Committee’s assessment |
Legally and politically important |
Cleared from scrutiny; but further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee and the International Trade Committee |
|
Document details |
Recommendation for a Council Decision authorising the entering into negotiations on the modernisation of the Energy Charter Treaty |
Legal base |
Articles 207(3) and (4), 194(2), 218(3) and (4) of the TFEU (noting Opinion 2/15 of the Court of Justice) |
Department |
International Trade |
Document Number |
(40578),—+ ADD 1, COM(19) 231 |
2.1 The Energy Charter Treaty (ECT) is a plurilateral trade and investment agreement applicable to the energy sector, with broad scope (covering investment protection, trade in energy materials and products, transit and dispute settlement) and membership (covering many former USSR states in addition to the EU and other major economies such as Japan). As a result, more investor-State disputes are adjudicated under the ECT than under any bilateral investment treaty; yet many of its provisions have not been revised since the 1990s.
2.2 The Energy Charter Secretariat initiated discussions on the modernisation of the ECT in 2017. Following consultations with the ECT Contracting Parties5 and industry stakeholders, a list of topics for modernisation was agreed at the Energy Charter Ministerial Conference of November 2018.
2.3 The proposed Council Decision authorises the Commission to enter into negotiations on behalf of the EU to modernise the ECT. One of its key objectives is to clarify and update the ECT’s outdated investment protection provisions, in order to reduce the risk of speculative claims and increase legal certainty (particularly given the large number of notified claims against EU Member States).
2.4 At its meeting on 19 June 2019, the Committee noted that investment protection is part exclusive competence of the EU and part shared competence between the EU and its Member States and that the Government was seeking to ensure that the final mandate accurately reflected this division of competence between the EU and its Member States.
2.5 The Committee granted the then Minister of State for Trade Policy (George Hollingbery MP) a scrutiny waiver to be able to support the negotiating mandate in Council, subject to the Government: keeping the Committee updated on the outcome of any vote in Council; securing the legally binding changes the Government considered necessary to reflect the division of competence between the EU and Member States (i.e. that the EU should only exercise competence in relation to external agreements to the extent that its competence is exclusive, leaving Member States to exercise shared or Member State competence); and setting out its negotiating objectives for ECT modernisation, as a Contracting Party in its own right, in the event of a no deal withdrawal from the EU.
2.6 In his letter of 31 July 2019, the Minister of State for Trade Policy (Conor Burns MP) informs the Committee that:
2.7 Following the adoption of the proposed Council Decision and accompanying negotiating directives, we now clear the documents from scrutiny. However, we ask to be kept updated on the progress of ECT modernisation negotiations via the Minister’s regular Trade Policy Updates to the Committee.
2.8 Furthermore, for ease of reference, we draw the following matters that have arisen in our scrutiny of the proposal to the attention of the House:
We draw the Minister’s update and our conclusions to the attention of the Business, Energy and Industrial Strategy Committee and the International Trade Committee.
Recommendation for a Council Decision authorising the entering into negotiations on the modernisation of the Energy Charter Treaty: (40578),—+ ADD 1, COM(19) 231.
Sixty-eighth Report HC 301–lxvi (2017–19), chapter 4 (19 June 2019).
4 See the Committee’s previous Report chapter of 19 June 2019 for further background on the ECT, the Commission proposal and the Government’s position.
5 The EU and all EU Member States have all signed and ratified the ECT, but Italy is no longer a Contracting Party (applying the ECT) following its withdrawal from the ECT in January 2016.
6 Decision of the Representatives of Government of the Member States that are parties to the Energy Charter Treaty meeting within the Council, authorising the European Commission to negotiate, on behalf of the Member States, an Agreement on the modernisation of the Energy Charter Treaty, to the extent this falls within the competences of the Member States.
Published: 29 October 2019