The Veblen Institute publishes a briefing on new cases of investor-State disputes based on the Energy Charter Treaty (ECT).

Despite the exit of the EU and 11 Member States, as well as the UK from the ECT, the briefing highlights that the agreement continues to be massively used by investors:

• firstly because it takes a year for the exit of a party to become effective after notification
• but also because, under the so-called sunset clause, investments protected on the exit date remain protected for a further 20 years. And the States that have withdrawn to date have taken no steps to neutralise this clause, at least among themselves.

Since the finalisation of negotiations for the modernisation of the Treaty, 24 new cases have been officially registered.

• EU Member States (or the EU itself) are respondents in 20 of the 24 cases.
• In 14 cases, the investors are from an EU Member State, and in 8 cases from the UK.
• Half of the cases (12) are intra-EU cases, involving at least one investor from an EU Member State against another EU Member State. Yet in 2021, the Court of Justice of the European Union (CJEU) ruled that such intra-EU disputes based on the ECT are incompatible with EU law.
• 16 cases concern activities linked to investments in fossil fuels (8 are described in more detail in the annex).

This is why the Veblen Institute urges France and the other parties that have exited the ECT to draw up an agreement to deactivate the ECT’s sunset clause and to revisit the other bilateral treaties to which they are party and which contain provisions quite similar to the ECT.

Notes

The Energy Charter Treaty (ECT) is the world’s most widely used investment treaty.

Despite efforts to modernise it since 2009 - leading to an agreement in principle in June 2022 and formal adoption in December 2024 - the treaty remains inconsistent with the Paris Agreement, according to France’s Haut Conseil pour le Climat and the UK’s Committee on Climate Change.

In 2022, the European Parliament labelled the ECT an obsolete instrument that hinders the EU’s climate ambitions. In 2023, the European Commission stated that the ECT was incompatible with initiatives such as the European Climate Act, and proposed a coordinated EU withdrawal from the Treaty. This proposal was adopted by the European Parliament on 24 April 2024 and received the final green light from the Council on 30 May 2024.

At the same time, several States have already formally left the ECT or announced their intention to withdraw: France, Germany, Poland, Luxembourg, Portugal, Slovenia, Spain, the Netherlands, the United Kingdom and Denmark have formally withdrawn, while Ireland and Lithuania have expressed their intention to do so.

Finally, since the formal adoption of the modernised treaty on 3 December 2024, the International Secretariat could relaunch the process of geographical expansion of the treaty, which had been suspended during the modernisation phase.