5. International energy governance: energy charter treaty

Energy Charter is the most overarching multilateral framework of energy governance. The Energy Charter process started with the European Energy Charter initiated by the Dutch Presidency of the European Community in 1990. In December 1991, the European Charter Declaration was adopted with the aim of bringing about a new East-West economic relationship. Three years later, the Declaration evolved into a binding Treaty. The ECT represents the first international regime in energy trade and transit. The ECT’s multilateral investment protection represents a positive move toward the unification of energy investment protection governance. The scope of the investment provisions covers fair and equitable treatment, ‘constant protection and security’ for investors as well as an obligation to respect any contractual arrangement.

In spite of its goal to forge a global energy governance framework, the geographical scope of the ECT remains rather limited. Several energy export-oriented states have rejected the Treaty, including Organization for Petroleum Exporting Countries members, Norway and Australia. Moreover the United States, which is one of the biggest energy importers in the world, has distanced itself from the process since the beginning of the Treaty negotiations.

Although EU-Russia energy relations are characterized by positive interdependency for the most part, negative interdependency developed in the gas sector. As a result, the gas transit crisis of 2009 between Russia and Ukraine accelerated risk perceptions vis-à-vis Russian gas supplies to Europe. Likewise, the process of liberalization of gas markets in Europe provokes strong opposition from Russia because of supply-capacity mismatch risks.

Following the crisis of 2009, Russia terminated the provisional application of the Treaty, meaning a temporary application without a ratification of provisions as far as they do not contradict national laws and Constitution. Russia is still a contracting signatory party (did not become an observer) and participates in the process.

Russia’s Draft Convention on Energy Security proposed in 2010 is rather part of the Energy Charter, whereas the Energy Charter Secretariat is the only organization who took this document into account.

Although the EU has its own legal difficulties with the Treaty because of the Internal Energy Market, the ECT is fully applicable in the EU Member States. There is an increased interest on behalf of investors to use the ECT to protect their energy investments in the EU. Hence, the process continues in spite of Russia’s political declarations.

High level of politicization (or securitization) can be one of the causes for the multilateral weakness.

Prof Andrey Konoplyanik is one of the architects of the Energy Charter process, and has been a Deputy Secretary General of the Energy Charter Secretariat from 2002 to 2007. His deep knowledge of energy sector in general and the Energy Charter process in particular depicts a useful picture of the main purposes of the international energy governance.

Prof Andrey Konoplyanik, "Energy Charter Process: multilateral governance for trade, transit and investments."

Obligatory learning material

Webpage of the Energy Charter Secretariat: www.encharter.org

[Study this webpage and focus on main provisions on investment protection, main State-investors disputes, Draft Transit Protocol]

Optional learning materials

Webpage of the Professor Andrey Konoplyanik: www.konoplyanik.ru/en

Belyi, S. Nappert, V Pogoretski, "Modernising the Energy Charter Process? The Energy Charter Conference Road Map and the Russian Draft Convention on Energy Security", Journal of Energy and Natural Resource Law, 2011, pp. 383-399

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