The UK is pulling out of a multi-country energy agreement that allowed fossil fuel firms to sue governments when their profits were negatively impacted by net zero policies.

The Energy Charter Treaty (ECT) was signed in 1994 as a way to incorporate energy sectors in Russia and Eastern Europe after the fall of the Soviet Union. It was signed before climate change had become a major political issue globally, and fossil fuel firms would often use it as a way to recoup some lost revenue when national policies hampered their extraction efforts.

But the ECT has faced ramping criticism in recent years for its ability to act as an obstacle to policies designed to combat climate change, and for actively disincentivising national governments from complying with international climate treaties such as the Paris Agreement.

Proposals to modernise the treaty to better support cleaner technologies have been subject to months of talks between European countries, resulting in a stalemate. In September, it...