CYIL vol. 12 (2021)

Monika Feigerlová CYIL 12 (2021) purely European matter concerning the ISDS, namely the EU plan for a multilateral investment court to replace the ISDS, does not find sympathy with other parties to the ECT, noticeably with Japan. The ECT contains a strong dispute resolution mechanism not only for disputes between investors and ECT parties but also among the ECT parties. Based on the EU Proposal, the state-state dispute settlement mechanism shall also be made available for disputes regarding newly proposed provisions on sustainable development. Some authors believe that, if successful, this amendment to the ECT could provide the obligations under the Paris Agreement with an international enforcement mechanism via the ECT among the ECT parties. 88 Conclusion The modernization proposal does not represent minor changes to the ECT system but touches upon many important elements of the ECT and indirectly the climate change regime. The first EU’s Proposal suggested amendments that are not strictly related to clean energy transition and corresponding climate goals. The proposal followed the practice of new style international investment treaties and the changes addressed long criticised matters such as the definition of investment, an affirmation of state’s right to regulate, and a narrower definition of the FET standard. The draft also included new articles on sustainable development in relation to climate change and clean energy transition, valuation of damages, frivolous claims, security for costs, interventions by third parties, and third-party funding. The additional EU’s Phase-Out Proposal of 2021 is more pertinent to the fight against climate change and focused on ECT’s definition of the ‘Economic Activity in the Energy Sector’. It suggests a gradual removal of fossil fuels from the treaty’s protection. No protections for new coal and oil investments as well as power produced from fossil fuels. Environmental groups ask for a much shorter phase out period than proposed by the EU, ideally immediately or within 1-2 years from the amendment. A challenge for the ECT and the on-going reform negotiations is to determine how to align the ECT with the Paris Agreement goals and to resolve the tension among various policies in time and among multiple stakeholders and countries with different economic positions and fossil fuel dependency. As, according to findings of a number of experts, the use of fossil fuels must be rapidly reduced in the next decade to achieve climate neutrality in the mid-century the time of the modernization is crucial. 89 The energy transformation requires unprecedented actions to which the ECT was not clearly designed and its reform will not be an easy task. The objective of the EU’s proposal for modernization is to align the ECT with the EU approach to international investment law and the EU’s climate objectives, including the European Green Deal. The EU thus must persuade its energy contractual partners not only about energy investments but also about its ambitious climate goals. Moreover, the ECT does not cover all important players in the world energy market, including the United States, 88 Kunstyr, J., Svoboda, O. ECT Modernisation Perspectives: “Can the EU Make the ECT the Greenest Investment Treaty of them All?” 25 July 2020. [online]. Available at: < http://arbitrationblog.kluwerarbitration. com/2020/07/25/ect-modernisation-perspectives-can-the-eu-make-the-ect-the-greenest-investment-treaty-of- them-all/>. 1 June 2021. 89 The International Energy Agency (IEA): Special Report Net Zero by 2050: A Roadmap for the Global Energy Sector. 2021. Available at: . Visited on 1 June 2021.

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