Proposal for a COUNCIL DECISION on the withdrawal of the Union from the Energy Charter Treaty
Date: 2023-07-07
Institutions: Directorate-General for Energy, European Commission
Subjects: climate change policy, energy cooperation, energy policy, international charter, investment policy, multilateral agreement, revision of an agreement, sustainable development, withdrawal from an agreement

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   EUROPEAN COMMISSION  Brussels, 7.7.2023  COM(2023) 447 final 2023/0273 (NLE)  Proposal for a COUNCIL DECISION on the withdrawal of the Union from the Energy Charter Treaty  
 
EXPLANATORY MEMORANDUM 

1. 

SUBJECT MATTER OF THE PROPOSAL 

This proposal concerns the decision to withdraw the Union from the Energy Charter Treaty, in 
accordance with Article 47 of that treaty. 

2. 

CONTEXT OF THE PROPOSAL 

2.1. 

The Energy Charter Treaty 

The Energy Charter Treaty (ECT) is a multilateral trade and investment agreement applicable 
to the energy sector that was signed in 1994 and entered into force in 1998. The ECT contains 
provisions on investment  protection, trade and transit in  energy materials and products,  and 
dispute  settlement  mechanisms.  The  ECT  also  sets  up  a  framework  for  international 
cooperation in the energy field between its 54 Contracting Parties. The European Union is a 
Contracting Party to  the ECT1, together with  Euratom, 26 EU Member States (as of 8 May 
2023)2, as well as Japan, Switzerland, Turkey and most countries from the Western Balkans 
and the former USSR, with the exception of Russia3 and Belarus4.  

2.2.  Modernisation of the ECT: outcome of the process and state of play 

In  the  absence  of  any  substantial  update  of  the  ECT  since  the  1990s,  the  ECT  became 
increasingly  outdated.  It  also  became  one  of  the  most  litigated  investment  treaties  in  the 
world, with EU Member States being the principle target of claims by investors, most of them 
based in other EU countries. As a result, a modernisation process was initiated in November 
2018.  The  Energy  Charter  Conference  first  approved  a  list  of  topics  for  discussion,  chiefly 
concerning provisions related to investment protection. The EU then proposed the removal of 
such protection for investments in fossil fuels, in order to bring the ECT in line with the Paris 
Agreement.  

After  15  rounds  of  multilateral  negotiations  held  between  July  2019  and  June  2022,  an 
“agreement  in  principle”  to  close  negotiations  was  reached  at  the  extraordinary  Energy 
Charter Conference of 24 June 2022, held in Brussels.  

The  negotiated  outcome  is  considered  by  the  Commission  to  be  in  line  with  the  mandate 
received from the Council.  

The  revised  text  of  the  ECT  and  its  Annexes  underwent  a  legal  review  and  final  draft-
decisions  containing  the  revised  texts  and  modalities  for  their  entry  into  force  (together 
referred  to  as  “the  modernisation  package”)  were  shared  on  19  August  2022  with  all 
Contracting  Parties  –  including  the  EU,  Euratom,  and  all  EU  Member  States  that  are 
Contracting Parties to the ECT.  
The  intention  at  that  time  was  to  list  the  “modernisation  package”  for  adoption  at  the  33rd 
meeting  of  the  Energy  Charter  Conference  on  22  November  2022.  To  that  end,  the 

1 
 Council  and  Commission  Decision  98/181/EC,  ECSC,  Euratom  of  23  September  1997  on  the 
conclusion,  by  the  European  Communities,  of  the  Energy  Charter  Treaty  and  the  Energy  Charter  Protocol  on 
energy efficiency and related environmental aspects (OJ L 69, 9.3.1998, pp. 1-116). 
2 
 All but Italy that unilaterally withdrew in 2015. France, Germany and Poland also initiated a procedure 
of  withdrawal  in  December  2022,  which  will  lead  to  their  effective  exit  of  the  Energy  Charter  Treaty  by 
December 2023. 
3 
Russian Federation. 
4 
and the provisional application of the ECT by Belarus. 

 The  extraordinary  Energy  Charter  Conference  of  24  June  2022  withdrew  the  observer  status  of  the 

 The extraordinary Energy Charter Conference of 24 June 2022 withdrew the observer status of Belarus 

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Commission  presented  proposals  for  two  decisions,  under  Article  218(9)  TFEU  and  Article 
101 of the Euratom Treaty respectively, with a view to establishing the position to be adopted 
on  the  Union’s  behalf  and  on  Euratom’s  behalf  at  the  33rd  meeting  of  the  Energy  Charter 
Conference.  At  the  same  time,  the  Commission  adopted  a  Communication  highlighting  the 
need to eliminate the risk of conflict between the Treaties and the ECT as interpreted by some 
arbitral  tribunals,  which  have  held  that  the  ECT  applies  to  intra-EU  disputes.  That 
interpretation, if confirmed by the courts of a third country, would de facto turn into a legal 
conflict  because  arbitration  awards  violating  EU  law  would  circulate  in  the  legal  orders  of 
third  countries.  The  proposals  put  before  the  Council  suggested  that  the  EU  and  Euratom 
support  the  adoption  of  the  “modernisation  package”  at  the  33rd  meeting  of  the  Energy 
Charter  Conference.  However,  these  proposals  were  not  adopted  by  the  Council,  due  to  the 
abstention  of  a  blocking  minority  of  four  Member  States  (Germany,  France,  Spain  and  the 
Netherlands) at the COREPER meeting of 18 November 2022. As a result, the “modernisation 
package” was taken off the agenda of the 33rd meeting of the Energy Charter Conference and 
the modernisation of the Energy Charter Treaty was not adopted. In the meantime, the current, 
unmodernised Treaty continues to apply to the EU, Euratom, and all Member States that are 
party to the ECT in their relations with other contracting parties. In addition, proceedings to 
obtain and enforce awards issued by tribunals purportedly established pursuant to Article 26 
ECT in intra-EU disputes continue unabated.  

2.3. 

Current situation and suggested way forward 

In the absence of EU and Euratom decisions, the EU and Euratom cannot take part in a vote 
on the adoption of the modernisation package at a meeting of the Energy Charter Conference. 
As a rule, when voting at an ECT Conference, the Union has a number of votes equal to the 
number  of  its  member  states  which  are  Contracting  Parties  to  the  ECT.  Without  the 
participation of the EU and Euratom in such a vote, the voting quorum in the Conference is 
not met, and the modernisation package cannot be adopted. 

There is no qualified majority in the Council for an EU or Euratom decision allowing the EU 
and  Euratom  to  take  part  in  the  vote  at  a  meeting  of  the  Energy  Charter  Conference  by 
supporting the adoption of the modernisation package. 

In  addition,  notwithstanding  the  issue  of  the  adoption  of  the  modernisation  package  by  the 
Energy  Charter  Conference,  the  entry  into  force  or  provisional  application  of  a  modernised 
Treaty would require the consent of the European Parliament, which has clearly stated that it 
does not support the reform of the Treaty and calls on the EU and Member States to organise 
a coordinated withdrawal from the ECT5. 

Consequently, there is no legal and/or institutional avenue for the modernisation of the 
ECT to be adopted and produce its effects, a condition for the EU to remain party to the 
Treaty.  

Remaining a Contracting Party to the current, unmodernised ECT is not an option for the EU 
or  its  Member  States,  as  the  current,  unmodernised  Treaty  is  not  in  line  with  the  EU’s 
investment policy and law and with the EU’s energy and climate goals. 

The provisions of the Treaty as regards investment protection, including the investor-to-State 
dispute  settlement  (ISDS)  mechanism,  are  not  in  line  with  the  EU  approach  to  investment 
protection.  In  particular,  the  unmodernised  ECT  is  incompatible  with  the  principle  of 
autonomy of Union law, as it does not include some of the safeguards identified by the Court 
in  the  CETA  opinion  in  order  to  conclude  that  the  arbitration  awards  would  not  have  the 

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modernisation  

Resolution  of  the  European  Parliament  of  24  November  2022  on  the  Energy  Charter  Treaty 

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“effect  of  preventing  the  EU  institutions  from  operating  in  accordance  with  the  EU 
constitutional framework”.6  

In addition, the protection granted to fossil fuels, under the conditions described above and for 
an unlimited period of time, does not fit with EU objectives as defined in the European Green 
Deal, the REPowerEU Plan or the Climate Law – namely: to accelerate the shift away from 
fossil fuels and towards renewable energy, to achieve a greater energy independence, ensure 
the  EU’s  energy  security,  and,  not  least,  deliver  on  the  commitment  to  cut  emissions  by  at 
least 55% by 2030 and to reach climate neutrality by 2050. 

As a result, the withdrawal of the EU from the ECT is the only available solution.  

3. 

LEGAL BASIS 

3.1. 

Nature and context of the proposal 

The  Commission  proposal  concerns  a  Council  decision  withdrawing  the  Union  from  the 
Energy Charter Treaty pursuant to Article 47.1 of that treaty.  

The adoption of such a decision by the Council, after obtaining the consent of the European 
Parliament  pursuant  to  Article  218(6)(a)(v)  of  the  TFEU,  would  enable  the  Commission  to 
give written notification to the Depositary of the Energy Charter Treaty (i.e. the Republic of 
Portugal) of its withdrawal from the Treaty pursuant to Article 47.1 of the ECT. 

Pursuant to Article 47.2 of the ECT, the withdrawal of the Union  shall take effect upon the 
expiry of one year after the date of the receipt of the notification by the Depositary, or on such 
later date as may be specified in the notification of withdrawal.  

Pursuant  to  Article  47.3  of  the  ECT,  the  provisions  of  the  ECT  shall  continue  to  apply  to 
investments  made  in  the  Union  by  investors  of  other  Contracting  Parties,  or  in  the  other 
Contracting Parties by investors of the Union,  for a period of 20  years as  of the date of  the 
Union withdrawal from the ECT. Article 47.3 of the ECT would have no impact on intra-EU 
relations,  to  which  the  ECT  has  never,  does  not  and  will  never  apply,  including  its  Article 
47.3.  However,  as  noted  in  the  Communication  referred  to  above,  there  is  a  risk  of  legal 
conflict  that  must  be  eliminated.  The  Commission  remains  of  the  view  that  the  appropriate 
response  is  to  adopt  an  instrument  that  is  a  ‘subsequent  agreement  between  the  parties 
regarding  the  interpretation  of  the  treaty  or  the  application  of  its  provisions’  within  the 
meaning of Article 31(3)(a) of the Vienna Convention on the Law of Treaties (VCLT), among 
the Member States, the Union and EURATOM . The Commission will therefore continue the 
negotiations of the text of such an agreement  which, once they are completed, would be the 
subject of a proposal for the conclusion of the subsequent agreement on behalf of the Union 
and of EURATOM. The codification of the interpretation of the EU and its Member States in 
a separate treaty (something that is possible because of the bilateral nature of the obligations) 
is all the more pressing in the absence of the ECT modernisation that would have embedded 
in the text itself and via a “for greater certainty” clause, the understanding of all Contracting 
Parties that its Article 26 does not apply intra-EU.  

3.2. 

Procedural legal basis 

3.2.1.  Principles 

A decision of the Union to terminate and withdraw from an international agreement must be 
adopted on the same legal basis, and following the same procedure, as a decision to conclude 
that agreement on behalf of the Union. Therefore, the Union’s termination of, and withdrawal 

6 

Opinion 1/17, paras. 152-161.  

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from, the Energy Charter Treaty requires the adoption of a Council decision based on Article 
218(6)(a)(v) of the TFEU.  

Pursuant to Article 218(6)(a)(v) of the TFEU, ‘The Council, on a proposal by the negotiator, 
shall adopt a decision concluding the agreement. Except where agreements relate exclusively 
to  the common foreign  and security policy, the Council shall  adopt  the decision concluding 
the  agreement:  (a)  after  obtaining  the  consent  of  the  European  Parliament  in  the  following 
cases: […] (v) agreements covering fields to which either the ordinary legislative procedure 
applies,  or  the  special  legislative  procedure  where  consent  by  the  European  Parliament  is 
required.’ 

3.2.2.  Application to the present case 

The Energy Charter Treaty is not an agreement that relates exclusively to the common foreign 
and security policy. The Energy Charter Treaty is instead an agreement covering subjects to 
which  the  ordinary  legislative  procedure  applies.  Therefore,  the  conclusion  of  the  Energy 
Charter Treaty by the Union would require a Council decision after obtaining the consent of 
the European Parliament pursuant to Article 218(6)(a)(v) of the TFEU.  

A decision of the Union to terminate and withdraw from the Energy Charter Treaty must be 
adopted on the same legal basis, and following the same procedure, as a decision to conclude 
that agreement on behalf of the Union 

Therefore, the procedural legal basis for the proposed decision is Article  218(6)(a)(v) of the  
TFEU.  

3.3. 

Substantive legal basis 

3.3.1.  Principles 

The  substantive  legal  basis  for  a  decision  under  Article  218(6)(a)(v)  of  the  TFEU  depends 
primarily on the objective and content of the envisaged act in respect of which a position is 
taken on the Union's behalf. If the envisaged act pursues two aims or has two components and 
if one of those aims or components is identifiable as the main one, whereas the other is merely 
incidental,  the  decision  under  Article  218(6)(a)  of  the  TFEU  must  be  founded  on  a  single 
substantive legal basis, namely that required by the main or predominant aim or component. 

With regard to an envisaged act that simultaneously pursues a number of objectives, or that 
has  several  components  which  are  inseparably  linked  without  one  being  incidental  to  the 
other, the substantive legal basis of a decision under Article 218(6)(a) of the TFEU will have 
to include, exceptionally, the various corresponding legal bases. 

3.3.2.  Application to the present case 

The  envisaged  act  pursues  objectives  and  has  components  in  the  area  of  energy  and  the 
common  commercial  policy.  These  elements  of  the  envisaged  act  are  inseparably  linked 
without one being incidental to the other. 

Therefore,  the  substantive  legal  basis  of  the  proposed  decision  comprises  the  following 
provisions: Articles 194(2) and 207(4), first subparagraph TFEU. 

3.4. 

Conclusion 

The  legal  basis  of  the  proposed  decision  should  be  Articles  194(2)  and  207(4),  first 
subparagraph, TFEU, in conjunction with Article 218(6)(a)(v) of the TFEU. 

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2023/0273 (NLE) 

Proposal for a 

COUNCIL DECISION 

on the withdrawal of the Union from the Energy Charter Treaty 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles  194(2)  and  207(4),  first  subparagraph,  in  conjunction  with  Article  218(6),  second 
subparagraph, point (a)(v), thereof, 

Having regard to the proposal from the European Commission, 
Having regard to the consent of the European Parliament7, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

The Energy Charter Treaty (‘the Agreement’) was concluded by the Union by Council 
and Commission Decision 98/181/EC, ECSC, Euratom8 and entered into force on 16 
April 1998. 

In  the  absence  of  any  substantial  update  of  the  Agreement  since  the  1990s,  the 
Agreement became increasingly outdated.  

In  2019,  the  Contracting  Parties  to  the  Agreement  engaged  in  negotiations  aimed  at 
modernising the Agreement  in  order to  bring it into alignment with  the principles of 
the  Paris  Agreement9,  the  requirements  of  sustainable  development  and  the  fight 
against climate change, as well as with modern standards of investment protection. 

The Contracting Parties  concluded the negotiations on 24 June  2022. The negotiated 
outcome  was  meant  to  the  adopted  at  the  33rd  meeting  of  the  Energy  Charter 
Conference on 22 November 2022. 

Ahead  of  the  meeting  of  the  Conference,  the  Union  was  unable  to  find  a  common 
position on the modernisation of the Agreement.   

In the absence of a Union position, the adoption of the modernised Agreement by the 
Energy  Charter  Conference  is  impossible.  The  current,  unmodernised  Agreement 
continues  to  apply  to  the  Union,  in  spite  of  the  fact  that  it  is  not  in  line  with  the 
Union’s investment policy and law, including in particular the principle of autonomy 
of Union law, and with the Union’s energy and climate goals 

(7)  With no alternative available, it is therefore necessary for the Union to withdraw from 

the Agreement. 

(8) 

Pursuant  to  Article  47(1)  of  the  Agreement,  a  Contracting  Party  can  give  written 
notification of its withdrawal from the Agreement to the Depository of the Agreement, 

7 
8 

9 

OJ C …, …, p. … / Consent of … (not yet published in the Official Journal). 
Council  and  Commission  Decision  98/181/EC,  ECSC,  Euratom  of  23  September  1997  on  the 
conclusion,  by  the  European  Communities,  of  the  Energy  Charter  Treaty  and  the  Energy  Charter 
Protocol on energy efficiency and related environmental aspects (OJ L 69, 9.3.1998, p. 1). 
OJ L 282, 19.10.2016, p. 4. 

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namely  the  Portuguese  Republic  [See  https://publications.europa.eu/code/en/en-
370100.htm].  Pursuant  to  Article  47(2)  of  the  Agreement,  such  a  withdrawal  takes 
effect upon the expiry of one year after the date of the receipt of the notification by the 
Depositary. 

HAS ADOPTED THIS DECISION: 

The Union shall withdraw from the Energy Charter Treaty. 

Article 1 

Article 2 

The Commission shall, on behalf of the Union,  give written notification  in  accordance  with 
Article 47(1) of the Energy Charter Treaty, of the withdrawal of the Union from the Energy 
Charter Treaty. 

Done at Brussels, 

For the Council 
The President 

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