European Commission proposes withdrawal from Energy Charter Treaty

Citing an outdated framework and climate concerns, the European Commission has proposed that the EU, its Member States and Euratom withdraw from the Energy Charter Treaty.

According to the Commission, the Treaty is largely unchanged since it was agreed in the 1990s, and is no longer compatible with the EU’s enhanced climate ambition under the European Green Deal and the Paris Agreement.

Therefore, the Commission is proposing that the EU, its Member States and Euratom (the European Atomic Energy Community) withdraw from the “unmodernised” Energy Charter Treaty, they state in a press release.

Said withdrawal would be done in a coordinated manner, to ensure the equal treatment of investors across the EU and beyond, states the Commission.

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Executive Vice-President for the European Green Deal Frans Timmermans said: “With the European Green Deal, we are reshaping our energy and investment policies for a sustainable future. The outdated Energy Charter Treaty is not aligned with our EU Climate Law and our commitments under the Paris Agreement.

“It’s time for Europe to withdraw from this Treaty, and to put all of our focus on building an efficient and competitive energy system that promotes and protects renewable energy investments.”

Legal proposals will be submitted to the Council of the EU, where a qualified majority vote is necessary for their approval.

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A first informal discussion is expected to take place among Energy Ministers in Valladolid, Spain, this week at the Informal Meeting of the Transport, Telecommunications and Energy Council, under the Spanish Presidency.

Not fit for purpose

There are currently 56 signatories and contracting parties to the Energy Charter Treaty (ECT), including both the European Union and Euratom.

The treaty was signed in 1994 and entered into force in April 1998.

The Treaty was signed with the intent of providing a multilateral framework for energy cooperation unique under international law, although it has been widely criticised for an outdated framework and protection of fossil fuel investments.

The Treaty's provisions focus on four broad areas:

• Protection of foreign investments
• Non-discriminatory conditions for trade in energy materials
• Resolution of disputes between participating states, and - in the case of investments - between investors and host states;
• Promotion of energy efficiency, and attempts to minimise the environmental impact of energy production and use

The EU and its Member States called for a modernisation of the Treaty in 2018 and successfully carried out negotiations between 2019 and 2022 in order to align the Treaty to European law, notably on investment policy and energy and climate goals.

Despite fulfilling all the requirements of the negotiating mandate given by the Council, Member States did not find the necessary majority to ratify the modernised Treaty, as proposed by the European Commission in October 2022.