On 9 April 2024, the European Parliament Committees for Trade (INTA) and Energy (ITRE) voted in favour of a coordinated EU withdrawal from the Energy Charter Treaty (ECT). Signed in 1994 by 56 parties, the international treaty originally intended to boost collaboration between states, foster energy security, and protect energy investments, and was designed to better integrate former Soviet and Eastern European nations into the global energy markets after the Cold War.

However, in the absence of revisions and modernisation in the past thirty years, the ECT had become increasingly outdated, allowing fossil fuel companies to sue governments for loss of investments generated by a transition to renewables, effectively making the treaty a threat to the Paris Agreement and the European Union’s ambitious climate policies. In a striking instance, in 2021 German energy companies RWE and Uniper sued the Netherlands in 2021 for €2.4 billion for passing a law banning coal-fired power plants after 2030.

Until 2022, the European Union was working towards a modernisation of the Energy Charter Treaty, but backtracked when France, Spain, the Netherlands and Germany made clear they would not endorse the reform, leaving no choice but to coordinate the EU’s complete withdrawal, effectively proposed by the European Commission in July 2023. The recent vote in the European Parliament’s committees follows a preliminary agreement reached by EU ambassadors last month. It should then be followed by a vote during the Parliament’s April plenary session, deemed a formality given the chamber’s wide support for the exit, and a formal agreement of the European Council. Indeed, a qualified majority of member states will need to back the proposal to withdraw from the Energy Charter Treaty.

In parallel, eleven member states have actually already announced or completed their exit from the ECT: Germany, France, Luxembourg, Spain, the Netherlands, Ireland, Denmark, Italy, Poland, Portugal and Slovenia. While reaching a qualified majority of fifteen member states should not pose a significant challenge, some EU member states, such as Cyprus, Greece, Hungary and Slovakia, are suspected of refusing to leave and giving their own individual notice, a mandatory step in the withdrawal process. In this scenario, the procedure is still unclear, but the Commission taking legal action against the member states is seen as a possibility.

Beyond the borders of the Union, the EU’s endeavour did not create unanimity either, and has yet to emulate other nations. For now, countries such as Switzerland and Japan have reiterated their support for the ECT. More worryingly, the departure from the pact will be far from instant and straightforward: the treaty contains a sunset clause that still allows lawsuits to be filed for twenty years after a member’s exit. For instance, in 2022, Italy was hit with a €190 million payment request, despite leaving the treaty in 2015, over a ban on Mediterranean oil drilling. Even if EU countries leaving the Energy Charter Treaty together should lower the risk of them being sued by companies based in other member states, certain contingencies will undoubtedly remain for the time being.