Energy Charter Treaty
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| Energy Charter | |
|---|---|
| Formation | 1991 |
| Type | Intergovernmental organization |
| Headquarters | Brussels, Belgium |
| Secretary General | Urban Rusnák |
| Deputy Secretary General | Vladimir Rakhmanin |
| Chairman | Selim Kuneralp |
| Vice Chairmen | Anatoliy Yanovskiy, Odd Sverre Haraldsen |
| Main organ | Energy Charter Conference |
| Website | http://www.encharter.org/ |
The Energy Charter Treaty (ECT) is an international agreement which provides a multilateral framework for energy trade, transit and investments. Originally, the Energy Charter process based on integrating the energy sectors of the Soviet Union and Eastern Europe at the end of the Cold War into the broader European and world markets.
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[edit] History
The original Energy Charter declaration was signed in the Hague on 17 December 1991. It was a political declaration of principles for international energy including trade, transit and investment, together with the intention to negotiate a legally-binding treaty.[1]
The legally-binding treaty was signed in Lisbon in December 1994, together with a Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA). The treaty and the protocol came into effect in April 1998; an amendment to the trade-related provisions reflecting the change from the General Agreement on Tariffs and Trade (GATT) to World Trade Organization (WTO) processes was also agreed that month.[1]
In December 2007, the Energy Charter Conference reaffirmed its support for the finalisation of negotiations and adoption of the Energy Charter Protocol on Transit in order to expand the existing provisions of the treaty. In this context, the conference resolved to ask the Energy Charter Group on Trade and Transit to return to multilateral consultations on the draft Transit Protocol during 2008, with a report back to the Conference on the outcome of these consultations at the end of 2008.[citation needed]
on 22 March 2010, a Strategy Group was established with a mandate to promote modernisation.
[edit] Scope
The Treaty's provisions focus on four broad areas:
- the protection of foreign investments, based on the extension of national treatment or most-favoured nation treatment (whichever is more favourable) and protection against key non-commercial risks;
- non-discriminatory conditions for trade in energy materials, products and energy-related equipment based on WTO rules, and provisions to ensure reliable cross-border energy transit flows through pipelines, grids and other means of transportation;
- the resolution of disputes between participating countries, and in the case of investments between investors and host countries;
- the promotion of energy efficiency, and attempts to minimise the environmental impact of energy production and use.[citation needed]
The Energy Charter Treaty includes an obligation of member countries to facilitate energy transit across their territory, in line with the principle of freedom of transit, and to secure established transit flows. At the same time, the treaty provisions do not oblige any country to introduce mandatory third party access.[citation needed]
While the Energy Charter is based on the idea that international flows of investments and technologies in the energy sector are mutually beneficial, national sovereignty over energy resources is a core principle of the treaty (ECT Article 18). An objective of the treaty is to promote transparency and efficiency in the operation of energy markets, but it is for governments to define the structure of their national energy sector. Each country is free to decide whether and how its national energy resources are developed, and also the extent to which its energy sector is open to foreign investors. The treaty does not deal with the ownership issues of the energy companies–there is no obligation to privatise state-owned energy companies, or to break up vertically integrated energy companies.[citation needed]
[edit] Transit Protocol
The Energy Charter Transit Protocol is a draft protocol which negotiations are not finalized yet. The protocol would amplify and strengthen ECT provisions on energy transit issues in order to mitigate some specific operational risks that continue to affect energy transit flows. Negotiations on the text of the Transit Protocol began in early 2000 and a compromise text reflecting a continued discussion between the European Union and Russia was tabled for adoption at the meeting of the Energy Charter Conference on 10 December 2003. However, it became clear at this meeting that a unanimous decision could not be achieved on the basis of the compromise text; a complicating factor was that energy issues, including transit, were also a subject on the bilateral agenda for the European Union and Russia in the context of Russian negotiations for accession to the World Trade Organisation. The Protocol negotiations were temporarily suspended. The suspension was lifted in 2004 after Russia and the EU reached agreement on the terms of Russian WTO accession; further bilateral consultations between the EU and Russia had taken place since the autumn of 2004.
[edit] Membership
The treaty has been signed or acceded to by fifty-one countries and the European Union. All members have ratified the Treaty except for Australia, Belarus, Iceland, Norway, and Russia. Belarus has accepted provisional application of the Treaty, which means that it applies the Treaty to the extent that it is consistent with its own constitutions, laws and regulations.
There are four levels of participation that a state could have, depending on the instruments applied (marking noted in brackets):
- Organization of the Energy Charter Conference[2] member or observer that is not yet party to the 1991 Energy Charter (O)
- some of these states have begun, but not yet finished the process of adopting the 1991 Charter (O+)
- 1991 Energy Charter[3] signatory state (OC)
- some of these states have begun, but not yet finished the process of ratifying the 1994 Treaty and Protocol (OC+)
- 1994 Energy Charter Treaty[4] and Protocol[5] ratifier state (OCT)
- some of these states have begun, but not yet finished the process of ratifying the 1998 Amendment (OCT+)
- 1998 Trade Amendment[6] ratifier state (OCTA)
[edit] Members of the Energy Charter Conference
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Note: * - denotes state provisionally applying signed, but not yet ratified instruments
[edit] Observers
Twenty four states and ten international organisations have the status of observers to the Energy Charter. Observers have the right to attend all Charter meetings and to receive all related documentation, reports and analysis, and to participate in the working debates taking place within the Energy Charter. The intention is that observer status should provide the chance for a country to familiarise itself with the Charter and its functions, in order to facilitate its assessment of the benefits of accession to the Energy Charter Treaty.
[edit] Countries
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[edit] International organisations
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[edit] Russian participation
Russia signed the treaty and applied it provisionally but failed to ratify it. It linked the ratification of the ECT to negotiations on an Energy Charter Transit Protocol. In December 2006, Russia indicated that the ratification of the ECT was unlikely due to the provisions requiring third-party access to Russia's pipelines.[10] On 20 August 2009, it officially informed the depository of the treaty (Government of Portugal) that it did not intend to become a contracting party to the treaty and the related protocol terminating the provisional application of the ECT and the PEEREA starting from 18 October 2009.[11]
Notwithstanding the termination of provisional application of the ECT by Russia, the provisions regarding dispute settlements and investment protection are still in force for additional twenty years. On 30 November 2009, the Permanent Court of Arbitration in The Hague, which had been considering this case since 2005 under the UNCITRAL Rules, ruled that former Yukos shareholders can move on to the merits phase of their arbitration claim against the Russian government.[11]
[edit] Energy Charter Conference
All members are represented in the Energy Charter Conference and its subsidiary bodies. The conference is the organisation's governing and decision-making body which meets on a regular basis to discuss issues affecting energy cooperation among the Treaty members, to review the implementation of ECT and PEEREA provisions, and to consider possible new instruments and joint activities within the Energy Charter framework. Starting from 7 April 2010, the chairman of the Energy Charter Conference is Ambassador of Turkey Selim Kuneralp.[12] The vice-chairmen are Anatoliy Yanovskiy, Russian Federation, and Odd Sverre Haraldsen, Norway. The Energy Charter Conference has following subsidiary bodies:
- Strategy Group
- Investment Group
- Trade and Transit Group
- Working Group on Energy Efficiency and Related Environmental Aspects
- Budget Committee
- Legal Advisory Committee
Additionally, a consultative board – the Industry Advisory Panel – presents the private sector's views on relevant issues related to energy investments, cross-border flows and energy efficiency to the Conference and its Groups.
The Legal Advisory Task Force was set up by the Energy Charter Secretariat in 2001 to assist in the drafting of balanced and legally coherent Model Agreements for cross-border oil and gas pipelines.
[edit] Secretariat
The Energy Charter Conference is served by a Secretariat based in Brussels. The Secretariat's functions are:
- monitoring the implementation of ECT and PEEREA obligations
- organising and administering the meetings of the Conference and its subsidiary bodies
- providing analytical support and advice to the Conference and its subsidiary bodies
- representing the Conference in the development of its relations with non-member states, organisations and institutions
- supporting negotiations on new instruments mandated by the Conference
Since 1 January 2012, the Secretary General is Urban Rusnák. Vladimir Rakhmanin became Deputy Secretary General in July 2008.
[edit] Provisions on Dispute Resolution
Whereas Article 27 sets out the provisions for dispute resolution between two contracting states, Article 26 of the Energy Charter Treaty provides express provisions for resolving disputes arising under the Treaty between an investor of a Contracting State and another Contracting State. The choice of arbitration rules are:
- ICSID Rules
- ICSID Additional Facilities Rules
- UNCITRAL Ad hoc Rules
- The Arbitration Rules of the Stockholm Chamber of Commerce
The largest claims against Russia, pertaining to the Yukos decision, arise under the provisions of Article 26.
[edit] Settlement of Investor-State Disputes
The drafting of the Treaty has thrown up some difficult questions, such as:
- the standards of protection granted by the Treaty;
- the international responsibility of States for breaches of the Treaty;
- the various procedures available for the vindication of rights under the Treaty;
- the conditions to be satisfied before a claimant's complaint may be considered on the merits;
- the impact of EU law on claims under the Treaty; and
- the Treaty's provisions concerning taxation. [13]
[edit] See also
- Russia in the European energy sector
- Energy policy of the European Union
- Energy policy of Russia
- Energy Community
- INOGATE
[edit] References
- ^ a b Konoplyanik, Andrei; Wälde, Thomas (2006). "Energy Charter Treaty and its Role in International Energy" (PDF). Journal of Energy & Natural Resources Law (International Bar Association) 24 (4): 523–558. ISSN 0264-6811. http://konoplyanik.ru/ru/publications/articles/410-JENRL-11.2006.pdf. Retrieved 2010-05-08.
- ^ Organization of the Energy Charter Conference
- ^ 1991 Energy Charter
- ^ 1994 Energy Charter Treaty
- ^ Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA)
- ^ 1998 Trade amendment to the 1994 Energy Charter Treaty
- ^ Belarus provisionally applies the 1994 Treaty, Protocol and the 1998 Amendment.
- ^ Russia is former signatory of the 1994 Treaty and Protocol, provisionally applying them between 1994-2009
- ^ Letter of Understanding on Cooperative Activities between the Secretariats
- ^ Russia gets tough on energy sales to Europe: No foreign access to pipelines, official says, by Judy Dempsey, International Herald Tribune 12 December 2006
- ^ a b "Arbitration Panel Holds That the 1994 Energy Charter Treaty Protects Foreign Energy Sector Investments in Former Soviet Union" (PDF). Skadden, Arps, Slate, Meagher & Flom. 2010-02-05. https://www.skadden.com/content/Publications/Publications1978_0.pdf. Retrieved 2010-05-08.
- ^ "Kuneralp becomes new Chairman of Energy Charter Conference". TRT. 2010-04-08. http://www.trt.net.tr/trtinternational/en/newsDetail.aspx?HaberKodu=8c3aa3de-7374-4ad7-bc5a-3a0ecf70bb0b. Retrieved 2010-05-08.[dead link]
- ^ Thomas Roe, Matthew Happold and James Dingemans QC, Settlement of Investor-State Disputes under the Energy Charter Treaty (Cambridge: Cambridge University Press), 2011.
