Browsing by Subject "Energy Charter Treaty"

The Energy Charter Treaty (ECT) is one of the most frequently invoked international investment treaties. Characteristically to modern international investment law, it provides for investor-state dispute settlement (ISDS). The ECT is a multilateral treaty to which the EU, EU member states (with the exception of Italy) and several non-EU states are parties. Therefore, it entails the possibility of settling intra-EU disputes, that is disputes between EU based investors and EU member states, by international arbitration. Before the Treaty of Lisbon and the inclusion of foreign direct investment in the common commercial policy of the EU, international investment law was the main tool of investment policy in Europe. For decades, international law and EU law were able to coexist and to harmonically interact. However, since the enlargement of the EU to the East, issues between EU law and international investment law and arbitration have preoccupied investors, EU member states and the European Commission. EU member states have argued since 2007 that intra-EU bilateral investment treaties have been superseded by EU law. In 2018, the claim was partially successful when the CJEU concluded in its Achmea judgement that ISDS arbitration clauses in intra-EU bilateral investment treaties are precluded by EU law. Under the ECT, the intra-EU jurisdictional objections have also been made since 2007, but ECT tribunals have consistently rejected them. The study examines the ECT panels’ jurisdiction in investor-state arbitration in an intra-EU context. As the Achmea judgement has been the most important recent development relating to the issue of jurisdiction of investment tribunals in intra-EU cases, the thesis examines especially how arbitral tribunals under the ECT have assessed the intra-EU jurisdictional objection before and after Achmea. Because the aim of the thesis is to identify relevant legal norms and to clarify their content in the light of recent case law, a doctrinal method is assumed. The study is conducted from a public international law perspective with limited elements of EU law. Hence, the doctrine of legal sources is crucial. The most relevant sources for the study are: 1) the ECT, Article 26(1) of the treaty in particular, as the jurisdictional basis of an arbitral tribunal and 2) ECT case law relating intra-EU disputes as it is what translates treaty language into operative law. Since the power to determine the extent of jurisdiction lies with the arbitral tribunal itself, jurisdictional issues in particular should be examined in the light of case law. In addition, customary international law regarding treaty conflict and treaty interpretation are included in the study as treaty-based rules have to be understood in the context of general rules of international law. In order for an arbitral tribunal to have jurisdiction under Article 26(1) ECT, five conditions must be met: 1) there must be a dispute concerning an alleged breach of an obligation under Part III of the ECT by a contracting party; 2) the dispute must relate to an investment as defined by the ECT; 3) the investment must be in the area of a contracting party; 4) the claimant must be an investor of another contracting party; and 5) the events with which the claim is concerned must have occurred at a date such as to give the tribunal jurisdiction. In summary, EU actors have argued that as the investor in intra-EU disputes is not from another contracting party (but from the area of the EU) the investment relations are subject to the EU’s regulatory framework and that the ECT and EU law have conflicting rules warranting EU law to prevail in intra-EU relations. Based on the research, it is established that ECT panels have jurisdiction in intra-EU disputes. In terms of argumentation, the case law rejecting the intra-EU jurisdictional objection is consistent enough to form the following general level conclusions: 1) interpretation of Article 26(1) ECT in accordance with the interpretation rules of customary international law is clear in including intra-EU disputes; and 2) there is no conflict between ISDS under the ECT and EU law. What remains undecided is the potential status of EU law from the perspective of the ECT. Application of EU law could only be possible based on international law that requires it and while the tribunals have assessed applying EU law based on e.g. the lex specialis and lex posterior principles or an inter se agreement, they have not formed a single approach. In fact, by stating that the interpretation of Article 26(1) ECT is clear and that there is no conflict with EU law, the tribunals leave little chance for applying EU law and therefore, little chance for the Achmea judgement or potential future developments of EU law to have an impact on the tribunals’ jurisdiction. Consequently, for the time being, the intra-EU claims under the ECT remain arbitrable.

The Energy Charter Treaty (ECT) is a multilateral investment treaty with over 50 contracting parties that solely concerns the energy sector, which is of crucial importance in combatting climate change. Further, more investor claims have been brought forward under the ECT than under any other investment agreement, and some of the largest arbitral awards have been rendered under its auspices. These factors combined make the ECT a very significant instrument for the global climate as a whole. This paper is based on the premise that more and more countries would wish to cut back on their use of highly polluting fossil fuels to produce energy. However, it is often argued that the investment protection clauses, which are also included in the ECT, cause ‘regulatory chill’, meaning that states are wary of passing stricter regulations, as such measures might well result in investor-state dispute settlement proceedings. Therefore, it is plausible that the investment protection clauses of the ECT are in fact slowing down the transition from fossil fuels to renewable forms of energy, and various NGOs in fact view the ECT solely as a tool of the fossil fuel industry used for this purpose. In this paper, I challenge such simplified take on the ECT and argue that states are in fact able to pass stricter regulations to protect the environment without breaching their ECT obligations towards foreign investors, and further, also should do so. This paper can most readily be described as a doctrinal research, as it concerns specific treaty provisions and all the claims made within it can be traced back to formal legal sources. In particular, I have relied on the texts of the ECT framework, and various judicial decisions. Therefore, large parts of this paper are comprised of treaty interpretation and analogic reasoning. The precise questions to which I have sought answers using these methods are: 1) What are the environmental aspects of the ECT; 2) Can the ECT, in its current form, be interpreted and applied in an environmentally sustainable way, and if so, how this could be done; 3) Why the ECT should be interpreted and applied in such way; and 4) Does the ECT require amendments to its current text? It is well known that the ECT framework contains a plethora of environmental provisions, however, due to their soft formulation, they are often overlooked as it would be difficult to find a state to be in breach of them. According to the findings of this paper this is, however, erroneous. Based on the sheer volume of environmental provisions, and the great significance placed upon them within the Preamble of the ECT and European Energy Charter, I have developed a novel, more balanced, take on the object and purpose of the ECT, which places significance on both the protection of investments and environment, unlike the tribunals applying the ECT have thus far done. Furthermore, I have found that despite the soft formulation of the environmental provisions, a state may still rely on them when responding to investor claims. However, the degree to which a state can do so depends greatly on the claims made – the text of the ECT places little to no significance to environmental matters in cases of alleged expropriation, whereas on alleged breaches of e.g. the FET standard environmental matters may be of great significance. Additionally, the text of the ECT allows for a state to argue that measures to protect the environment fall under the allowed exceptions of the ECT. Having identified the various environmental aspects of the ECT, and developed techniques for responding states to utilise them, I have also discussed why the presented findings should be applied, and whether it would be enough. It is evident that matters such as sustainable development and protection of the environment are gaining foothold within the law both on national and international level. As the ECT is not situated in a void, these global trends should be considered when applying it. As the findings of this paper would encourage states to pass legitimate measures for the protection of the environment, there are relatively clear policy reasons as to why the application of the findings would be desirable. Many of the findings made in this paper were reached through teleological interpretation of the ECT. While such interpretative approach is perfectly valid, it would nevertheless be beneficial for the text of the ECT to be amended to explicitly incorporate the interpretations made within this paper. Amending a multilateral treaty such as the ECT is, however, difficult. Therefore, the findings of this paper can be of great importance for states wishing to pass measures to protect the environment, as they offer greater certainty of the legality of their actions towards foreign investors.