Withdrawal from the Energy Charter Treaty: the Ostrich Effect?

Abstract

This paper explores the legal challenges and implications surrounding recent withdrawals from the Energy Charter Treaty, particularly focusing on the enduring impact of its sunset clause. The ECT, established to foster energy sector cooperation and investment protection, has drawn criticism for enabling investor-state dispute settlements that potentially conflict with climate change policies. The wave of withdrawals by European states reflects concerns about the treaty’s alignment with modern environmental goals, yet the sunset clause—extending investment protections for 20 years postwithdrawal—remains a formidable barrier. This paper critically examines the feasibility of using inter se agreements and the doctrine of rebus sic stantibus to mitigate the effects of the sunset clause. It also explores whether environmental protection obligations, emerging as erga omnes duties, could offer states a defense against ISDS claims linked to legitimate climate measures. While acknowledging the clause’s robustness, this paper proposes a balanced strategy that accommodates both investment protections and environmental imperatives. It concludes with a forward-looking perspective, suggesting that if climate obligations attain jus cogens status within the sunset period, they could override the clause, accelerating the global transition toward sustainable energy.

A.  Introduction

The Energy Charter Treaty (“ECT” or the “Treaty”) has a fascinating history, originating from the European Energy Charter in 1991¹ and evolving into a significant framework for investment protection in the energy sector. The dynamics between capital-exporting Western European States and energy-rich former Soviet Union States² have shaped its development and significance. At its core, the Treaty, as stipulated in Article 2, endeavours to provide a “legal framework in order to promote long-term cooperation in the energy field, based on complementarities and mutual benefits.”³

Crucially, the ECT extends the same level of protection across diverse energy sources, including renewables, nuclear, coal, natural, gas and oil.⁴ This indiscriminate safeguarding of investments has stirred considerable controversy, particularly regarding its implications for climate action. Central to these concerns is the Treaty’s provision for investor-state dispute settlement (“ISDS”), granting energy investors the power to challenge legitimate climate actions undertaken by States.⁵ The ease with which such disputes can be triggered⁶ has fuelled anxieties and calls for its termination.⁷

Largely as a response to the above challenges, a modernization process began in 2017 with a view to “facilitate investment in the energy sector in a sustainable way between the ECT contracting parties by creating a coherent and up-to-date legally binding framework that provides for legal certainty and ensures a high level of investment protection”⁸and in particular “reflect climate change and clean energy transmission goals and contribute to the achievement of the objectives of the Paris agreement.”⁹This culminated in the Agreement in Principle (“AIP”) in 2022.¹⁰ However, the AIP fell short of expectations as it was less ambitious on climate change than the EU and several EU Member States had hoped for.¹¹

Consequently, a wave of withdrawals from the Treaty ensued, with several EU Member States including Belgium, France, Germany, Luxembourg, Netherlands, Slovenia, and Poland declaring their intent to withdraw. Portugal and the United Kingdom followed suit on 2 and 22 February respectively (Collectively “Withdrawing States”). The UK government, in its communication, stated that this move aligns with its commitment to achieving net-zero emissions.¹²

Yet, amid this withdrawal lies an obstacle: the sunset clause. This provision ensures the protection of existing investments, including fossil fuel investment, for 20 years postwithdrawal.¹³ As Withdrawing States grapple with the implications of this clause, strategies to mitigate its impacts are cropping up.

This paper argues that while withdrawal from the ECT signals a commendable commitment to climate change objectives, the iron-clad nature of the sunset clause poses a challenge. An alternative strategy is also put forth in this Paper. While this strategy does not outright invalidate the sunset clause, it provides Withdrawing States with a potential defence in the event of ISDS challenges concerning legitimate climate measures.

B.  Withdrawal woes: implications of the sunset clause

Article 47 of the ECT delineates the withdrawal process for Contracting Parties. Crucially, Article 47(3) introduces the sunset clause, stipulating as follows:

“The provisions of this Treaty shall continue to apply to Investments made in the Area of a Contracting Party by Investors of other Contracting Parties or in the Area of other Contracting Parties by Investors of that Contracting Party as of the date when that Contracting Party’s withdrawal from the Treaty takes effect for a period of 20 years from such date.”¹⁴

As elaborated by Klabbers, both the Vienna Convention on the Law of Treaties (“VCLT”) and the ECT do not provide avenues for the termination of the ECT’s sunset clause.¹⁵ In fact, the sunset clause serves the purpose of establishing a robust framework for investment protection that persists postwithdrawal,¹⁶ reflecting the Treaty’s core essence.

While some argue that sunset clauses safeguard long-term investment value, especially in sectors like energy, their rigidity presents significant hurdles, particularly in the context of climate change. Klabbers emphasizes their importance in industries requiring extended investment horizons for returns to materialize.¹⁷

The conventional method to avoid the constraints of a sunset clause involves a straightforward tactic—for instance, in the case of a Bilateral Investment Treaty (“BIT”), States can amend the BIT to eliminate the sunset clause before terminating the amended BIT. However, when it comes to the ECT, this approach proves unfeasible, largely due to the complex political and legal landscapes involved.

Given that amending the Treaty is not a possibility, the critical question arises: can a State withdraw from both the ECT and its sunset clause? The clause’s wording suggests its resilience, serving to sustain investment protection postwithdrawal. Some Withdrawing States, such as Poland, tacitly acknowledge this stance, with its Bill focusing on future implications such as excluding new investments from the Treaty’s protection.¹⁸

Amidst these challenges, the European Commission (“EC”) has proposed a potential solution: the negotiation of an inter se agreements¹⁹—these can be in-between EU Member States and also with a non-EU ECT Contracting Party.²⁰ An inter se agreement is essentially a “modification of the ECT by a subset of ECT Contracting parties.”²¹

Furthermore, recent attention has turned to Article 62 VCLT as a ground for terminating or withdrawing from the Treaty based on a ‘fundamental change in circumstances,’ following the ECT Secretariat’s communication on its website.²² The latter highlighted the limited applicability of this provision, emphasizing its relevance only to unforeseen changes in circumstances. Nonetheless, a successful application of Article 62 VCLT would effectively nullify the sunset clause.

Against this backdrop, Part C of this Paper delves into the potential of inter se agreements as a viable solution, alongside the prospects and limitations of invoking Article 62 VCLT to eliminate the challenges posed by the sunset clause.

C.  Propositions put forward

1.  Inter Se agreements

At the outset, it is important to note that an inter se agreement agreeing to remove the effect of the sunset clause would solely bind the signatories of the said agreement. Therefore, it does not nullify the sunset clause in its entirety. Although not explicitly catered for under the ECT, Article 41 VCLT outlines the conditions for such agreements:

“1.Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:

(a) the possibility of such a modification is provided for by the treaty;²³  or

(b) the modification in question is not prohibited by the treaty and:

(i) does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;

(ii) does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.”²⁴

As per the wording of the article, the absence of a prohibition against modification is a prerequisite before delving into further analysis under Article 41(1)(b)(i) and (ii).

(a)  The modification not prohibited under the ECT

According to the commentaries on the VCLT, a prohibition under Article 41(1)(b) may need to be explicit.²⁵ While the ECT does not explicitly prohibit inter se modifications, the potential implications of an inter se agreement aimed at circumventing the sunset clause demand closer scrutiny, particularly in light of Article 16(2) ECT:

“nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty, where any such provision is more favourable to the Investor or Investment.”²⁶

It is evident that Part VIII of the Treaty, containing the sunset clause, is not mentioned under Article 16(2) ECT. However, a literal interpretation might not do justice, particularly in light of the interplay between the role of the sunset clause and Parts III and V of the Treaty.

Part III of the Treaty pertains to “Investment Promotion and Protection.” Its importance was emphasized in the case of Baywa R.E. Renewable Energy GmbH and Baywa R.E. Asset Holding GmbH v Kingdom of Spain²⁷(“Baywa R.E”), wherein the Tribunal noted that “Article 16 of the ECT […] evinces an intent […] to preserve the rights of investors and investments, which constitute a major plank of that multilateral treaty.”²⁸

Part V of the Treaty concerns “Dispute Settlement.” The Tribunal in Silver Ridge Power BV v. Italian Republic²⁹ emphasised the significance of international arbitration “as the most essential element of an investment treaty.”³⁰

An inter se agreement seeking to nullify the sunset clause would undoubtedly undermine investors’ rights enshrined in Part III of the Treaty. Moreover, given that the aim of the sunset clause is to offer a robust protection postwithdrawal, it inevitably includes the right to dispute resolution. Any attempt to circumvent its effects would depart from Part V of the Treaty. Both forms of derogation are expressly prohibited under Article 16(2) ECT.

Morgandi and Bartles argue that “[…] Article 16(2) requires these tribunals to disapply these agreements, to the extent that they are less favourable […] But it does not prohibit them."³¹ While this Paper agrees with the views of Morgandi and Bartles, the practical outcome of "disapplying" such agreements is that it effectively renders them null and void.

Based on the above analysis, while the ECT does not explicitly prohibit inter se modifications, an inter se agreement aimed at circumventing the sunset clause might be, in light of Article 16(2) of the ECT, deemed to be a prohibited modification.

(b)  The object and purpose of the treaty as a whole

The ECT stands as a cornerstone in the realm of international energy investment, aiming to cultivate a robust legal framework facilitating cooperation and investment protection among its signatory States. At its core, the ECT seeks to promote long-term collaboration in the energy sector, echoing the aspirations outlined in the European Energy Charter.³² The signatories of the said charter “undertake to pursue the objectives of creating a broader European energy market and enhancing the efficient functioning of the global energy market by joint or coordinated action under the charter in the following fields: […] promotion and protection of investments.”³³

The above are often cited as the object and purpose of the Treaty when interpreting ECT provisions³⁴ and provide valuable insight into the Treaty’s background. However, while they offer a guiding framework, they are not determinative, as the object and purpose of a treaty can also be identified through its operative provisions.³⁵

Indeed, it is within the operational provisions of the ECT that its essence truly lies, particularly those relating to enforceable protection. Among these provisions, the principles of national treatment and the most favoured nation treatment emerge as pivotal pillars. This is reflected in the ECT’s preamble through the affirmation of the Contracting Parties’ commitment to the “effective implementation of full national treatment and most favoured nation treatment.”³⁶ This emphasizes the importance of ensuring protection for investors and their investments across all signatory States. While the preamble itself does not create legally binding obligations, it serves as a guiding principle for interpreting the treaty.³⁷

Any inter se agreement seeking to disapply the sunset clause would undermine these principles, thereby contradicting the treaty’s stated objectives. In light of the above, it becomes challenging to reconcile an inter se agreement aimed at circumventing the sunset clause with the object and purpose of the ECT.

(c)  Conclusion on inter se agreements

Based on the above, the possibility of inter se agreements, as proposed by the EC, raises significant legal considerations. While the ECT does not explicitly prohibit inter se modifications, the potential implications of such agreements, particularly regarding the circumvention of the sunset clause, demand careful analysis.

The absence of explicit prohibition does not preclude the possibility that inter se agreements aimed at nullifying the sunset clause could be deemed prohibited under the ECT, especially in light of Article 16(2) ECT.

The recent ruling in Republic of Moldova v Komstroy LLC³⁸ by the Court of Justice of the European Union (“CJEU”) has clarified that intra-EU arbitration under the ECT is incompatible with EU law. Specifically, the CJEU ruled that it cannot be inferred that Article 26(2)(c) of the ECT applies to intra-EU disputes. This ruling establishes that the ECT’s ISDS mechanism cannot be invoked for intra-EU disputes. As a result, the practical effect of the ECT’s sunset clause is significantly diminished when it comes to intra-EU disputes.

However, this conclusion does not extend to non-EU states. In such cases, any inter se agreement must be assessed in light of the broader object and purpose of the ECT, which emphasizes investment protection for investors from its signatory States. A departure from this, such as through the circumvention of the sunset clause, would not be in line with Article 41(b) VCLT.

2.  Rebus Sic Stantibus

The doctrine of rebus sic stantibus, codified under Article 62(2) VCLT provides as follows:

“A fundamental change of circumstances which has occurred with regard to those existing at the time of the conclusion of a treaty, and which was not foreseen by the parties, may not be invoked as a ground for terminating or withdrawing from the treaty unless:

(a) the existence of those circumstances constituted an essential basis of the consent of the parties to be bound by the treaty; and

(b) the effect of the change is radically to transform the extent of obligations still to be performed under the treaty.“³⁹

Historically, a successful invocation of this doctrine has been rare and subject to scepticism by international legal scholars.⁴⁰ However, recent criticisms of the ECT and notifications of withdrawal suggest that circumstances have changed.⁴¹ Therefore, it is imperative to critically evaluate whether the stringent conditions of this doctrine are met in the current context.

To begin with, a comparative analysis is necessary to identify the circumstance that served as the essential basis for the Treaty’s conclusion, which has now fundamentally changed in an unforeseen manner. Subsequently, it must be demonstrated how this change renders it unduly burdensome for a party to fulfil its obligations under the Treaty.

In practical terms, one could argue that the urgent imperative to phase out fossil fuels rapidly to mitigate the severe impacts of climate change represents a fundamental change of circumstances not anticipated at the time of the ECT’s inception in 1994. This shift now makes it excessively burdensome to continue safeguarding fossil fuel investors and investments for a prolonged period of 20 years postwithdrawal from the ECT.⁴²

(a)  T he change of the essential condition in an unforeseen manner

In the Gabčíkovo-Nagymaros case,⁴³ the International Court of Justice (“ICJ”) had to decide, inter alia, whether Hungary could withdraw from the Budapest Treaty of 1977 based on Article 62 VCLT. In its judgment, the Court, emphasized the exceptional nature of invoking fundamental changes in circumstances, stressing the conditional nature of Article 62, and held that:

“The Court does not consider that new developments in the state of environmental knowledge and of environmental law can be said to have been completely unforeseen.”⁴⁴

This legal stance has been a focal point for scholars debating the applicability of unforeseen circumstances, particularly concerning the imperative to address climate change. While the Gabčíkovo-Nagymaros ruling offers valuable insights, the material treaty differs from the ECT. Hence, a contextual analysis of the ECT is warranted.

Examining the preamble of the ECT, which invokes the United Nations Framework Convention on Climate Change (“UNFCCC”),⁴⁵ it becomes evident that climate change mitigation was a central concern even during the Treaty’s inception. The UNFCCC, guided by findings from the Intergovernmental Panel on Climate Change (“IPCC”), highlighted the urgent need to tackle climate-related challenges. The IPCC had already identified energy, particularly fossil fuels, as the primary anthropogenic source of radiative forcing and emphasized reducing fossil fuel usage as a one of the climate change management strategy.⁴⁶ Therefore, the argument that combating climate change represents an unforeseen change of circumstance lacks merit, as it was a fundamental consideration from the Treaty’s outset.

Some argue that while climate change was recognized in 1994, the extent of the risk and the necessary mitigation measures were unforeseen.⁴⁷ Thus, the emergence of more ambitious climate goals, such as those outlined in the Paris Agreement, is seen as a fundamental change in circumstances.⁴⁸ While this is undeniably true, the use of the qualifier “fundamental” under Article 62 VCLT signifies a high threshold to be met. A genuine shift in circumstances would, for example, entail a scenario where the need to address climate change was previously absent, but has now become imperative.

Furthermore, it is difficult to see how, under Article 62(2)(b), the need to combat climate change “radically […] transform[s] the extent of obligations still to be performed under the treaty.” While it may be politically unpopular, there is no substantial difficulty in protecting these investments.⁴⁹ The primary change lies in the political landscape, with increased pressure in Western states to accelerate the transition to a greener economy.⁵⁰ Had there been a political aspect to climate change so closely linked to the Treaty that it became an essential basis for the consent of the Contracting Parties to the ECT, an argument could have been made under Article 62 VCLT.

Based on the above, the ECT’s preamble and objectives indicate that climate change mitigation was a central concern from its inception, challenging the notion of unforeseen circumstances justifying withdrawal.

D.  Alternative solution

While the above appears to be a hurdle in nullifying the sunset clause, there remains a pressing need to explore alternative avenues, given that “climate change is a common concern of human kind since climate is an essential condition which sustains life on earth.”⁵¹

However, at this juncture, it is important to highlight that the ECT has its positive aspects. Firstly, the ECT has recently been invoked in number of disputes concerning renewable energy investments. A significant portion of these cases involves solar energy projects, highlighting that the treaty's role in protecting investments is aligned with global climate objectives. For instance, in the case of Baywa R.E.,⁵² the tribunal ordered Spain to pay damages to German Investors who owned and managed a number of wind farms in northern Spain, following changes to the Spanish renewables energy regulatory framework.

This trend suggests that the ECT serves as a mechanism to safeguard investments in sectors that contribute to environmental sustainability. Consequently, the Treaty's provisions may support, rather than hinder, efforts to combat climate change. The protections it offers to renewable energy investments could be seen as complementary to global environmental goals, potentially mitigating concerns about the Treaty's compatibility with the combat against climate change.

Another point to consider is that protecting the environment can be achieved by incentivising clean energy investments. Investment protection is what the ECT seeks to do. By protecting clean energy investments, the Treaty aligns itself with the broader objective of combating climate change. The sunset clause plays a role here by ensuring these investments remain protected even after a state withdraws from the treaty, for up to 20 years. This protection can provide the stability needed for long-term investments in renewable energy—an outcome consistent with global environmental goals.

Concerns arise in cases where the ECT’s sunset clause is used to protect fossil fuel investments. In this respect, the second part of this paper will delve into one potential alternative approach available.

1.  Jus Cogens v Erga Omnes obligations

According to Article 64 VCLT, the emergence of a new peremptory norm renders any conflicting treaty null and is automatically terminated.⁵³ As per Article 53 VCLT:

“[…] For the purposes of the present Convention, a peremptory norm of general international law is a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character.”⁵⁴

This raises the question: if the need to combat climate change is recognized as jus cogens, could the ECT, with the protections it affords to, inter alia, fossil fuel investments, be rendered null and void?

While it is clear that combating climate change is a priority for the international community, jus cogens norms require a level of clarity and consensus that climate change, as a policy objective, is yet to attain. Drawing from the VCLT and the International Law Commission (“ILC”) report on the subject matter,⁵⁵ it is evident that identifying peremptory norms requires adherence to stringent criteria: a norm must be universally recognized as non-derogable,⁵⁶ embodying the highest principles of international law. At present, there is no universal agreement that climate change constitutes such a norm. It remains a major policy issue, but not necessarily a peremptory norm of international law.

Conversely, an erga omnes obligation represents overarching duties owed to the global community.⁵⁷ Its roots can be traced back to the Barcelona Traction case⁵⁸ wherein ICJ held that:

“[…] In particular, an essential distinction should be drawn between the obligations of a State towards the international community as a whole, and those vis-a-vis another State in the field of diplomatic protection. By their very nature the former are the concern of all States. In view of the importance of the rights involved all States can be held to have a legal interest in their protection; they are obligation erga omnes.”⁵⁹

The ICJ is yet to provide clear guidance on the threshold of importance required for the establishment of erga omnes obligations. Yet, from the above dictum, it can be inferred that the interests protected by erga omnes obligations pertain to the collective welfare of the international community or common interests. In essence, the notion of community interests, reflecting fundamental values shared by the global community, emerges as a pivotal aspect of erga omnes obligations.⁶⁰

2.  Is the worldwide ambition for the protection of the environment a Jus Cogens or an Erga Omnes obligation?

States have consistently emphasized the necessity to protect the climate through participation in international agreements and the adoption of non-binding resolutions by global organizations such as the UNFCCC, the Kyoto Protocol, and the Paris Agreement, among others.⁶¹

The discourse surrounding the classification of environmental protection, particularly in combating climate change, as either jus cogens or erga omnes obligations is multi-layered and highly debated. While there is a growing acknowledgment of the global significance of climate change and the exigency to address it, the consensus regarding its elevation to the status of jus cogens remains elusive. Despite extensive research, the prevailing understanding suggests that climate change obligations have not yet ascended to the level of jus cogens.⁶²

For instance, while the ILC discussed peremptory norms extensively, it has not explicitly included duties related to climate change in its (non-exhaustive) list of jus cogens obligations.⁶³ However, in its commentaries, it concedes that “although all peremptory norms of general international law (jus cogens) give rise to obligations erga omnes, it is widely considered that not all obligations erga omnes arise from peremptory norms of general international law (jus cogens) […] The International Tribunal for the Law of the Sea determined that the obligations of States parties relating to preservation of the environment of the high seas and the deep seabed under the 1982 United Nations Convention on the Law of the Sea had an erga omnes character.”⁶⁴

The Vice-President of the ICJ, in his dissenting opinion in the Gabčíkovo-Nagymaros⁶⁵ case, highlighted the inadequacy of inter partes litigation to ‘rights and obligations of an erga omnes character—least of all in cases involving environmental damage of a far-reaching and irreversible nature.’⁶⁶

Furthermore, the Brundtland Report emphasized that ‘all human beings have the fundamental right to an environment adequate for their health and well being’,⁶⁷ implying a duty owed to the international community as a whole to ensure sustainability. This assertion finds support in Resolution 76/300 of the United Nations General Assembly on The Human Right To A Clean, Healthy And Sustainable Environment, which ‘calls upon States […] to adopt policies […] and continue to share good practices in order to scale up efforts to ensure a clean, healthy and sustainable environment for all’,  ⁶⁸ thereby reinforcing the notion of an erga omnes obligation to promote a sustainable environment.

Despite ongoing debates within the legal community, it is evident that there is a growing consensus that environmental protection, particularly in the context of addressing climate change, is emerging as an erga omnes obligation. While some may argue otherwise, the weight of scholarly discourse and legal reports strongly supports this assertion. The recognition of environmental protection as an erga omnes obligation reflects the imperative for collective global action to safeguard the planet for current and future generations.

3.  A way around the sunset clause?

While erga omnes obligations have been increasingly referred to in the jurisprudence, their legal consequence is not clarified in international law.⁶⁹ In fact, it has been pointed out that “no judgment of this Court [the ICJ] thus far addressed the consequences of violation of erga omnes obligations.”⁷⁰ However, there is one pronouncement that can guide us. In the advisory opinion of the ICJ on the Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, the Court held that “the obligations violated by Israel include certain obligations erga omnes.”⁷¹ In this connection the ICJ ruled that:

“given the character and importance of the rights and obligations involved, the Court is of the view that all States are under an obligation not to recognise the illegal situation […] they are also under an obligation not to render aid or assistance in maintaining the situation.”⁷²

While these legal effects primarily pertain to States’ responsibilities for internationally wrongful acts, a parallel can be drawn to parties involved in ISDS. In ISDS, one party typically represents a commercial entity, which differs significantly from the legal status of a State. However, the other party is inevitably a State. Therefore, recognizing environmental protection as an erga omnes obligation can potentially serve as a justifiable reason for States to absolve themselves of liability.

By acknowledging environmental protection as an obligation owed to the international community as a whole, investment tribunals would be compelled to consider the broader implications of investment disputes on environmental sustainability. Under the principle of non-recognition and non-assistance inherent in erga omnes obligations, States would obligated not to recognize or assist actions that violate environmental protection laws. In practical terms, this means that States would be justified in implementing environmental regulations or policies aimed at mitigating climate change and protecting the environment, even if these measures result in adverse consequences for investors. Investment tribunals would need to balance investor rights with broader environmental considerations, recognizing the legal importance of erga omnes obligations.

This has profound implications for the interpretation of the sunset clause. While the sunset clause sets a time limit on the applicability of investment protections, the recognition of environmental protection as an erga omnes obligation introduces a new dimension to the discourse. It establishes a justification for States to take measures to deter environmental damage, even if such measures result in the termination or limitation of investment protections guaranteed by the ECT’s sunset clause.

While the recognition of environmental protection as an erga omnes obligation does not nullify the effects of the sunset clause per se, it provides a legal basis for States to prioritize environmental concerns over investment protections when necessary. This represents a significant shift in the interpretation and application of the sunset clause.

E.  Conclusion

This paper has examined various propositions aimed at addressing the challenges posed by the sunset clause within the ECT. As evident from the analysis, the purpose of the clause is to provide a robust protection mechanism postwithdrawal, making it challenging to circumvent.

Nevertheless, this paper acknowledges the pressing need to combat climate change by transitioning away from fossil fuels and embracing cleaner energy sources. In light of this imperative, this paper proposes a solution that acknowledges the iron-clad nature of the sunset clause. Rather than seeking to nullify it outright, the proposed solution offers States a defence strategy in the event of ISDS claims arising from legitimate climate measures.

It is hoped that during the 20-year timeframe under the sunset clause, the imperative to combat climate change may attain the status of jus cogens, a peremptory norm of international law. Should this occur, it would render the sunset clause null and void, thereby facilitating a more seamless transition towards sustainable energy practices. In the meantime, the proposed solution strikes a balance between acknowledging the inherent protections afforded by the sunset clause and the urgent need to address climate change.

Footnotes