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THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty on the Functioning of the European Union, and in particular Article 194 thereof,Having regard to the proposal from the European Commission,After transmission of the draft legislative act to the national parliaments,Having regard to the opinion of the European Economic and Social Committeenote,After consulting the Committee of the Regions,Acting in accordance with the ordinary legislative procedurenote,Whereas:
(1)In its judgment of 2 September 2021 in case C-741/19note, Republic of Moldova v Komstroy (the ‘Komstroy judgment’), the Court of Justice of the European Union (CJEU) held that Article 26(2), point (c), of the Energy Charter Treaty, approved on behalf of the European Communities by Council and Commission Decision 98/181/EC, ECSC, Euratomnote, is to be interpreted as not being applicable to disputes between a Member State and an investor of another Member State concerning an investment made by that investor in the first Member State, i.e. intra-EU disputes.
(2)Despite the Komstroy judgment, arbitral tribunals have continued to accept jurisdiction and to issue awards in intra-EU arbitration proceedings which are purportedly based on Article 26(2), point (c), of the Energy Charter Treaty. According to the CJEU, any such award is incompatible with Union law, in particular Articles 267 and 344 of the Treaty on the Functioning of the European Union. Therefore, such awards cannot produce legal effects and the payment of compensation further to those awards cannot be enforced.
(3)The effective implementation of Union law is being undermined by the issuing of awards violating Union law in intra-EU arbitration proceedings. There is a risk of a conflict between the Treaties, on the one hand, and the Energy Charter Treaty as interpreted by some arbitral tribunals, on the other, which would, if confirmed by the courts of a third country, become a de facto legal conflict where such awards were circulating in the legal orders of third countries.
(4)According to the case law of the CJEU, the risk of a legal conflict is sufficient to render an international agreement incompatible with Union law. The risk of such a conflict between the Treaties and the Energy Charter Treaty should therefore be eliminated. The adoption of an instrument of international law, in the form of an agreement setting out the common understanding of the parties to that agreement on the non-applicability of Article 26 of the Energy Charter Treaty as a basis for intra-EU arbitration proceedings, would help to eliminate that risk.
(5)The Commission, on behalf of the Union, and the Member States have concluded negotiations on the terms of an agreement on the interpretation and application of the Energy Charter Treaty. The common understanding contained in that agreement has been reiterated in the ‘Declaration on the legal consequences of the judgment of the Court of Justice in Komstroy and common understanding on the non-applicability of Article 26 of the Energy Charter Treaty as a basis for intra-EU arbitration proceedings’ of 26 June 2024note.
(6)The Agreement on the interpretation and application of the Energy Charter Treaty should therefore be approved in order to enable its signature by the Union and to express the Union’s consent to be bound by it,
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