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Veblen | 22 May 2025
Recent fossil fuel arbitration claims based on the ECT: the urgency of neutralizing the sunset clause
by Mathilde Dupré & Stéphanie Kpenou
Introduction
The Energy Charter Treaty (“ECT”), the most widely used investment treaty, has become highly
controversial for enabling investors to challenge national policies aimed at achieving climate goals
through its ISDS mechanism, leading to a phenomenon known as “regulatory chill”.1 Despite
modernization efforts initiated in 2009 - culminating in an agreement in principle in June 2022 and
formal adoption in December 2024, the treaty still fails to align with the Paris Climate Agreement,
according to the French High Council on Climate2 and the British Climate Change Committee3.
In 2022, the European Parliament described the ECT as an “outdated” instrument hindering EU climate
ambitions.4 In 2023, the European Commission asserted that the ECT was incompatible with initiatives
such as the EU Climate Law and proposed a coordinated EU withdrawal from the ECT.5 The EU
Parliament endorsed the Commission’s proposal on 11 April 20246 and the Council gave its final green
light on 30 May 2024.7
In parallel, several States (France, Germany, Poland, Luxembourg, Portugal, Slovenia, Spain, the
Netherlands, the United Kingdom and Denmark) have already officially exited or have announced their
intent to leave (Ireland, Lithuania) the ECT8.
Despite these advancements, the situation is not yet under control as many states remain members
of the ECT. For the latest who have notified their withdrawal, the decision only becomes effective after
12 months.
The ECT therefore continues to have a substantial impact as it serves as the basis for arbitral
proceedings, particularly within the fossil sector and including against EU Member States and even
the EU itself. Besides, its “sunset” clause9 will prolong its impacts as regards existing investments
for 20 more years, unless it is neutralized (see part 3).
Moreover, following the formal adoption of the modernized treaty on December 3, 2024, the
international Secretariat is likely to resume the process of geographic expansion, which had been put
on hold during the modernization process.
This note provides an overview of recent cases based on the ECT (including in the fossil fuel sector)
and shows the continuing harmful effects of the treaty on climate actions and the need to neutralize
the sunset clause.
