in the energy sector, including the peculiar privilege to directly sue states in secret international tribunals arbitrated over by three private lawyers. Companies are claiming 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.
Swedish energy giant Vattenfall, for example, sued Germany for €1.4 billion in compensation over environmental restrictions imposed on a coal-fired power plant. The lawsuit was settled after the government agreed to relax the restrictions protecting the local river and its wildlife. Since 2012, Vattenfall has been suing Germany again, seeking €4.3 billion plus interest for lost profits from two nuclear reactors, following the country’s phase-out of atomic energy after the Fukushima disaster. Several utility companies are pursuing the EU’s poorest member state, Bulgaria, seeking hundreds of millions of euros because the government reduced soaring electricity costs for consumers. And these are only a few examples.
Global records
No trade and investment agreement anywhere in the world has triggered more investor-state lawsuits than the ECT. 117 corporate claims are known to have been taken at the time of writing, following an explosion of lawsuits over the past five years. By the end of 2017, governments had been ordered or agreed to pay more than $51 billion in damages from the public purse. That’s about the same amount as the annual investment needed to provide access to energy for all those people in the world who currently lack it. The value of the ECT lawsuits pending – $35 billion – is more than the GDP of many countries – and more than the estimated annual amount needed for Africa to adapt to climate change. Due to the opacity of ECT arbitrations, the actual figure is likely to be much higher.
