Withdrawal from mixed agreements under EU law: the case of the Energy Charter Treaty

The relationship between EC law and international investment law has gained increasing attention. This is due to ongoing proceedings before the European Court of Justice (ECJ) concerning the compatibility of bilateral investment treaties (BITs) of EU Member States with EC law, several arbitral proceedings of investors versus EU Member States based on BITs between EU Member States and/or concerning substantive legal problems that are somehow related to EC law (e.g. Eastern Sugar). Insufficient attention, however, has so far been paid to the relationship between EC law and the Energy Charter Treaty (ECT) with regard to the specific situation of a possible arbitral proceeding of an EU national versus an EU Member State. As the ECT is a plurilateral treaty that has been concluded as a so-called mixed agreement by the EC and all its Member States, the questions that arise are to a large extent different than in the Eastern Sugar/BIT situation. Accordingly this paper discusses the applicability of the ECT in ICSID arbitrations of EU nationals versus EU Member States. The first part of the paper provides an introduction to the applicable law concerning the admissibility and merits of ECT/ICSID proceedings. The second part discusses the public international status of the ECT towards the EC and its Member States and analyses the legal phenomenon of ‘mixed agreements’ within the EC and its Member States. The author continues to examine the general aspects concerning the legally-binding effects of mixed agreements such as the ECT from a public international law perspective. Following the emphasis upon a number of intrinsic legal principles of public international law, the author argues that the ECT as a mixed agreement under EC law does not influence the comprehensive legally-binding effect of the ECT treaty in view of the EC and its Member States under public international law. In the third part of the paper the contributor adheres to providing an overview of the exemptions to the comprehensive binding effects regarding mixed agreements, focussing particularly on the analysis of possible limitations of the legally-binding inter se relationship as a result of explicit and implicit ECT standards. Subsequently an intermediate conclusion is presented, which underlines that from a public international law perspective, an inter se modification of the ECT by EC law is not possible. The author continues to contextualise Part III and V of the ECT and concludes that no competency is given therein to the EC. In the last part of the paper the contributor assesses the associated sub problem of the conflicting jurisdiction in the sense of Art. 292 EC and discusses the irrelevance of Art. 307 EC from an international public law perspective in relation to ECT/ICSID proceedings.The paper closes by providing an analysis of the legal principles of lex arbitri and ordre public concerning the applicability of EC law in an ECT/ICSID proceeding. The author concludes that the legal provisions of the ECT are applicable in an ICSID proceeding of an EU national versus an EU Member State; similarly it is established that EC law does not influence such proceedings which are exclusively governed by public international law.

This essay deals with selected legal problems arising out of the EU Council’s decision adopted in June 2024. The Decision denies benefits of investment protection to Russian and Belorussian investors under the Energy Charter Treaty (ECT) adopted in June 2024. Because the ECT is a mixed agreement, this essay analyses the Decision from two angles: EU Law and International Law. From an EU-law perspective, it explores whether the EU Council can deny benefits to foreign investors on behalf of all Member States, or Member States can continue to afford benefits independently of the Council’s decision. It argues that even if decisions falling within Part III of the ECT do not have to be adopted unanimously, failure of a Member State to adhere to EU Council’s decision would constitute a breach of the sincere cooperation principle. From the viewpoint of International Law, the essay focuses on two key issues triggered by the Decision, namely its temporal scope and its effect on legitimate expectations of targeted investors. Regarding the application in time, the author argues that the Decision can have only prospective effects and should not apply retroactively. Regarding legitimate expectations, the Decision opens discussion on legitimate expectations that we might witness in potential claims in the years to come.

Mixed agreements, discussed jointly by the European Union and its Member States, are derived from necessity, due to division of competences part of the agreement falls under EU exclusive competence. Mixed agreements raise the question as to what extent they are binding on the institutions and on the Member States as EU law. Can mixed agreements be considered as a source of European Union law regardless of the sphere of competence under which their provisions fall? is a mixed agreement in its entirety a source of EU law or only as far as provisions falling under EU competence are concerned? And which EU competence, exclusive or also shared, is to be taken into consideration? The issue is of specific interest, given the consideration of a mixed agreement as a source of EU law implies the Court's interpretative jurisdiction and the possibility to enforce its application against Member States. Keywords:European Union; European Union Law; interpretative jurisdiction; Member States; Mixed Agreements

Introduction The European Union (as successor to the European Communities) and all of the EU member states are parties to the Energy Charter Treaty. From the EU law perspective, the ECT is a ‘mixed agreement’; that is, an agreement parts of which fall within the EU's competence and parts of which fall within the competences of the member states. In particular, at the time of its adoption foreign investment fell within the competences of the member states (although this has now changed, at least as regards foreign direct investment, which the Lisbon Treaty has brought within the Common Commercial Policy). The fact that the ECT is a treaty to which the EU and its member states are parties distinguishes it from the numerous BITs entered into by individual member states. It has been argued (albeit, it is submitted, plainly wrongly) that intra-EU BITs (BITs entered into between two EU member states before either or both were EU member states) automatically terminate on both parties becoming EU members. However, given the ECT's status as a mixed agreement to which the EU is itself a party, participation in it cannot be per se incompatible with member states' obligations. Several member states' extra-EU BITs (BITs entered into between a member state and a non-member state) have been held to contain provisions which violate EU law on the ground that they have the potential to impede possible restrictions on capital movements (although this does not mean that the BITs are themselves invalid, only that the member states party to them are under an obligation to remove the incompatibilities).

The joint participation of the EU and its Member States in an international agreement blurs the extent of the rights and obligations governed by the agreement. The use of this mixed formula can create situations of uncertainty for third parties since it avoids the question of the division of competence between the EU and its Member States in matters governed by the mixed agreement. The desire of third parties to a mixed agreement to know the scope of the competence and the responsibility of the EU and its Member States has been the driving force behind a specific treaty-making practice developed by the EU in the framework of multilateral agreements. Within these multilateral conventions, third parties want to know beforehand who is voting (to avoid a double exercise of voting rights); who is implementing (to ensure compliance); and, more importantly; who is responsible for a breach of the agreement (even before an internationally wrongful act has been committed): the EU and/or its Member States? In response to these concerns, the EU makes a declaration when concluding the mixed agreement delimiting the extent to which the international agreement falls within EU competence. In other words, declarations of competence are an attempt to apportion responsibilities within a multilateral agreement based on who has competence (the EU and/or its Member States) over issues covered by specific provisions of the multilateral agreement.

This chapter also looks at issues that typically arise in Energy Charter Treaty (ECT) cases. In particular, it explores those cases in which respondent states have made use of EU law in mounting a jurisdictional or substantive defence under the ECT. First, regarding EU law as a jurisdictional defence, the chapter looks both at intra-European BIT cases and intra-European ECT cases. Regarding the latter, the chapter addresses, among other things, the critical question of whether the ECT is applicable to disputes between an EU member state and a national of another EU member state, or whether such application is precluded by an implicit ‘disconnection clause’ under the ECT, as argued by the EU Commission. Second, regarding EU law as a substantive defence, the chapter analyzes scenarios in which EU law arguably requires conduct, on the part of a member state, that the ECT itself forbids, or vice versa.

The following Report will be presented to the 22nd FIDE Congress to be held in Limassol, Cyprus, 1-4 November 2006. It has been prepared in response to a questionnaire devised by the General Rapporteur, Professor Piet Eeckhout, which is reproduced as an Annex. It seeks to do two things: first, to respond to the questions and issues raised by the General Rapporteur, and second to comment on some issues and recent developments which are particularly relevant to the relationship between the European Union and its Member States in the external relations field. These include the obligation on Member States when exercising their own external competence to comply with their Community law obligations, including procedural obligations; issues relating to choice of legal base for external action, and in particular the impact of the pillar structure when characterising EU external action; international responsibility under mixed agreements; and the relationship between international law and EU law.

Since 1961, the EEC has concluded so-called mixed agreements with the rest of the world. On the EU side, such agreements are concluded both by the EU and by its member states, acting jointly. This is a consequence of the principle of conferral, which sometimes limits EU capacity to act on the international stage; it also helps managing over time the evolving distribution of competencies between the EU and its member states. If mixed agreements are consistent with the EU legal order, they constitute a peculiar novel practice under general international law. Such agreements do not fit in any of the existing treaty law ‘categories’, and the legal qualification for the EU and its member states’ commitments under mixed agreements may appear problematic according to international law. Under EU law, the principles of pre-emption and sincere cooperation are applicable. However, Brexit forces legal scholars to reconsider the issue under international law: what happens when a member state leaves the EU regarding its commitments under mixed agreements? According to international law it shall remain a party to such agreements, as a State, bound by its international commitments. But how and under which conditions shall these agreements be implemented remain open questions. We propose to investigate these legal issues with regard of the UK’s commitments under mixed agreements in the perspective of Brexit.

EU law has developed a unique and complex system under which both the Union and its Member States can act under international law, separately, jointly or in parallel. International law was not set up to deal with such complex and hybrid arrangements, which raise questions under both international and EU law. This book assesses how EU law has adapted to cope with the constraints of international law in situations in which the EU and its Member States act jointly in relations with other States and international organisations. In an innovative scholarly approach, reflecting this duality, each chapter is jointly written by a team of two authors. The various contributions offer new insights into the tension that continues to exist between EU and international law obligations in relation to the (joint) participation of the EU and its Member States in international agreements. Volume 108 in the Series Modern Studies in European Law

After having considered the general predictions of public international law on legal responsibility, it is now turned to the issue of responsibility in the context of WTO Agreement, as a preliminary step for analyzing the management of problems of responsibility in the EU polity. The responsibility of the EU and its Member States from the joint participation in international agreements in general, and in the WTO Agreement in particular, is discussed in view of mixed agreements. A mixed agreement, in the context of this work, shall be defined as a multilateral treaty concluded between, on the one hand, the EU as an international organization and any or all of its Member States, and, on the other hand, other states and/or international organizations. The mixed nature is determined due to the fact that the international agreements cover certain matters which fall indubitably within the competences of the EU and its Member States, and which they exercise on an exclusive or shared basis. The main legal argument for this participation is explained by the fact that the international organization alone may lack the full and autonomous capacity to participate in the treaty, or that the international organization and its member states are competent for different areas of governance covered by the international treaty. Hence, they complement each other with their joint participation in this treaty. This is the case of the WTO Agreement, where the Union and its Member States contribute jointly and complementarily with their own and shared powers.

The Achmea judgment of the Court of Justice of the EU (CJEU) found that arbitration clauses in bilateral investment treaties (BITS) between Member States of the European Union are incompatible with European Union law. Following this, Member States attempted to invoke this judgment in relation to similar intra-EU arbitrations under the Energy Charter Treaty (ECT). Tribunals established under the ECT have however generally rejected the applicability of the Achmea judgement. While the EU Commission and the majority of Member States concluded that this judgment also precludes intra-EU ect arbitrations, a few Member States held the opposite view. The future of intra-EU ECT arbitrations therefore seems fragile in the least. A closer analysis of the decisions of ECT Tribunals, and the relationship between obligations under European Union law and international law however argues that the future of such intra-EU ECT arbitrations is not as fragile as it may seem.

In its 2018 Achmea ruling, the European Court of Justice (ECJ) found intra-European Union (EU) investment arbitration incompatible with EU law, and in its 2019 opinion on the proposed Canada–EU Trade Agreement (CETA), the ECJ has set out requirements for the recognition by the EU of investor–State arbitration at large. On the other hand, in the last few years a great many tribunals (under both International Centre for the Settlement of Investment Disputes (ICSID) and non-ICSID regimes) have dealt with intra-EU investment arbitrations, most of them under the Energy Charter Treaty (ECT). None of these tribunals found the proceedings to be incompatible with EU law. The reason for this discrepancy is that the tribunals deal with investors’ rights, while the ECJ, in contrast, is concerned with intra-EU governance issues. However, individual rights are not alien to EU law. Against that background, this note is based on the established finding that investment treaties bestow private investors with individual rights under public international law. These rights need to be taken seriously: as third parties, investors can, under both public international law and EU law, draw upon these rights, irrespective of the internal EU governance rules with which the ECJ was concerned. Hence, this note2 is not meant to be a further contribution to the voluminous debate on the internal EU governance rules drawn upon by the ECJ. In contrast, it is based on the binding effect on the EU of the investors’ individual rights. Furthermore, it shows that the ECJ’s rulings do not have an adverse precedent effect on the pursuit of investors’ rights and that, in addition, the ECT meets the criteria under which the ECJ has assessed EU compatibility of investment arbitration. Last but not least, the denial by EU institutions of investors' rights under the ECT may, in itself, constitute an infringement of the ECT.

Following a wave of announcements from major EU Member States withdrawing or considering withdrawing from the Energy Charter Treaty (ECT), the European Commission decided to recommend a coordinated withdrawal of the EU and its Member States from the ECT. The European Commission also backs the adoption of a ‘subsequent agreement on the interpretation of the ECT’ between the EU and its Member States that would ‘clarify’ that the ECT and its sunset clause do not apply intra-EU. The sunset clause contained in Article 47(3) of the ECT has been described as a major hurdle in States’ attempt to exit the ECT. However, under an international treaty law analysis, strong arguments confirm the availability of an agreement between a subset of ECT Contracting Parties that would exclude the application of the ECT and its sunset clause in their relations inter se—including the envisaged EU agreement—as a suitable and effective alternative to modernisation of the ECT. Not only does this appear as the most desirable outcome in view of the continuing protection of fossil fuels under the modernised ECT, but such an agreement would also be firmly grounded in public international law.

The purpose of this paper is to examine the structural crisis that currently faces the international investment arbitration regime within the European Union, with particular attention to the growing incompatibility between the Energy Charter Treaty (ECT) and the principles of EU law. Building on the jurisprudence of the Court of Justice of the European Union (CJEU) in Achmea and Komstroy, Member States have relied on EU law to resist compliance with arbitral awards, thereby undermining investor confidence and generating unprecedented legal uncertainty. Against this backdrop, this document analyses the case of investment awards in which Spain was condemned under the ECT and its investors recourse to external jurisdictions, notably the United Kingdom, the United States, and Australia, as alternative forums to seek enforceability against this nation. Through a comparative examination of landmark cases, the study identifies the legal arguments that have enabled enforcement abroad, the limits investors encounter in practice, and the broader consequences for the coherence of EU public order and the legitimacy of the international investment law system.

The Achmea judgment of the Court of Justice of the EU (CJEU) found that arbitration clauses in bilateral investment treaties (BITs) between Member States of the European Union are incompatible with European Union law. Following this, Member States attempted to invoke this judgment in relation to similar intra-EU arbitrations under the Energy Charter Treaty (ECT). Tribunals established under the ECT have however generally rejected the applicability of the Achmea judgement. While the EU Commission and the majority of Member States concluded that this judgment also precludes intra-EU ECT arbitrations, a few Member States held the opposite view. The future of intra-EU ECT arbitrations therefore seems fragile in the least. A closer analysis of the decisions of ECT Tribunals, and the relationship between obligations under European Union law and international law however argues that the future of such intra-EU ECT arbitrations is not as fragile as it may seem.