2 The Energy Charter Treaty: An Overview

Abstract

This chapter provides an overview of the Energy Charter Treaty. Developed on the basis of the European Energy Charter of 1991, the Energy Charter Treaty is a multilateral treaty dealing with inter-governmental co-operation in the energy sector. It covers five broad areas in the energy sector: trade; investment protection; transit; environmental protection and energy efficiency; and settlement of disputes. The trade provisions of the Treaty were designed to import fundamental GATT principles, such as non-discrimination, national treatment, most-favoured-nation treatment, and transparency. The provisions on investment protection are found in Part III of the Treaty. In particular, Article 13 in Part III deals with expropriation, while Article 10 deals with various standards of treatment of foreign investments. The rules for facilitating transit of energy through the participating States are laid down in Article 7. The transit regime is based on freedom of transit and the principle of non-discrimination. Meanwhile, Article 19 of the ECT sets forth a number of ‘best efforts’ obligations of the Contracting Parties with respect to environmental protection and energy efficiency. Lastly, the ECT includes two binding dispute settlement mechanisms: investor-State arbitration for investment disputes (Article 26) and state-to-state arbitration for basically all disputes that may arise under the ECT (Article 27), with the exception for disputes concerning competition (Article 6(7)) and environment (Article 27(2)). The chapter then looks at the Energy Charter Conference, an inter-governmental organization established by the ECT and the governing and decision-making body for the Energy Charter Process.