The UK is pulling out of a treaty that lets fossil fuel giants sue governments over their climate policies.

The Government said the UK was withdrawing from the Energy Charter Treaty after efforts to modernise it ended in stalemate.

The controversial treaty was established in the 1990s when the world energy system was heavily dominated by fossil fuels and enables foreign companies to challenge energy policies that threaten their investments, using secretive arbitration courts.

It was originally designed to encourage international energy investment but a number of countries have faced costly legal challenges over reducing their reliance on fossil fuels and boosting renewables.

The Department for Energy Security and Net Zero said efforts to modernise the treaty to better support cleaner technologies had led to stalemate among European countries.

The UK has joined France, Germany, Spain and the Netherlands in withdrawing from the agreement.

Minister of State for Energy Security and Net Zero Graham Stuart said: ”The Energy Charter Treaty is outdated and in urgent need of reform but talks have stalled and sensible renewal looks increasingly unlikely.

“Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.

“With £30 billion invested in the energy sector just since September, we continue to lead the world in cutting emissions, attracting international investment and providing the strongest legal protections for those who invest here.”

Shaun Spiers, executive director of environmental think tank Green Alliance, said:  “Civil society organisations and parliamentarians from all political parties have been clear that the Energy Charter Treaty is an out-of-date agreement and undermines our efforts to tackle climate change.

“We welcome the UK’s decision to leave, which will strengthen global efforts to roll out cheap, clean renewable energy.”

Shadow climate minister Kerry McCarthy said: “We are in an urgent global fight against the climate emergency.

“We cannot allow fossil fuel companies to stop democratically elected governments from taking strong climate action.

“Labour has long argued that the Energy Charter Treaty is clearly outdated and not fit for purpose – it is good that the Government have finally taken the step to leave it.”

But she criticised the Government for failing to deliver the clean power Britain needs and said only “Labour can cut bills and make Britain a clean energy superpower, tackling the climate crisis with good jobs for our country”.