On 28 June2025, the European Union (EU) formally withdrew from the Energy Charter Treaty (ECT), a multilateral investment agreement designed to promote and protect foreign investment in the energy sector. This decision followed a European Parliament vote on 24 April 2024, which concluded that the ECT had become incompatible with the EU Green Deal, the Paris Agreement, and the Union’s long-term climate neutrality goals.

Despite years of debate over modernization efforts, the EU ultimately determined that the treaty, particularly its Investor-State Dispute Settlement (ISDS) mechanism and “sunset clause” posed significant risks. These provisions were seen as locking in fossil fuel investments and undermining the ability of states to shift their policies toward clean energy.

As part of the withdrawal arrangement, the EU clarified that existing investments made within its territory, and with respect to measures adopted by the EU and Euratom, would remain protected by the ECT until 28 June 2045. This 20-year extension reflects the treaty’s sunset clause, designed to shield investments made prior to withdrawal.

Although Tanzania is not a full signatory to the ECT, it has held observer status since 2015, alongside other East African Community (EAC) countries. This non-binding participation allowed Tanzania to engage in ECT dialogues and capacity-building processes, often seen as preparatory steps toward eventual accession. 

Tanzania’s decision now appears prudent in hindsight. Nevertheless, the country is not immune to the ripple effects of the EU’s departure, especially since many energy multinationals investing in Tanzania originate from EU member states and have historically relied on ECT protections to mitigate investment risks abroad.

Tanzania possesses an estimated 57.54 trillion cubic feet of recoverable natural gas reserves, with an annual production of 110 billion cubic feet from three major fields: Songo Songo, Mnazi Bay, and Kiliwani North. These largely offshore reserves represent one of the largest untapped gas deposits in sub-Saharan Africa. They have attracted substantial interest from international energy giants, including TotalEnergies (France), Equinor (Norway), and Shell (UK/Netherlands).

The Fallout and Critical Implications for Tanzania

For over a decade, Tanzania has pursued an ambitious gas-based industrialization agenda. Central to this vision is the proposed multi-billion-dollar Liquefied Natural Gas (LNG) export terminal in Lindi. These projects rely heavily on foreign capital, technology, and market access—much of which has traditionally come from European investors. With the EU’s withdrawal from the ECT, the legal landscape for these investors is changing, potentially affecting their willingness to commit to long-term, capital-intensive ventures.

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The ECT served as a key instrument for European investors seeking legal certainty when investing in fossil fuel projects in non-EU countries. Its absence could now reduce appetite for major infrastructure investments in places like Tanzania. While some protections may still be provided through bilateral investment treaties (BITs), these do not offer the same multilateral scope and enforceability as the ECT.

The impact will likely be most acute for fossil fuel-backed projects. The ECT was often used as a legal shield for such investments, even amid shifting regulatory priorities or political transitions. With Europe stepping away from these protections, fossil fuel investments may face increased scrutiny, stricter Environmental, Social, and Governance (ESG) requirements, and growing pressure to align with net-zero targets.

Tanzania must also prepare for a broader shift in global energy diplomacy. The EU’s move signals a transition away from fossil fuel investment protections in favor of frameworks that support renewable energy, carbon trading, and green finance. While Asian investors—particularly from China and India—may step in to fill some of the emerging gaps, this shift represents a long-term realignment of global capital flows.

Still, this moment presents an opportunity for reform. The absence of binding ECT obligations gives Tanzania the space to strengthen its domestic legal and regulatory environment. A more robust investment framework that provides clarity and predictability to investors while safeguarding national interests and environmental goals—could enhance the country’s attractiveness to a new generation of sustainable investors.

Reforms could include a thorough review of outdated Production Sharing Agreements (PSAs), alignment with international best practices on energy transition policy, and the establishment of strong benefit-sharing mechanisms for local communities. A forward-looking legal architecture would help position Tanzania not only as a resource-rich country, but also as a responsible and competitive energy partner on the global stage.

 Strategic Choices for Tanzania

The EU’s withdrawal from the ECT—driven largely by climate concerns—raises fundamental questions for countries like Tanzania, where fossil fuels remain central to economic development. It creates a policy dilemma: should Tanzania curtail gas exploitation in the name of global climate solidarity, or harness its natural gas resources for industrial transformation while gradually transitioning to a greener energy mix?

The answer lies in pragmatic, negotiated policy decisions—not in isolation or reactionary measures. The government must seize this moment to accelerate finalization of the LNG framework agreement and ensure that it incorporates modern principles of sustainability, transparency, and local content. It must also reassess and, if necessary, renegotiate all energy-related BITs, particularly those with EU countries, to manage legal exposure and align them with Tanzania’s strategic priorities.

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Moreover, Tanzania should begin engaging with new models of energy governance, including climate-aligned trade frameworks, carbon finance initiatives, and green hydrogen partnerships. Investment in domestic capacity for negotiation and dispute resolution will also be critical, especially as the global legitimacy of the ISDS mechanism continues to erode.

The ECT may be fading from the global investment scene, but the questions it raised remain. How do countries like Tanzania balance energy sovereignty, investor protection, environmental justice, and equitable development? The EU’s exit is not a crisis for Tanzania—it is a wake-up call. It offers a rare opportunity to rethink, reform, and recalibrate the country’s energy investment strategy for the challenges and opportunities of a changing world.

Baraka Thomas is a legal expert. He can be reached at barakathomas50@gmail.com or on X (Twitter) as @BarakaMasubo. The opinions expressed here are the writer’s own views and do not necessarily reflect those of The Chanzo. If you are interested in publishing in this space, please contact our editors at editor@thechanzo.com.