Energy Charter Treaty

The Energy Charter Treaty (ECT) is an international agreement which establishes a multilateral framework for cross-border cooperation in the energy industry, principally the fossil fuel industry. The treaty covers all aspects of commercial energy activities including trade, transit, investments and energy efficiency. The treaty contains dispute resolution procedures both for States Parties to the Treaty (vis-à-vis other States) and as between States and the investors of other States, who have made investments in the territory of the former. Full versions of the treaty, both consolidated and official, are readily accessible.

Initially, the Energy Charter process aimed to integrate the energy sectors of the Soviet Union and Eastern Europe at the end of the Cold War into the broader European and world markets. Its role, however, extends beyond east–west cooperation and, through legally binding instruments, free trade in global energy markets and non-discrimination to stimulate foreign direct investments and global cross-border trade.

Awards and settlements of the international arbitrations put forward by breaking the law of the Energy Charter Treaty are sometimes in the hundreds of millions of dollars. In 2014, the Yukos cases were decided in favour of the claimants on the basis of the treaty with a record-breaking US$50 billion award, although appeals continue in courts in the Netherlands.

The Energy Charter Treaty has been criticized for being a significant obstacle to enacting national policies to combat climate change, and for actively disincentivizing national governments from compliance with recent international climate treaties such as the Paris Agreement due to the threat of significant financial loss.

As of 2023, numerous countries have either left or have announced plans to leave the ECT. The European Union and Euratom took the final and formal step of exiting the Energy Charter Treaty, which will take effect one year after the depository has received the notification.