THE AUTHOR:
Lenora D’Souza, Master’s Student in Economic Law, Sciences Po Paris
Introduction
For nearly three decades, the Energy Charter Treaty (“ECT”) was the backbone of investment protection in the energy sector, giving investors in oil, gas, and power projects a multilateral route to sue host states directly before an international tribunal. That backbone has now been fractured. Between a landmark ruling of the Court of Justice of the European Union (“CJEU”), a coordinated wave of state withdrawals, and a stalled modernisation process, the ECT investors relied on in 2020 is not the treaty they are left with in 2026. What replaces it is a fragmented, jurisdiction-dependent patchwork, and understanding it has become essential for anyone advising on cross-border energy investment.
The Unravelling of a Cornerstone Treaty
The first crack came from Luxembourg, not from a Contracting Party. In Achmea v. Slovakia (I), the CJEU held that investor-state arbitration clauses in intra-EU bilateral investment treaties (“BITs”) were incompatible with EU law, on the basis that they let arbitral tribunals rule on matters of EU law outside the EU’s own judicial system. Three years later, the Court extended that logic to the ECT itself. In Republic of Moldova v. Komstroy (2021), the CJEU ruled that Article 26(2)(c) of the ECT (the treaty’s investor-state arbitration mechanism) does not apply to disputes between an investor from one EU Member State and another EU Member State.
Komstroy gave the European Commission the legal hook it needed to move against the treaty altogether. Rather than waiting for case-by-case annulments, the EU pursued what it called a “coordinated withdrawal”. France, Germany, and Poland exited in December 2023, followed by Luxembourg in June 2024 and Slovenia in October 2024. On 30 May 2024, the Council formally approved the withdrawal of the EU and Euratom, which took effect on 28 June 2025, with the Netherlands withdrawing on the same date. Portugal, Spain, and the United Kingdom followed between February and April 2025. The UK’s exit is notable because it came from outside the EU bloc entirely: London withdrew after concluding that the treaty could not be reconciled with its net-zero commitments, a rationale distinct from, but overlapping with, the EU’s own reasoning. Alongside the withdrawal, 26 Member States and the EU signed a declaration in June 2024 affirming that Article 26 does not apply to intra-EU proceedings, intended to pre-empt any tribunal that might read Komstroy differently.
A Fragmented, Contested Landscape
None of this has produced a clean break. Article 47(3) of the ECT contains a sunset clause: investments made before a state’s withdrawal takes effect remain protected under the treaty for a further 20 years. That means claims by investors with pre-withdrawal investments in France, Germany, or the UK can, in principle, still be brought for two more decades against the very states that left partly to escape this exposure.
The picture gets messier still at the treaty’s edges. In December 2024, the Energy Charter Conference adopted long-delayed amendments to modernise the treaty, including a revised Annex NI that strips protection from new fossil fuel investments made after 3 September 2025 and shortens the sunset period for pre-existing fossil investments to 10 years, for parties that actually ratify the amended text. Because the EU and UK left before the modernised treaty entered into force for them, it remains genuinely unsettled which sunset period, if any, governs fossil fuel investments made in those jurisdictions during the transition. Practitioners are warning that this ambiguity will land squarely in arbitrators’ laps in the coming years.
Tribunals, meanwhile, have not applied Komstroy uniformly. ICSID tribunals operate outside the EU legal order and have largely continued to accept jurisdiction over intra-EU ECT claims.
In Infracapital v Spain (ICSID Case No. ARB/16/18), the tribunal dismissed Spain’s request to reconsider jurisdiction, calling Komstroy “entirely irrelevant” to its findings. In Sevilla Beheer v Spain, the tribunal similarly held it was not bound by Komstroy and was unpersuaded by its reasoning on Article 26 ECT. English courts reinforced this divergence at the enforcement stage: in Infrastructure Services Luxembourg (formerly Antin) v Spain, the High Court held that the CJEU “is not the ultimate arbiter under the ICSID Convention, nor under the ECT”, refusing to let Spain rely on Achmea or Komstroy to resist enforcement.
That trend was not absolute, and it has since fractured further. The Stockholm-seated Green Power v Spain SCC tribunal accepted the intra-EU objection back in 2022, precisely because it was seated within the EU. Then, on 11 October 2024, two ICSID tribunals — in claims brought by Sapec S.A. and European Solar Farms A/S against Spain — upheld the intra-EU objection for the first time, reasoning that Article 26 ECT does not contain a valid standing offer to arbitrate between an EU Member State and an EU investor. The result is close to a jurisdictional lottery: outcomes now turn heavily on the seat of arbitration and the specific tribunal, with the Stockholm Chamber of Commerce announcing in October 2024 that it would favour non-EU seats for intra-EU investment disputes specifically to protect the enforceability of resulting awards.
Seventeen EU countries, together with non-EU Contracting Parties including Switzerland, Japan, Türkiye, and states across the Western Balkans and the former USSR, remain ECT members, meaning the treaty has not disappeared so much as split into a smaller, geographically shifted club.
What Options Remain
For investors and counsel navigating this landscape, several routes remain open, each with real limitations:
- Sunset-clause claims. Investments made before a state’s withdrawal took effect can still, in principle, be protected for up to 20 years post-exit, though intra-EU claims face the added hurdle of the Komstroy carve-out and the 2024 declaration, making the forum and seat of arbitration decisive to a claim’s prospects.
- The modernised treaty for remaining parties. States that stay in the ECT and ratify the 2024 amendments will operate under “ECT 2.0”, a narrower instrument that excludes new fossil fuel protection but preserves the ISDS mechanism for renewables, power, and other covered investments.
- Bilateral investment treaties. Where the ECT falls away, an investor’s home-state BIT with the host state may fill the gap. The UK, for instance, retains 85 BITs in force, overlapping with roughly 20 of the 50 ECT Contracting Parties, a meaningful but partial safety net that has to be checked treaty-by-treaty.
- Contractual and domestic protections. In the absence of treaty coverage, investors are leaning more heavily on stabilisation clauses, choice-of-law provisions, and international arbitration clauses embedded directly in project contracts, alongside host-state domestic investment laws. These are generally considered less robust than treaty-based protection and harder to enforce across borders, but they are increasingly the primary line of defence for new projects in withdrawing states.
- Corporate structuring. Some investors are restructuring holdings to route investments through jurisdictions that retain treaty coverage. Regulators and tribunals are alert to this, and commentators have flagged the risk that restructuring undertaken principally to access protection may be scrutinised as treaty shopping rather than accepted as a legitimate structuring choice.
The Practical Takeaway
The ECT has not been dismantled so much as regionalised and complicated. For energy investors, the question is no longer simply “does the ECT apply?” but a layered analysis: what is the investment’s vintage, which state hosts it, has that state ratified the modernised text, does an alternative BIT exist. And, critically, where would a claim be seated and which institution would hear it, given that tribunals have not converged on a single answer to Komstroy’s reach. For arbitration counsel, this fragmentation is not a footnote to energy disputes practice; it is becoming the practice itself, and the coming years of sunset-clause claims and modernised-treaty test cases are likely to define how far investor protection in the energy sector actually extends.
ABOUT THE AUTHOR
Lenora D’Souza is a Master’s Student in Economic Law at Sciences Po Paris, specialising in International Arbitration and Business Law through a joint programme with Columbia Law School and Université Paris 1 Panthéon-Sorbonne. Her research and professional interests centre on energy law, with a particular focus on the GCC and wider MENA region, where she grew up. She aims to specialise in energy-sector arbitration, bridging commercial and regulatory perspectives on evolving energy markets.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
