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More Countries Signal Intention to Withdraw from the Energy Charter Treaty – Why Now?

On November 18, 2022, Luxembourg became the seventh country to announce plans to withdraw from the Energy Charter Treaty (ECT), following in the footsteps of Poland, Spain, the Netherlands, France, Slovenia, and Germany.

The ECT is a multilateral framework agreement for energy cooperation that is unique under international law. It was created to promote energy security through the operation of more open and competitive energy markets. The agreement to establish the ECT was signed in Lisbon in 1994. Since then, 51 members, including predominantly European countries and the European Union, have ratified the ECT. Additionally, 15 countries, including the United States, Indonesia, and Australia, participate as observers.

Recently, there has been a growing wave of countries signaling their intention to pull out of the ECT. These countries are predominantly citing concerns stemming from the ECT’s Investor-State Dispute Resolution mechanism. There are also environmental concerns, specifically that the ECT is frustrating aggressive efforts against climate change through its protection of foreign fossil fuel investments and is incompatible with the Paris Climate Agreement.

Another contributing factor appears to be the Russian war against Ukraine and, particularly, its impact on Europe’s energy supply, which is causing some countries to rethink their reliance on traditional fossil fuels.

The ability of ECT Parties to withdraw from the agreement raises important questions. Under the treaty’s terms, member states can only exit because of “fundamental changes of circumstances.” It remains to be seen whether the withdrawing states will be required to demonstrate that such changes have occurred and, if so, how. Further, the ECT contains a 20-year sunset provision, according to which the treaty takes effect for an additional period of 20 years after a party withdraws from the treaty. However, given the number of members withdrawing, an amendment or bilateral or trilateral agreement to waive the 20-year sunset provision may be in the cards.

© 2023 ArentFox Schiff LLPNational Law Review, Volume XII, Number 341
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About this Author

Timothy J. Feighery Attorney Arbitration ArentFox Schiff Washington DC
International Arbitration & Dispute Resolution Practice Co-Leader

Tim is a partner in our Washington, DC office and co-leader of the firm’s International Arbitration & Dispute Resolution practice.

Tim’s practice focuses on international arbitration, international claims, and dispute resolution work, including the representation of sovereign states, investors, and private parties in international commercial transactions. Current active matters include: representation of US investors in investment dispute brought under the US-Colombia Trade Promotion Agreement; representation of Sovereign in two separate...

202-857-6085
Lee Caplan Arbitration Attorney ArentFox Schiff Washington DC
International Arbitration & Dispute Resolution Practice Co-Leader

Lee is a partner in our Washington, DC office and co-leader of the firm’s International Arbitration & Dispute Resolution practice.

Lee counsels private and sovereign clients in a wide range of matters involving international dispute resolution, public international law, and international investment law and policy. He regularly appears before international tribunals in connection with complex and high-value disputes arising out of concession agreements, investment treaties, and other international agreements. Lee's experience spans a range of...

202-857-6337
Associate

Maya has a background in international arbitration, international investment law, and complex litigation with experience in the U.S., Europe, and within international organizations.

Prior to returning to ArentFox Schiff, Maya worked previously at a boutique complex litigation firm, the Department of Health and Human Services, Brooklyn Defenders Services, the Office of the High Commissioner of Human Rights, the International Residual Mechanism for the Criminal Tribunals, and the U.S. Embassy in Paris, France.

202-350-3664
Derek Ha San Francisco International Trade Attorney ArentFox Schiff
Associate

Derek is an Associate at ArentFox Schiff, based in the San Francisco office.

Prior to joining ArentFox Schiff, Derek worked at an education start-up in China and was a paralegal in one of the country’s largest immigration law firms. During law school, he received the Prosser Award in Advanced Legal Writing, and he was an associate editor for the California Law Review and the Asian American Law Journal. His pro bono experience includes work in unlawful detainer defense, affirmative asylum, and LGBTQ rights impact litigation....

415-757-5897
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