The Government have today announced that the UK is withdrawing from the energy charter treaty (ECT).
The statement follows the Government’s announcement on 1 September 2023 that the UK was reviewing its treaty membership in the event that the modernised treaty was not adopted by November 2023. The modernised treaty was not adopted, and the review has now concluded. It has carefully considered the views of stakeholders in business, civil society and Parliament following extensive engagement.
The energy charter treaty was signed in 1994 to promote international cooperation in the energy sector in eastern Europe and central Asia following the break-up of the Soviet Union, primarily to facilitate investment in fossil fuels. However, the failure of the modernisation process means the treaty is no longer fit for purpose. The treaty means British taxpayers could bear unfair financial risk as the Government implement the necessary policies to secure the UK’s energy supplies and decarbonise.
The UK has been a strong advocate for modernising the treaty to better align it with modern energy priorities, international treaty practice and commitments on climate change. However, over a year after contracting parties reached an agreement in principle on modernisation, following two years of negotiations, there is still no clear route for adopting the modernised treaty. I am clear that the UK cannot remain in an unmodernised treaty that does not align with our unwavering commitment to energy security and net zero.
I am proud of the UK’s strong and stable investment climate. Twenty-three billion pounds were invested in UK low-carbon sectors in 2022 alone, and the review into the UK’s ECT membership particularly considered investor and business interests. Business groups supported withdrawal over remaining in the unmodernised treaty, and the UK will now join Italy, France, Germany, Poland, Luxembourg, Spain, the Netherlands, Slovenia, Denmark, and Portugal in leaving the treaty. Alternative protections for investment and trade in the energy sector will remain with all but four out of 48 of the treaty’s existing signatories. Following withdrawal, the UK will remain an attractive destination for investment in the energy sector due to its favourable environment and strong rule of law.
The UK will now initiate the process to withdraw from the energy charter treaty. The UK is required to give a one-year notification of withdrawal, removing treaty protections for new investments made after this period.
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