Joining the Energy Charter Treaty could cost developing countries money that is urgently needed to fight Covid-19 and a loaming economic crisis. The Energy Charter Treaty (ECT) has become increasingly controversial.
The agreement, which dates to as far back as the early 1990s, grants corporations in the energy sector enormous power to sue states at international investment tribunals for billions of money including, for instance, when a government decides to stop new oil or gas pipelines or to phase out coal.
The Charter potentially obstructs climate solutions such as energy transition, lock-in failed energy privatizations, and undermine affordable energy prices, which means there is little to gain and much to lose for countries choosing to join.
Despite the growing controversy, the Brussels based Secretariat of the ECT is putting serious efforts in silently expanding its geographical reach in Africa, Asia, and Latin America.
The Secretariat envisions that by 2021, ECT membership will have spread to all continents to become quasi-universal.
Many countries, mostly in Africa, are now in the process of joining the ECT. Burundi, Eswatini and Mauritania are in the ratification stage while Uganda is waiting for the formal invitation to accede to the ECT.
Niger, Chad, Gambia, Nigeria, and Senegal are among the countries preparing accession reports.
The ECT Secretariat’s work for 2020 includes numerous activities to support countries’ accessions, including outreach activities towards countries such as Kenya, the Economic Community of West African States (Ecowas) as well as the Association of Southeast Asian Nations (ASEAN).
Countries face numerous risks when joining the ECT, including an avalanche of expensive lawsuits.
Under the ECT foreign investors can sue states for dizzying sums in compensation for government actions that they argue have damaged their investments.
No trade and investment agreement anywhere in the world has triggered more investor-state lawsuits than the ECT. In March 2020 the ECT Secretariat listed a total of 129 corporate claims.
Governments have been ordered to pay more than $52b in damages from the public purse – more than the annual investment needed to provide access to energy for all people in the world.
Outstanding ECT claims where this information is available (only about half of the cases) have a collective value of $32b – far more than the estimated annual cost for the African continent to adapt to climate change.
The legal costs of these proceedings can also weigh heavily on public budgets. They average $4.9m for sued states and $6m for claimant investors, but can be much higher.
In times of great economic and social uncertainty, it is absurd to sign on to a treaty with such costly consequences.
Public money that is urgently needed to address crucial health, social and economic care should not end up in pockets of private lawyers and large energy companies using the ECT to seek unmerited compensation.
African ministry of energy leaders should make sure that their countries, majority of which possess a rich variety of energy resources do not fall prey to the ECT’s expansion process in the Global South – and the ECT Secretariat should stop pursuing these states to accede to an agreement that majority of its members already consider seriously flawed.
Countries such as Burundi, Eswatini, Mauritania and Uganda should urgently take a step back and not accede to the ECT.
Pia Eberhardt, Cecilia Olivet and Faith Lumonya are researchers and campaigners with Corporate Europe Observatory (CEO), the Transnational Institute (TNI) and the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda.