In October of 1999, the Catholic Church and the Lutheran World Federation signed a document known as the Joint Declaration on the Doctrine of Justification (JD).
Neither Catholics nor Lutherans retracted their positions on justification. The document that both signed clarified one.aspect of justification that both sides could agree to, with the hope that more dialogue and agreements will follow in years to come.
Lutherans have been suspicious for a long time that the Church’s discussion of good works means that one must do good works in order to enter a state of justification. But the Catholic Church has never taught this. In Catholic teaching, one is not capable of doing supernaturally good works outside of a state of justification because one does not have the virtue of charity in one’s soul--the thing that makes good works good. Consequently, the Council of Trent taught "none of those things that precede justification, whether faith or works, merit the grace of justification" (JD 8).
The Joint Declaration stressed that good works are a consequence of entering a state of justification and can never be the cause of entering it:
We confess together that good works—a Christian life lived in faith, hope, and love—follow justification and are its fruits. When the justified live in Christ and act in the grace they receive, they bring forth, in biblical terms, good fruit. . . .
When Catholics affirm the "meritorious" character of good works, they wish to say that, according to the biblical witness, a reward in heaven is promised to these works. Their intention is to emphasize the responsibility of persons for their actions, not to contest the character of those works as gifts, or far less to deny that justification always remains the unmerited gift of grace. (JD 37–38)
The document points out that, "It does not cover all that either church teaches about justification; it does encompass a consensus on basic truths of the doctrine of justification and shows that the remaining differences in its explication are no longer the occasion for doctrinal condemnations" (JD 5).