EU Denies Energy Charter Treaty Benefits to Russian and Belarusian Investors

On June 25, 2024, the European Union (EU) made a significant decision regarding the Energy Charter Treaty (ECT). This move aims to protect the EU and its member states from potential legal challenges related to sanctions against Russia and Belarus. Here's what you need to know:

1. What is the Energy Charter Treaty? The ECT is an international agreement that provides protection for foreign investments in the energy sector. It allows investors to sue countries if they believe their investments have been unfairly treated.

2. What did the EU decide? The EU has chosen to deny the benefits of Part III of the ECT to: a) Legal entities owned or controlled by Russian or Belarusian citizens that don't have substantial business activities in the country where they're registered. b) Investments made by Russian or Belarusian investors.

3. Why was this decision made? The EU has imposed various sanctions on Russia and Belarus due to Russia's war against Ukraine and Belarus's involvement. This decision aims to prevent Russian and Belarusian investors from using the ECT to challenge these sanctions through legal action.

4. How will this be implemented? The European Commission will circulate a declaration within the Energy Charter Conference on behalf of the EU, Euratom, and relevant member states.

5. What does this mean for affected investors? Russian and Belarusian investors, or companies controlled by them, will no longer be able to use the ECT's investment protection provisions to bring claims against the EU or its member states.

6. Is this a permanent decision? While the decision doesn't have an expiration date, it's tied to the ongoing sanctions against Russia and Belarus. The EU and its member states retain the right to invoke this denial of benefits separately and at any appropriate time.

This decision reflects the EU's ongoing efforts to maintain the effectiveness of its sanctions regime and protect itself from potential legal challenges related to these measures. It's an important development in the complex landscape of international energy investments and geopolitical relations.

Source: Council Decision (EU) 2024/1852 of 25 June 2024 on the denial of advantages under Part III of the Energy Charter Treaty by the Union to any legal entity that is owned or controlled by citizens or nationals of the Russian Federation or of the Republic of Belarus and to any investment within the meaning of the Energy Charter Treaty which is an investment of an investor of the Russian Federation or of the Republic of Belarus

Patrick Goergen - 5 July 2024