Why the Energy Charter has become a legal and political issue for the EU
The Commission has sent formal letters to 16 Member States requesting withdrawal from the Energy Charter Treaty after the EU and Euratom officially left the agreement.
According to Brussels, maintaining the Treaty is incompatible with the EU’s exclusive competences in trade and investment, as well as with the objectives set by the European Green Deal and the Paris Agreement.
The Commission warns that if satisfactory responses are not received within two months, it may proceed with a reasoned opinion, initiating the next step in infringement proceedings.
Why the Commission is asking Member States to leave the Energy Charter
The Commission argues that trade and investment fall under the EU’s exclusive competence. Following the withdrawal of the EU and Euratom from the Energy Charter, Member States that remain contracting parties no longer have a European mandate to exercise those competences.
For this reason, Brussels has issued letters of formal notice to 16 countries, inviting them to withdraw “without undue delay”. The governments concerned must clarify whether they intend to align with the new legal framework or maintain a position that, according to the Commission, breaches EU Treaties. The stated objective is to restore coherence between European law, energy policy and the common commercial policy.
Which Member States have left and which remain?
Several countries have already completed their withdrawal from the Energy Charter Treaty. Italy notified its withdrawal in 2014, effective from 1 January 2016. France, Germany and Poland also formalised their exit, which entered into force in December 2023.
Other Member States, including Slovenia, Portugal and Spain, have launched withdrawal procedures. Nevertheless, 16 EU countries remain contracting parties to the Treaty.
The Commission’s action now focuses on this group, with the aim of achieving a complete and coordinated disengagement at European level.
Why the Treaty is seen as incompatible with EU climate objectives
At the core of the decision is a political and climate assessment. The Commission maintains that the Energy Charter Treaty provides broad protection for fossil fuel investments, making it incompatible with commitments undertaken under the European Green Deal and the Paris Agreement.
The Treaty text, largely unchanged since the 1990s, does not reflect the current level of European climate ambition. According to Brussels, continuing to guarantee legal protection for fossil investments risks hindering the energy transition and exposing Member States to multi-billion-euro disputes linked to decarbonisation policies.
Intra-EU arbitration: what changes with withdrawal?
Another key element concerns the dispute settlement mechanism. The Court of Justice of the European Union, in the Komstroy judgment, ruled that arbitration under Article 26 of the Treaty does not apply to intra-EU disputes.
In other words, a European investor cannot initiate arbitration against a Member State before international tribunals on the basis of the Energy Charter. Despite this, several arbitral tribunals have continued to declare themselves competent.
For this reason, the EU, Member States and Euratom agreed on an inter se agreement clarifying that such arbitrations are legally ineffective and unenforceable within the EU legal order. Withdrawal from the Treaty reinforces this position.
Why modernisation of the Treaty was not sufficient
Since 2018, the EU has sought to modernise the Energy Charter Treaty by introducing limits to fossil fuel investment protection and strengthening sustainability clauses. In 2022, an agreement in principle was reached among the contracting parties.
However, the modernised text did not obtain the necessary support within the Council and the European Parliament. Faced with the impasse, the Commission proposed a coordinated withdrawal of the EU, Euratom and Member States from the non-modernised Treaty.
Under the Belgian Presidency of the Council, a compromise was defined allowing the EU’s withdrawal while enabling modernisation to proceed for non-EU countries.
The “sunset clause”
Even after withdrawal, the Energy Charter Treaty continues to produce legal effects due to the so-called sunset clause. Article 47.3 provides that investment protections remain valid for 20 years after a State’s exit.
This clause has already had significant consequences. In 2022, Italy was ordered to pay around €200 million to the company Rockhopper following a ban on offshore drilling within 12 nautical miles, adopted in 2015.
The Commission and Member States believe that coordinated withdrawal and the closure of intra-EU arbitration could reduce the future impact of this clause. However, the issue remains one of the most sensitive aspects of the dossier.