The ECT protects foreign investments in energy supply and allows investors to seek compensation from their host state for almost any measures that lower the investors expected profits.
“It's outrageous that fossil fuel firms can use this powerful Treaty to obstruct the clean energy transition” said director of Climate Action Network (CAN) Europe, Wendel Trio. “It’s high time for European countries to withdraw from this dangerous agreement and don’t waste any more time in futile attempts to reform it. This is not the first time a fossil fuel company tries to get tax payers to pick up the bill for bad business decisions and it won’t be the last if we fail to act. RWE knew about the dangerous impacts of climate change and the need to phase-out fossil fuels rapidly when they decided to open a coal-fired power plant in 2015 and so do companies that continue investing in fossil gas in 2021. This perilous Energy Charter Treaty will continue to be used to pass the costs of stranded assets to the public.”
RWE’s claim is the first in Europe of a coal-plant owner against a state’s decision to phase-out coal to fulfil its climate commitments. Another owner of a Dutch coal-fired power plant, Uniper, started legal proceedings on the basis of the ECT in December 2019, but has not requested arbitration to date.
The ECT is currently undergoing a modernisation process as it is widely seen as outdated and an obstacle to the clean energy transition. In December 2020, the Spanish minister for the Ecological Transition, Teresa Ribera, called for the EU to withdraw if ECT reform failed to align the treaty with the Paris Agreement. Four French ministers sent a letter to the European Commission, heavily criticising the modernisation process for being too slow and voicing doubts it could ever achieve the changes needed to make the ECT harmless from a climate perspective. They, therefore, asked for the Commission to assess the "legal, institutional and budgetary modalities" of coordinated withdrawal.
RWE already threatened a lawsuit (paywall) in late October 2019 - before the coal phase-out law had passed the Dutch senate.
They did not disclose at the time on which legal basis they would sue (Dutch law or ECT) but they mentioned that they make a loss of 2 billion euros for one of their plants from the Dutch coal phase-out law.
Under the ECT they can claim compensation for financial loss AND future expected profits, which means that it is likely they are claiming more than 2 billion euros - but this is pure speculation as no figure has been released in relation to this claim. The relevant passage, citing RWE’s explanation, reads as follows:
“Damage claim - The law prohibiting the use of coal for electricity production now lies with the Senate. As soon as it comes into force, RWE will go to court with a billions claim. "We regard that law as a form of expropriation. The government wanted these coal plants, we have the permits, so we have the right to use coal. And when that right is taken away from us, we regard it as an expropriation. And there must be compensation for that. It is true that we can continue by burning biomass, but we do not know whether that is still feasible if the subsidy ends in 2026. We think that the damage, for Eemshaven alone, is 2 billion euros. "The construction of the plant required an investment of 3.2 billion euros.""
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