On 12 March 2025 at City St George’s, University of London, Institute for the Study of European Laws (ISEL), Prof. Eleftheria Neframi presented her recent paper, titled ‘‘Withdrawal of the European Union from the Energy Charter Treaty: A Case Study for Mixity.’’
This blog post outlines the key ideas of the presentation, collated by Christos Karetsos
The Energy Charter Treaty (ECT) was concluded by more than 53 contracting parties, including the European Union (EU) and Euratom, as well as the Member States of the EU. It was approved by the EU in 1998 as a mixed agreement. Establishing a framework for energy cooperation, promoting energy security and the protection of foreign investments in the energy sector, the ECT was heavily criticized for its incompatibility with the objective of phasing out fossil fuels and making a rapid transition to renewable energies. Such criticism was an opportunity for the EU to promote its environmental standards and reform international investment law in line with its green transition objectives, given its interest in regulating the neighbourhood market through the ECT as a way of ensuring security of supply. The EU participated in the process launched in 2018 to modernise the ECT and submitted a proposal. After four years of negotiations, the Agreement in Principle of the Modernisation of the ECT (AIP), which was adopted in June 2022, largely reflected the content of the EU proposal. The main changes included a flexibility mechanism allowing parties to exclude fossil fuels from the energies whose investments are protected and to phase out existing fossil fuel investments after 10 years (instead of the 20 years sunset clause), a reference to the International Energy Charter, the application of the United Nations Commission on International Trade Law (UNCITRAL) rules on transparency in investor-state dispute settlement, and recognition of the need to respect the rights and duties of Parties under the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. However, Member States representing more than 70% of the EU population considered that the modernisation proposal did not meet their environmental ambitions. The modernised text failed to gather the necessary majority in the EU Council. Consequently, under the pressure of sustainability concerns, the door to withdrawals was opened.
From the EU law perspective, the application of Article 26 of the ECT, concerning the settlement of disputes between an investor and a contracting party (ISDS) through arbitration, to disputes within the Union, was judged incompatible with the autonomy of the EU legal order. The proposed modernised text included a clause that would end arbitration cases between investors and States that are both located in the EU. The non-adoption of the modernised text maintained the conflict between the ECT and EU law. Withdrawal from the ECT is in accordance with the autonomy of the EU legal order and the preservation of the Union’s sustainability standards. At the same time, however, it undermines the Union’s role as global energy and climate actor. It has been suggested that withdrawal should be preceded by the adoption of the modernisation of the ECT as a contribution to the achievement of the green investment objective, but the Union had to deal with its constitutional limits and its Member States’ autonomous decisions. Participation in and withdrawal from the ECT challenge the Union’s external representation and credibility, as a result of mixity.
The ECT, approved by the Union and its Member States, became an incomplete or partial mixed agreement, following the withdrawal of five Member States and the announcement by several others of their intention to withdraw. After the withdrawal of the EU, the ECT will be a former mixed agreement. Since a coordinated withdrawal, as proposed by the European Parliament and the European Commission could not be enforced on Member States, the EU institutions recognised that some Member States may remain parties to the ECT upon authorization from the Council. A non-coordinated withdrawal from the ECT invites us to rethink issues such as the management of mixity and the role of the principle of sincere cooperation according to Article 4 (3) of the Treaty on European Union (TEU), but also the double dimension of the EU’s constitutional requirements, as a limit (via the hazards of mixity) and lever (via the obligations of the Member States) of the Union’s role as promoter of sustainability goals. Recognising that mixity undermines the efficiency of the Union’s external action and may have hindered the adoption of the modernized ECT, the first question is whether mixity of the ECT is mandatory. The joint participation of the Union and its Member States in the ECT raises next the question of the limits of the principle of sincere cooperation in the modernisation process and in the coordination of withdrawals. However, the principle of sincere cooperation entails obligations for the Member States which are inherent in the joint participation in the ECT, but which go beyond the management of mixity, and which can go as far as the exercise of the Union’s competence in line with the objective of greening investment law.
It has been argued that it would be preferable for the Union to first approve the modernised ECT and then withdraw in order to benefit from the shortening of the sunset clause and the recognition of the non-application of the ISDS provisions within the Union. In the absence of Union approval, the Union’s interest is in promoting its sustainability standards in another multilateral context. The obligation of the EU Member States to exercise their voting rights in favour of the modernisation of the ECT, together with the expression of the Union’s intention to authorize them to remain contracting parties, is an original and still effective way for the Union to promote its interests and the balance between sustainability objectives and investment protection also for the benefit of non-EU contracting parties. The new situation is not without further complexities, in particular with regard to the obligation of Member States to reconcile the ECT with respect for EU law and their international responsibilities that may arise in case of conflict. However, the constitutional imperatives of the EU legal order, which imposed mixity and prevented the adoption of the modernised ECT, have also proved to be a driving force, as the Member States’ obligations under EU law restore the momentum for promoting the Union’s environmental standards in the ECT.
The research paper can be accessed here.
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