The EU is planning to withdraw from the contentious Energy Charter Treaty

After years of futile attempts to modify the agreement, the European Commission revealed its proposal for the EU’s departure from the Energy Charter Treaty (ECT) on Friday (7 July).

As a result, the Commission proposes that the EU, its Member States, and Euratom withdraw from the outdated Energy Charter Treaty in a coordinated and orderly manner, in order to ensure equal treatment of investors across the EU and beyond. 

To guarantee legal clarity, the Commission is also withdrawing its prior proposal to ratify the updated Treaty, which did not receive the necessary majority of Member States.

“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 The outdated Energy Charter Treaty is not aligned with our EU Climate Law and our commitments under the Paris Agreement.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.”

Executive Vice-President for the European Green Deal Frans Timmermans

The legal recommendations will now be submitted to the EU Council for approval, which will require a qualified majority vote.

The European Commision anticipate a first informal discussion among Energy Ministers next week in Valladolid, Spain, during the Informal Meeting of the Transport, Telecommunications, and Energy Council, hosted by the Spanish Presidency.

Background

The Energy Charter Treaty (ECT) now has 56 signatories and contracting parties, including the European Union and Euratom. 

In the early 1990s, the agreement was designed to attract the West’s oil and gas industry to invest in former Soviet states by providing an independent arbitration tribunal if negotiations went wrong.

The pact was signed in 1994 and became effective in April 1998.

In 2018, the EU and its Member States called for a modernization of the obsolete Energy Charter Treaty, and between 2019 and 2022, they successfully negotiated to align the Treaty with European legislation, particularly on investment policy and energy and climate goals.

The European Commission, the bloc’s executive body, had previously lobbied for a modernised version of the treaty that would have put an end to intra-EU conflicts, as well as a reduction in the length of a “sunset clause” preserving investments.

Italy quit the treaty in 2015, while France, the Netherlands, Poland, Spain, and Belgium pushed for the bloc to withdraw as a whole.