More than 50 countries are signed up to the ECT, which specifically protects investments in the energy sector. It is the key international agreement used most often by companies to sue states for potentially billions of dollars in compensation claims.
If investors believe government measures endanger their current – or even potential future – profits, they can demand compensation under the treaty. RWE, which is now demolishing Lutzerath in order to extract more brown coal, launched a €1.4bn claim against the Netherlands in 2021 for its ‘coal exit’ law, which would end the burning of coal for electricity in 2030. The case is currently suspended until summer awaiting the decision of the German Supreme Court, which is expected in April.
But energy corporations can extract a lot of public money even when they don’t sue. After Swedish energy company Vattenfall successfully sued Germany for its nuclear phase-out after the Fukushima disaster, the German government decided it must prevent another expensive ECT claim at all costs.
RWE used the ECT to pressure the German government during negotiations over the country’s coal exit (the phasing out of coal-fired power generation). In exchange for RWE waiving its ability to sue under the ECT, the government agreed to pay them unusually high compensation: 2.6bn euros. The deal has since been criticised by independent experts for the generous payouts and the European Commission is still investigating it for illegal state aid.
Time to abolish the treaty
There have been protests across Europe against this antiquated and controversial treaty. More than one million people signed a petition to end it. Several leading EU states, including France, Germany, the Netherlands, Poland and Spain, have announced they will exit this secret weapon of the fossil fuel industry. Italy has already left. However, the European Commission is doing everything it can to save the treaty.
The events surrounding the demolition of Lutzerath bring home to people in Europe – and across the world – the violent destruction and dispossession that accompanies fossil fuel extraction. Coal is a 19th-century fuel source, protected by 20th-century treaties.
If we are to have a fighting chance for a future free from catastrophic climate change, we need 21st-century solutions. Finally abolishing the Energy Charter Treaty is a good place to start.
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