Seanad debates
Wednesday, 1 June 2022
Nithe i dtosach suíonna - Commencement Matters
International Agreements
10:30 am
Lynn Boylan (Sinn Fein)
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I welcome the Minister of State, Deputy Naughton. This is not the first time I have raised this issue of the Energy Charter Treaty and the modernisation process, Ireland's position is on that treaty and when Ireland will cut its losses and walk away from it.
The Energy Charter Treaty was ratified in the 1990s by Ireland with no debate and it has been lingering around like a bad smell ever since. It is an international treaty that protects fossil fuel companies from any risk to their profits or future profits. The investor provisions in the Energy Charter Treaty are of the most archaic form of investor-state dispute settlement, ISDS. ISDS is a legal system that is based on the neocolonial mindset that we cannot trust new democracies or foreign countries for investors and, therefore, investors must have the protection of a private court system for corporations. This is despite the fact the OECD and another academic meta-analysis of all of the investment protections within treaties found that the effect of ISDS in promoting investment into countries is so small as to be considered zero.
What we have seen in recent years is a significant escalation in the number of ISDS cases that are being taken by corporations, especially since 2013. What is most concerning is the use of ISDS in the Energy Charter Treaty to stymie climate action, so much so that the Energy Charter Treaty was flagged in the most recent Intergovernmental Panel on Climate Change, IPCC, Working Group III report. That report could not have been any clearer. It stated that agreements such as the Energy Charter Treaty with their investment protections are being used by fossil fuel companies to block national legislation aimed at phasing out the use of their assets.
So far, fossil fuel companies have commenced or threatened legal action to the value of €2.15 trillion against countries and their governments for taking climate action. For example, the Corrib gas field is one of the ones that was flagged as most likely where companies have threatened legal action against Ireland in the past but, that we know of, we have never been taken to court.
In 2018, the then EU Commissioner for Trade, Dr. Cecilia Malmström, declared that ISDS was dead, and yet under the current modernisation of the Energy Charter Treaty the EU has not even put ISDS on the table for reform or modernisation. This is despite the fact an EU court ruling found that ISDS and the Energy Charter Treaty is contrary to EU law.
The last time I asked the question of a Minister, we were over in the convention centre and I was told the modernisation process was ongoing and we would wait and see how it went. To be honest, we know it is going nowhere. The fact the most insidious part of the agreement is not even on the table for reform means we are wasting valuable time in tackling climate action by remaining a party to this dinosaur agreement.
Climate change has fundamentally changed the world. We woke up only this morning to hear the news that not only will Ireland not meet its climate emission targets this year but they are actually going up. My question for the Minister of State is, at what point do we face the reality that the Energy Charter Treaty cannot be reformed, it is not fit for purpose and it does not belong in a world system where we are facing planetary breakdown from climate change?
Hildegarde Naughton (Galway West, Fine Gael)
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The Energy Charter Treaty is a political declaration on international energy co-operation with 53 signatories and contracting parties, including all EU member states, except Italy. It was signed in 1994 and entered into legal force in 1998. Since then, the Energy Charter Treaty has provided a multilateral framework for energy co-operation. It promotes 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's provisions focus on four broad areas: the protection of foreign investments, based on the extension of national treatment or most favoured nation treatment, whichever is more favourable, and protection against key non-commercial risks; non-discriminatory conditions for trade in energy materials, products and energy-related equipment based on WTO rules, and provisions to ensure reliable cross-border energy transit flows through pipelines, grids and other means of transportation; the resolution of disputes between participating states and, in the case of investments, between investors and host states; and the promotion of energy efficiency and attempts to minimise the environmental impact of energy production and use. The treaty is, therefore, 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.
While the treaty has worked well for many years, situations and circumstances have changed over time, as they always do. It has been recognised for a number of years that it is necessary to update and modernise the treaty, in particular to take account of the objectives of the Paris Agreement. In 2017, therefore, the Energy Charter Conference decided to modernise the treaty.The modernisation of the treaty aims to address developments in the energy sector, especially in light of the rapid changes that have occurred in recent years and that have brought new opportunities and challenges for the sector. Its modernisation is key to ensuring the treaty fulfils its potential to strengthen long-term co-operation in the energy field and to contribute to enhancing energy security.
The negotiations for this modernisation, when concerning more than 50 different countries, have naturally taken time. I am pleased, however, that they are reaching their conclusion. The most recent round of negotiations, held in May, indicate that the contracting parties are close to reaching agreement on the key reforms. Following a final round of negotiations planned for next week, it is possible that an agreement, in principle, can be announced at the ECT conference at the end of this month.
Ireland's position remains to support the treaty and the benefits to international energy security that it can provide, especially at a time energy security has been threatened, while also supporting the modernisation process to align the treaty with the objectives of the Paris Agreement. Ireland, therefore, awaits the outcome of the final rounds of negotiations planned for this month, while reserving the option to support a co-ordinated withdrawal from the treaty, should these efforts ultimately fail and if such a course of action is considered appropriate by Government to achieve our national renewable energy and climate ambitions.
Lynn Boylan (Sinn Fein)
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It is deeply disappointing to hear the Minister of State say that Ireland supports this treaty and that it has worked well or in any way protects energy security. The only thing this treaty protects is the profits of fossil fuel companies. They are looking at ways to bail themselves out before the transition to a decarbonised future. The ISDS is not part of the modernisation process and no matter what conclusions are made next month, it will not address the biggest issue with this treaty.
Ireland is looking at introducing seven temporary gas-fired power plants and there is potentially planning permission in for an LNG terminal in Shannon. They will all be protected by ISDS for years. These are huge projects and they are not temporary. If a future Government decides that it wants to phase out those fossil-fuel facilities, it will be on the hook to cover the profits of those fossil fuel investors. That is exactly what happened to the Dutch Government when it tried to phase out temporary, coal-fired power stations. It now faces litigation in a private corporate court for billions of euro because the court found that it was not doing enough on climate action and it chose to try to close down coal-fired fossil fuel plants. The fact that we are four years into negotiations and still trying to fix this treaty is deeply disappointing. It does not bode well for us meeting our climate targets.
Hildegarde Naughton (Galway West, Fine Gael)
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The modernisation of the treaty was initiated to respond to a world where the importance of renewables was paramount and to the policy objectives of the EU and non-EU countries to phase out fossil fuels in favour of renewables. That is essential. The Government's position is, therefore, that the best outcome of the treaty-modernisation negotiations is to align the treaty with the Paris Agreement and the European Green Deal, while maintaining the energy security framework provided by the treaty.
While the option to withdraw from the treaty is reserved, the Senator will be familiar with the sunset clause that would apply in this case, recent CJEU rulings notwithstanding. Given the agreement, in principle, is now considered possible at the ECT conference at the end of this month, considerations of withdrawal should be deferred until at least this event has had the opportunity to deliver agreement.
Recent rulings by the CJEU have determined that the arbitration system under the ECT cannot be used to claim compensation in intra-EU disputes. The court confirmed that despite the multilateral character of the ECT and the fact that it also governs relationships with non-EU countries, the preservation of the autonomy and specific character of EU law precludes the ECT from being able to impose the same obligations on the member states among themselves. Since the ruling would likely not preclude the use of the treaty arbitration process in intra-EU cases held elsewhere in the world, there have been further calls from several member states for a co-ordinated withdrawal from the treaty. It should be noted, however, that in terms of a 20-year sunset clause under which treaty terms would continue to apply, a co-ordinated withdrawal would, therefore, need to manage this risk.