The compatibility of the Energy Charter Treaty with EU law

The report concludes that the Energy Charter Treaty (ECT) is incompatible with EU law because it allows international tribunals to interpret EU law and undermines the regulatory autonomy of EU institutions. While the European Court of Justice (ECJ) has already ruled that intra-EU arbitration under the ECT is illegal (Komstroy), the report argues that extra-EU arbitration also poses significant risks. It highlights that the ECT lacks the procedural and substantive safeguards found in modern agreements like CETA. The authors suggest that the most effective remedy is a combination of withdrawal from the ECT, inter-se modification to eliminate the sunset clause between withdrawing parties, and interpretative declarations to prevent investors from circumventing these measures by relocating their seats outside the EU.

• The Energy Charter Treaty (ECT) is fundamentally incompatible with the EU Treaties because it enables investment tribunals to interpret and apply EU law without the safeguards necessary to preserve the EU's unique legal and judicial framework.
• The ECT lacks the critical procedural and substantive safeguards present in the EU-Canada Comprehensive Economic and Trade Agreement (CETA), such as provisions ensuring that tribunals do not determine the legality of measures under domestic law or that they follow the prevailing interpretation of that law by domestic courts.
• The ECT's ISDS mechanism undermines the regulatory autonomy of EU institutions by potentially forcing the EU or Member States to amend or withdraw legislation based on the assessment of a tribunal outside the EU judicial system.
• The ECT creates a conflict with EU state-aid rules, as arbitral tribunals may award damages to investors when Member States recover unlawful state aid, effectively maintaining unlawful aid in contradiction to EU law.
• The ECT structurally subordinates environmental protection to investment protection and trade liberalisation, which creates tension with the EU's climate goals and the Paris Agreement.
• The EU's May 2020 text proposal for modernisation is insufficient because it does not fully implement CETA-like safeguards, does not address intra-EU arbitration, and faces a cumbersome ratification process.
• The most promising legal path to resolve the incompatibility is a combination of withdrawal, inter-se modification to remove the 20-year sunset clause between withdrawing parties, and an interpretative declaration to prevent investors from relocating to non-EU ECT parties to circumvent the modification.
• EU Member States are obligated under the principle of loyalty to terminate their obligations under the ECT that are incompatible with EU law, including the prohibition of intra-EU arbitration established in the Komstroy ruling.

APA

Eckes, C., & Ankersmit, L. (2022). The compatibility of the Energy Charter Treaty with EU law. ClientEarth. https://www.clientearth.org/media/2n2po04j/report-on-ect-compatibility-with-eu-law.pdf

Chicago

Eckes, Christina, and Laurens Ankersmit. The compatibility of the Energy Charter Treaty with EU law. ClientEarth, 2022. https://www.clientearth.org/media/2n2po04j/report-on-ect-compatibility-with-eu-law.pdf.

Wikipedia

{{cite report |last1=Eckes |first1=Christina |last2=Ankersmit |first2=Laurens |title=The compatibility of the Energy Charter Treaty with EU law |publisher=ClientEarth |date=21 April 2022 |url=https://www.clientearth.org/media/2n2po04j/report-on-ect-compatibility-with-eu-law.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{eckes2022compatibility, author = {Eckes, Christina and Ankersmit, Laurens}, title = {{The compatibility of the Energy Charter Treaty with EU law}}, institution = {ClientEarth}, year = {2022}, month = apr, url = {https://www.clientearth.org/media/2n2po04j/report-on-ect-compatibility-with-eu-law.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }