Calls for ECT to be scrapped to stop fossil fuel firms using it to take governments to court

The international energy treaty that threatens Labour’s energy nationalisation plans may also risk undermining the EU’s green new deal, according to Friends of the Earth.

The environmental organisation is calling for parts of the energy charter treaty (ECT) to be scrapped to prevent fossil fuel companies from using the multilateral agreement to take governments to court over green policies.

The group has warned that unless the ECT undergoes a fundamental overhaul in talks this week, it risks undermining the European green new deal, which is to be unveiled on Wednesday by Ursula von der Leyen, the president of the European commission.

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The ECT was set up after the end of the cold war to protect western energy companies as they started to invest in former Soviet states. However, energy companies are increasingly using the treaty to challenge governments’ new climate policies.

The ECT would also threaten a Labour government’s plans to nationalise large parts of the energy industry that are owned by foreign companies covered by the treaty. City lawyers have said Labour’s plan to pay a discount to nationalise foreign-owned energy networks and the big six energy suppliers would run the risk of a legal battle in European tribunals.

Paul de Clerck, the economic justice coordinator at Friends of the Earth Europe, said the treaty was outdated and “a boon to dirty fossil fuel companies”.

“As soon as people hear about this obscure pact undermining the public interest and the fight against climate change, they will be outraged. Either the EU and member states fundamentally revise it, or pull out,” he said.

Friends of the Earth Europe is one of 260 civil society organisations and trade unions that have warned the ECT is incompatible with climate action because it contains measures to protect energy investments even where they contradict climate goals.

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The environmental groups say the treaty is being used by large fossil fuel companies to to take national governments to court over decisions to phase out dirty energy.

The German government became embroiled in a legal battle with the Swedish utility company Vattenfall over Berlin’s decision to halt nuclear power generation in the wake of the Fukushima disaster. The Dutch government may also be taken to court by the German fossil fuel company Uniper if it moves ahead with plans to phase out coal-fired power generation by 2030.

Freek Bersch, a campaigner for Friends of the Earth Netherlands, said the ECT has already played a part in slowing down the Dutch coal phase-out because of “fear of high claims, like from Uniper”.

A spokesman for Labour said last month that the party has consulted “with a number of lawyers” about the ECT and it was confident that the party would “deliver the changes that the electorate wants”.