The not-so-hidden cost to “Mega” Energy Deals

Nigeria has a terrible history with international oil companies like Shell, having a hard time getting compensation for environmental damage. Even with some legal wins,  like when the Hague Court of Appeals found Shell Nigeria liable for damages from pipeline leaks in the villages of Oruma and Goi, the country is still a long way from achieving true justice. To add salt to the injury, the violators have themselves gone on to sue Nigeria, sometimes using domestic law, but in the greater number of cases, resorting to  Investor State Dispute (ISDS) clauses in Bilateral investment treaties (BITs) that Nigeria is signed to.

As a result of these cases, where costs to citizens have run into billions of dollars, Nigeria has become critical of the current international arbitration system, and has since announced that it will revise all bilateral investment treaties (BITs) signed between 1990 and 2001. They plan to re-negotiate 12 out of the 15 BITs that are currently in force.

However, at the same time, Nigeria has already completed the first three steps of joining the Energy Charter Treaty (ECT). This treaty is frequently used by fossil fuel companies to sue countries when they try to enact environmentally friendly policies. History shows that, though the Energy charter treaty makes many promises of burgeoning investment, the reality is that it doesn’t significantly improve investment prospects. Instead, the ECT’s Investor State Dispute Settlement (ISDS) provisions give foreign investors in the energy sector sweeping rights to directly sue states in international tribunals of three private lawyers, called arbitrators. Companies can be awarded dizzying sums in compensation for government actions that have allegedly damaged their investments.
When you consider that nearly all ISDS cases against Nigeria so far are already linked to the exploitation and selling of oil or gas, and couple this with the importance of the energy sector to Nigeria’s economy, it’s easy to see the risk the country could face. If Nigeria joins the Energy Charter Treaty, the effort to critically assess its current investment treaties seems rather futile.

In many of the countries that are in the process of acceding to the ECT, hardly anyone seems to have even heard of the agreement, let alone have thoroughly examined its political, legal, and financial risks. And even with a supposed “modernization process”, which is supposed to deal with the problematic clauses in the treaty,  it  continues to threaten to bind yet more countries to corporate-friendly energy policies.

Why are African countries like Nigeria drawn to the ECT, when the treaty has such obvious grave implications for their ability to determine their own internal policies?  What is the broader context that informs this seemingly contradictory behaviour?  To understand what is happening with the Energy Charter Treaty in West Africa, and particularly in the region’s biggest country by population and economy, Nigeria, I spoke to Oberko Daniel. Daniel works as a tax and trade organizer for Public Services International, which is the  Global Union Federation of Workers in Public Services. Currently based in Accra, Daniel also coordinates PSI’s project on digitalization in the region

Image: The retired Orlando Power station in Johannesburg, South Africa/ Wikimedia Commons.

Episode Notes:

ISDS in Nigeria
https://www.tni.org/en/publication/isds-in-nigeria

Busting myths around the Energy Charter Treaty:
https://www.tni.org/en/ect-mythbuster

Public Services International
https://publicservices.international/?lang=en