Why do political leaders applaud David Attenborough but ignore what he says? And why is our government still granting licences to oil and gas companies, when already we can see the effects of catastrophic climate change: people fleeing from wildfires, being swept away by floods and up to their necks in water on the underground. When the danger is so great, why are governments STILL funding fossil fuels instead of tackling climate change?
The answer may be that governments are afraid of being sued for damages under the Energy Charter Treaty. This is because multinational fossil fuel companies can use the Investor-State Dispute Settlement (ISDS) clauses in the Energy Charter Treaty to claim massive damages for loss of future profits from any government which tries to limit the exploitation of coal gas and oil.
The activities of Rockhopper Exploration, an oil company based in Salisbury, provide an example of how this works.[1] In 2014, Rockhopper Exploration bought a licence to drill for oil off the Adriatic coast of Italy. Within two years, public protests persuaded the Italian government to ban new offshore oil drilling. Rockhopper fought back by submitting an ISDS claim under the Energy Charter Treaty for loss of future profits. Reports suggest that Rockhopper has spent £21 million on the project, but they are claiming almost 10 times that amount for loss of future profits, and they say they have strong prospects of recovering very significant damages. That’s how ISDS works.
Usually, we don’t get to hear about these cases, because international trade disputes are heard in separate arbitration tribunals and hearings are usually confidential. We only know about this dispute, because Members of the European Parliament held up ‘Stop ISDS’ posters to express their outrage that fossil fuel companies are using these clauses in the Energy Charter Treaty to block action on climate change.[2]
And, of course, it’s not just Rockhopper Exploration. According to Global Justice Now, currently the United States, the Netherlands, Slovenia and Italy are facing climate action lawsuits which amount in total to about £18 billion.[3] It is possible that other governments are lowering their ambitions to cut emissions in order to avoid ISDS claims. The UK has not been sued under the Energy Charter Treaty, but could be vulnerable to such claims if North Sea oil fields are sold to foreign investors.
The huge difference in the levels of compensation awarded under the corporate court system and other courts was highlighted by a case in which Russia was ordered to pay $50 billion to shareholders of the former Yukos oil company![4]However, the Yukos shareholders also took their case to the European Court of Human Rights, which awarded damages of only €1.9 billion. That’s less than 5% of the amount awarded under the Energy Charter Treaty in an arbitration tribunal. No wonder fossil fuel companies prefer to make ISDS claims in their own corporate court system.
Unfortunately, ISDS clauses have been included in thousands of investment treaties and trade deals. This means that multinational companies could conceivably sue governments who try to prevent the destruction of rainforests, to limit single use plastics or to restrict pesticides which are wiping out bees and other insects. The waste disposal company Veolia even tried to sue the Egyptian government for introducing a minimum wage!
Sometimes just the threat of an ISDS claim can persuade governments to do what multinational companies want. This may explain why, according to Bloomberg NEF, the G20 nations have funnelled $3.3 trillion into fossil fuel subsidies since the 2015 Paris Agreement.[5]
As citizens we have no say in these decisions. But WHY should our taxes be used to pay compensation to the companies who are destroying our future?
Under the Energy Charter Treaty, multinational fossil fuel companies can sue any of the 53 signatories, including the UK, if they try to stop the exploitation of oil, gas and coal reserves. In October 2020, the European Parliament voted to end the Energy Charter Treaty’s protection for fossil fuels, describing it as an obstacle blocking our transition to a low-carbon economy.[6] Despite this, attempts to reform the Energy Charter Treaty have failed. More than 400 groups have called on the UK government to withdraw from the Energy Charter Treaty before COP26,[7] and indeed this could protect us from future ISDS claims if North Sea oil fields are sold to foreign investors. France and Spain want to withdraw from the Energy Charter Treaty, but that will not protect them from claims relating to past investments. Italy left the Energy Charter Treaty in 2016 but is still being sued under a 20 year “sunset clause”.
The terrifying truth is that governments have handed power to multinational companies, and fossil fuel companies are blocking action on climate change by making huge claims for damages under the Energy Charter Treaty. They are not going to stop. In fact, they want to persuade African countries to sign the treaty! And instead of challenging this, our government says the Treaty promotes investment in energy and they support it! [8]
How can we trust a government which upholds the rights of fossil fuel companies instead of taking urgent action on the climate catastrophe to ensure our safety? And how can COP26 be a success, if our government continues to appeasethe fossil fuel companies?
Can Boris pull another rabbit out of the hat?
Realistically, there is no easy or quick way to ‘unwrite’ the thousands of investment treaties and trade deals that contain ISDS clauses, and it is abundantly clear that multinational corporations feel entitled to continue exerting power to the detriment of our planet.
However, there is at least one initiative which could help to protect our planet. This would be to make ecocide a criminaloffence in international law so that key decision-makers in companies and governments can be held to account individually for causing widespread damage or destruction to the environment. This would involve asking the 123 member states who have signed the Rome Statute to accept an amendment adding ecocide to the list of crimes against humanity. This would be a powerful deterrent, as not even the most gung-ho CEOs and politicians would want to risk such damage to their reputation and the possibility of facing trial in the International Criminal Court in The Hague.
An ecocide amendment has already been drafted by international lawyers and is now being seriously considered by several of the State Parties to the Rome Statute. When it has sufficient support, it will be tabled for consideration at the annual conference at the International Criminal Court. Support is building and there is a concerted international diplomatic effort taking place to get to the stage where the amendment can be tabled with a good chance of passing. (For further information see www.stopECOCIDE.earth ) This is likely to happen within the next five years as the climate emergency becomes more terrifying, but wouldn’t it be an amazing coup for our PM if he could persuade the governments attending COP26 to support this?
To be honest, at present this is most unlikely as our PM has said that he does not recognise the word ‘ecocide’ and the Chancellor has consistently been very reluctant to spend any money on tackling climate change. But do they really want to go down in history as the government which threw away our last chance of preventing catastrophic climate change?
[1] The Guardian (25.7.21) Outrage as Italy faces multimillion pound damages to UK oil firm.
[2] Ibid.
[3] Global Justice Now (16.9.21) Corporate Courts vs The Climate
[4] Corporate Europe Observatory (15.12.20) Busting myths around the Energy Charter Treaty.
[5] https://www.edie.net/news/G20-nations-have-funnelled-$3.3trn-into-fossil-fuel-subsidies-since-2015
[6] Corporate Europe Observatory (15.12.20) Busting myths around the Energy Charter Treaty.
[7] The Independent (6.7.21) UK urged to quit treaty letting energy companies sue states for taking climate action.
[8] The Independent (6.7.21) UK urged to quit treaty letting energy companies sue states for taking climate action.
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