On 22 February 2024, the UK government confirmed the UK’s withdrawal from the Energy Charter Treaty (ECT), blaming a failure of efforts to modernise the treaty and align it with net zero aims. The UK joins nine EU member states, including France, Spain, and Germany, in withdrawing from the treaty.
The ECT is a multilateral treaty that was designed to promote international investment in the energy sector. It gives foreign investors the ability to bring international arbitration proceedings against the host state of their investment, to seek damages where the host state is found to have breached the ECT.
The ECT was signed in 1994, and historically was intended to protect fossil fuel investments, production and transportation and focus on ‘East-West’ cooperation after dissolution of the USSR. Over time, however, the scope of the ECT has become broader, and many cases have also been brought in relation to solar, wind, and other renewables investments following the general shift of focus to renewables sectors.1 The ECT has become the most litigated investment agreement in the world, with the majority of disputes being intra-EU.2
The UK and EU (which accounted for over half of the members of the ECT) had been at the forefront of efforts to modernise the ECT, and an agreement in principle on amendments to modernise the text was reached in June 2022. However, a vote on the proposed amendments scheduled for November 2022 was postponed at the eleventh hour after EU members were unable to reach consensus. In the weeks leading up to the vote, France, Germany, Luxembourg, the Netherlands, Slovenia, Spain, and others announced their intention to withdraw from the ECT. On 24 November 2022 the European Parliament passed a resolution calling on the European Commission (EC) to begin a co-ordinated exit of all EU members from the ECT, and in July 2023 the EC announced its proposal for the EU block’s coordinated withdrawal.
