European Union’s Withdrawal from Energy Charter Treaty: A Result of Climate Policy?

Abstract

This article analyzes the political and economic motivations behind the coordinated decision of the European Union and its member states to withdraw from the Energy Charter Treaty (ECT) in March 2024. Special emphasis is placed on the role of the EU’s climate policy in this process. A comprehensive review of the thirty years since the treaty’s inception is presented, aiming to uncover its influence on the domestic political dynamics within EU member states. Through an examination of investment arbitration practices and official EU documents, it is concluded that, despite declarative statements, the climate agenda was merely an external and secondary factor, while the primary driver was a shift in the EU’s investment policy. The article illustrates that the treaty did not obstruct the achievement of the EU’s climate objectives; however, the investment protection mechanism in international arbitration proved incompatible with the principles of autonomy and primacy of EU law. Furthermore, the treaty indeed provided investors with avenues to seek compensation from EU member state governments for assets “blocked” as a result of climate policies. The abandonment of a proven international investments protection tool may negatively impact the foreign investment attractiveness of the EU’s green energy sector.