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UK Quits Treaty Allowing Oil Firms to Sue Governments Over Climate Policy

By Charles Kennedy - Feb 22, 2024

The UK will leave the Energy Charter Treaty (ECT), a 1994 pact that allows oil and gas companies to sue governments over their climate policies for compensation for lost profits.

The Energy Charter Treaty was originally designed to promote international investment in the energy sector and has historically provided protections for investors in fossil fuels.

Efforts to modernize the treaty, which the UK considers “outdated” in view of its net-zero policies and ambitions, have failed, resulting in a stalemate, which prompted the UK government to announce on Thursday that it would leave the Energy Charter Treaty (ECT) “after the failure of efforts to align it with net zero.”

After considering the views of businesses, industry, and civil society, ministers will now instigate the UK’s withdrawal, which will take effect after one year, removing protections for new investments after this period. ?

The UK is not the only European country quitting the treaty—France, Spain, the Netherlands, and six other EU member states have announced similar moves.

According to the UK, proposals to modernize the treaty to support cleaner technologies have been subject to months of talks between European countries, resulting in a stalemate. The UK government believes that the decision to leave the treaty “will support the UK’s transition to net zero and strengthen its energy security.”

“The Energy Charter Treaty is outdated and in urgent need of reform but talks have stalled and sensible renewal looks increasingly unlikely,” the UK’s Minister of State for Energy Security and Net Zero, Graham Stuart, said in a statement.

“Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.”

Environmentalists welcomed the UK's withdrawal from the ECT.

“Leaving this incredibly flawed treaty is a brilliant win for our environment and the climate,” Kierra Box of Friends of the Earth, said, as quoted by the BBC.