The rubble of the wall was still smoking. In a few months they had dissolved the USSR and reunited Germany. The gates of the Soviet world were finally opening – globalization, which many had hoped would be happy, could take full flight. The “sweet trade”, withered flower of the Enlightenment yet swept away by the crises of the 20th century, seemed to have to resume service in this best of liberal worlds. A quarter of a century later, the era that saw the birth of the Energy Charter Treaty (ECT) seems to us decidedly as obsolete as the walkman.
The goals of an era
However, this treaty also condenses the whole spirit of the 1990s. The former Soviet empire was full of natural resources, especially in the energy field. Power stations, refineries, coal, natural gas, and of course oil: all the conditions were met to trigger a veritable buying frenzy among the Western energy majors. It was to facilitate this movement towards integration that the Energy Charter Treaty was signed in 1994, initially thought of as a tool to open up and integrate the countries of Eastern Europe and the Russian Federation to global energy markets.
But not content with making the movement of capital towards the East more fluid, the treaty also and above all offers legal guarantees to energy companies intended to secure their investments. In these Wild West years in the disintegrated Soviet sphere, mergers and acquisitions sometimes prove to be rough. The treaty therefore provides for the right for a company to sue by private arbitration any signatory State which comes to promulgate a law reducing the profitability of its energy investments – demanding damages and interest if necessary.
So many objectives that sum up an era: triumphant globalization, free movement of capital, economic integration through legal instruments, and sanctuarization of private arbitration, which elevates companies to the level of States. Better still, through its “protocol on energy efficiency and related environmental aspects”, the TCE also prided itself on environmental virtue. Building on the successes of the Helsinki agreements on acid rain in 1985 and the Montreal agreements on the ozone layer in 1987, the international protocols still offered a realistic hope of initiating the reduction of emissions. And after all, wasn’t the climate crisis confined to the far reaches of the 21st century?
An anachronistic treaty
Almost three decades have passed; nothing went as planned. By offering a far too powerful legal tool to energy companies, the TCE has become a combat weapon for the oil and gas majors against the energy transition. The one who wanted to be a pillar of tomorrow’s energy Europe has proven to be a major obstacle in meeting the real challenge of this century. In this light, it is salutary that Emmanuel Macron finally had the good sense to announce the withdrawal of France on October 21, 2022, joining the declarations in this sense of Spain, Poland or the Netherlands in month of October.
But beyond its deleterious nature for the climate, it is the anachronism of the TCE that is striking. The sweetness of trade came crashing down on the rigor of trade wars. At a time when the World Trade Organization is in a state of brain death, economic sovereignty and security of supply have replaced the leitmotifs of the Clinton years. The growing integration of energy markets seems a long way off at a time of war in Ukraine.
It is difficult not to realize today that the central mechanisms of “happy globalization”, by guaranteeing legal protection to investors as universal as possible, can be taken hostage to curb policies as essential as the fight against climate change. The ECT appears to be one of the last great remnants of that post-Cold War euphoria, which would be lovely if it hadn’t been wrong on nearly every major issue. When the end of the story sort of ends.