Earlier last week, the European Commission took the next step in its infringement proceedings against Hungary, referring the country to the Court of Justice of the European Union (CJEU) over its stance on intra-EU investor-State arbitration under the Energy Charter Treaty (ECT). The move, presented as a defense of legal uniformity within the EU, underscores a persistent and perhaps growing rift between Brussels’ expansive interpretation of Union law and Member States’ ability to navigate complex international legal frameworks in their own right.

At the heart of this matter lies the CJEU’s judgment in Case C-741/19 – République de Moldavie (“the Komstroy judgment”), in which the CJEU concluded that the arbitration clause in the ECT does not apply to disputes between EU investors and EU Member States. This interpretation forms the foundation of the EU’s current legal position, namely that such arbitration provisions are (and have always been) incompatible with Union law.

To solidify this interpretation, the EU and 26 Member States adopted a Declaration in June 2024 asserting that intra-EU arbitration under the ECT has never been valid. Hungary, however, adopted its own declaration clarifying that it does not share this retroactive reading. In Hungary’s view, the Komstroy judgment applies prospectively, and only once the ECT itself is amended. It is this position that the Commission now frames as a breach of EU law — and the reason for taking Hungary to the CJEU.

According to the Commission, Hungary’s unilateral declaration directly contradicts both the Komstroy judgment and the EU’s collective position vis-à-vis arbitral tribunals and courts of third countries. In the Commission’s view, Hungary is also in breach of the duty of sincere cooperation, as well as the general principles of autonomy, primacy, effectiveness, and uniform application of Union law.

While the Commission is entitled — and arguably obligated — to uphold, and defend the integrity of, EU law, the referral raises broader concerns about the tone and trajectory of EU legal governance. Hungary’s declaration, while diverging from the Commission’s interpretation, does not reject the Komstroy judgment outright. Rather, it reflects a plausible legal position grounded in international treaty law that considers the temporal limits of judicial interpretation and respects the still-operative text of the ECT.

This kind of nuance has been largely absent from the Commission’s narrative. As we previously argued, the EU’s approach risks sidelining international law principles in favor of an ever-expanding view of Union legal primacy. That approach may win in an EU court — but at what cost to legal legitimacy, internal cohesion, and the EU’s credibility on the international stage?

Ironically, the Commission’s aggressive enforcement comes even as the EU is actively exiting the ECT. The Union formally notified its withdrawal in June 2024 (with the withdrawal taking effect in June 2025), citing climate policy and legal incompatibility as key reasons. Yet while the EU distances itself from the ECT in substance, it continues to pursue infringement proceedings over its interpretation. Apparently, the ECT is no longer fit for purpose, but it is still worth litigating against Member States.

The Commission’s infringement proceedings against Hungary have ramifications beyond the dispute itself. They raise deeper questions about how the EU balances its central authority and autonomy with Member State sovereignty in complex areas like investment arbitration. Rather than using this moment to foster constructive legal dialogue on the evolving relationship between EU law and international commitments, the Commission has chosen a path of litigation and legal absolutism.

Whether the CJEU upholds the Commission’s position or not, the broader challenge remains: finding space within the Union for legal complexity, interpretive plurality, and respect for international legal traditions that don’t always conform neatly to a fully autonomous concept of the EU legal order.

For further context and our earlier analysis of the Commission’s legal approach, see our related article: The Commission’s Legal Overreach: Infringement Proceedings Against Hungary and the Ignored International Law.

By Maria Paschou and Dániel Dózsa