Energy Charter Treaty: Council gives final approval for EU’s withdrawal

On 30 May 2024, the Council of the EU formally adopted the decision for a coordinated withdrawal of the EU and Euratom from the multilateral Energy Charter Treaty (ECT) (see Council press release), following the European Parliament’s approval in April 2024 (for more details, see the May edition of the ESG Newsletter). The decision was published in the Official Journal of the EU on 5 June 2024.

The ECT, which came into force in 1998, was established to protect foreign investments in the energy sector. However, the treaty has increasingly been seen as a barrier to climate action, as in practice, it allows conventional fossil fuel companies to file claims against states that implement policies promoting the clean energy transition. The Council’s decision will also pave the way for modernisation of the ECT, after previous efforts to do so failed (see our previous blog post) – EU Member States that wish to remain as contracting parties to the ECT after the withdrawal will be able to vote to approve or not oppose the adoption of a modernised ECT at the next Energy Charter Conference, scheduled for late 2024. The Council’s decision in this regard was published in the Official Journal of the EU on 6 June 2024.

The withdrawal will take effect one year after the treaty depositary receives the notification. However, investors may continue to benefit from the treaty’s protections for many years even after withdrawal under a sunset clause (see our previous blog post). For more information on the ECT, visit our dedicated page.