EU Formally Approves Agreement Clarifying Non-Application of the Energy Charter Treaty in Intra-EU Arbitration

On 19 September 2025, Decision (EU) 2025/1904 of the European Parliament and of the Council was published in the Official Journal of the European Union. The Decision formally approves the Agreement on the Interpretation and Application of the Energy Charter Treaty (“<span class="news-text_medium">ECT</span>”), adopted by the EU and its Member States (collectively, the Parties), with the exception of Hungary, in June 2024. The Decision will enter into force on 9 October 2025.

The Agreement reinforces the common understanding among the EU and its Member States that Article 26 of the ECT, the Treaty’s dispute resolution clause, neither provides nor ever could have provided a basis for intra-EU investment arbitration. It also confirms that the sunset clause in Article 47(3), which extends the Treaty’s protections for 20 years following a state’s withdrawal, has no effect within the EU and cannot prolong intra-EU arbitration rights.

The initiative follows the landmark judgment of the Court of Justice of the European Union (CJEU) in <span class="news-text_italic-underline">Republic of Moldova v Komstroy LLC (Case C-741/19, EU:C:2021:655)</span>, where the Court held that investment arbitrations between EU investors and EU member states under the ECT are incompatible with EU law. Despite this clear ruling, several arbitral tribunals constituted under the International Centre for Settlement of Investment Disputes (“<span class="news-text_medium">ICSID</span>”) Convention have continued to accept jurisdiction over intra-EU investment disputes, leading the EU to pursue this formal interpretative agreement to solidify its legal position.

The Agreement codifies three principal points:

1. Article 26 of the ECT cannot serve and never could have served, as a legal basis for intra-EU investment arbitration proceedings (Article 2(1)).
2. Article 47(3) of the ECT (the sunset clause) does not and never did, extend to intra-EU arbitration (Article 2(2)).
3. Neither Article 26 nor Article 47(3) produces any intra-EU legal effects (Article 2(3)).

While the Agreement settles the EU’s internal legal position, its external implications remain uncertain. It is not yet clear how tribunals or courts outside the EU, including those under the ICSID Convention, will respond to this development in ongoing or future enforcement proceedings.

Indeed, some non-EU jurisdictions have continued to recognise and enforce intra-EU ECT awards. Notably, in August 2025, the Federal Court of Australia upheld the enforceability of four ECT awards against Spain, reasoning that Australia, as a non-EU state, is not bound by the effects of EU law or the Komstroy judgment.

The publication of Decision (EU) 2025/1904 therefore represents a significant milestone in the EU’s long-running effort to eliminate intra-EU arbitration under the ECT, though its international reach and effectiveness will depend on how non-EU courts and tribunals respond in future proceedings.

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<span class="news-text_medium">Decision Reference:</span> Decision (EU) 2025/1904 of the European Parliament and of the Council of 10 September 2025 on the approval by the European Union of the Agreement on the Interpretation and Application of the Energy Charter Treaty, published in the Official Journal of the European Union on 19 September 2025 (entering into force on 9 October 2025).