Ossian Smyth (Dún Laoghaire, Green Party) | Oireachtas source

I thank the Senator for the question and am delighted to answer it.

The ECT is a political declaration on international energy co-operation which was signed in 1994 and entered into force in 1998. Currently, there are 53 signatories and contracting parties to the treaty, including all EU member states, except Italy, the UK, Japan and many former Soviet states. The ECT provides a multilateral framework for energy co-operation that is unique under international law. It is designed to promote energy security through the operation of more open and competitive energy markets while respecting the principles of sustainable development and sovereignty over energy resources. The treaty also provides for dispute resolution procedures between states and between states and investors in other states who have made investments in the territory of said states.

More recently, in particular following policy actions taken by EU member states in pursuit of Paris Agreement objectives, a number of cases have been taken against member states by energy investors. In one notable case, a German energy company has filed an arbitration claim against the Netherlands seeking in excess of €1 billion in compensation for the Dutch decision to phase out electricity production from coal by 2030.

Use of the ECT provisions in this way has attracted international criticism and accelerated the process to modernise the treaty to accommodate the objectives of the Paris Agreement, while within this context the European Commission has proposed modernised and revised treaty provisions that could restrict energy investment protection only to those investments that comply with emissions thresholds, effectively ruling out protection for coal power and all but the most efficient gas power plants. The Commission also proposes to extend ECT protections to biomass and hydrogen infrastructure, including hydrogen generated using fossil fuels provided that the associated CO2 emissions generated are captured and stored.

The Commission's proposed reforms have split the ECT membership, many of whom do not share the same emissions reduction ambition, and the EU bloc itself, with an increasing number of member states calling for the EU to abandon the modernisation process and withdraw from the treaty altogether. Spain and France have threatened to leave the treaty following Italy's earlier departure in 2016. However, the effectiveness of such a step remains unclear given the continued applicability of the treaty after withdrawal under a 20-year sunset clause under article 47(3) which overlaps substantially with 2050 net zero goals.

The Department's position is to continue to support the efforts of the Commission to negotiate reform of the ECT in the first instance while reserving the option to withdraw from the treaty should these efforts fail and if it is considered the appropriate approach by Government to achieve our national renewable energy and climate ambition. The Department's view is, in a nutshell, in line with the Commission's approach of reform not withdrawal. The rounds of negotiations in 2021 are foreseen for 1 to 4 June, 6 to 9 July and during the weeks of 28 September and 9 November.

Separately, in late 2020 Belgium submitted a request to the Court of Justice of the European Union for an opinion on the compatibility of the future modernised ECT arbitration provisions within EU law. This follows from a recently established position that arbitration provisions in intra-EU bilateral investment treaties are incompatible with the EU law principle of autonomy. Therefore, from an EU law perspective Belgium's request may provide some clarity on the future relevance of ECT provisions for member states. A decision from the court is expected in the coming months.