The UK has formally notified its withdrawal from the Energy Charter Treaty (ECT), the multilateral treaty covering the energy sector. The treaty was designed to promote energy security through the operation of more open and competitive energy markets, and provides a framework under which qualifying investors may bring claims against Contracting Parties for breach of its investment protection provisions. The UK's 26 April 2024 withdrawal notification was announced on 28 May 2024 by the ECT Secretariat.
The UK's withdrawal will take effect on 27 April 2025, one year after formal receipt of the UK’s withdrawal notification by the ECT Depository. The ECT's so-called "sunset clause" states that the ECT's provisions continue to apply to qualifying investments hosted by a withdrawing Contracting Party, or made by qualifying investors of that Contracting Party, for a period of 20 years from the effective date of withdrawal.
As noted in our previous post (here), the UK's withdrawal comes after a process to modernise the ECT has faltered. A number of EU Member States have also signalled their intention to withdraw from the ECT, some of which have already taken formal steps to withdraw. Following Italy in 2016, the withdrawals of France, Germany, and Poland all became effective last year. Additionally, the withdrawals of Luxembourg and Slovenia are set to become effective in 2024, and those of Portugal and Spain in 2025.
Comment
The UK's withdrawal from the ECT comes amidst recent EU developments concerning the ECT and the modernisation process.
On 30 May 2024, the Council of the EU gave its final approval to the withdrawal of the EU, itself an ECT Contracting Party, from the ECT (available here). This followed the April 2024 vote of the European Parliament in favour of the EU withdrawal. The Council of the EU also adopted a decision to the effect that the EU and its Member States which remain ECT Contracting Parties will not obstruct the adoption of a modernised ECT framework at the next Energy Charter Conference (available here).
If you would like to discuss the impact of the UK's withdrawal decision on your business or investment plans, please contact Andrew Cannon, Partner, Hannah Ambrose, Partner, Jefferi Hamzah Sendut, Associate, or your usual HSF contact.
Key contacts
Andrew Cannon
Partner, Global Co-Head of International Arbitration and of Public International Law, London
Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.