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Energy Charter Treaty: Legal Framework for Energy Investments

Explore the legal aspects of investment promotion and protection in the energy sector at the Black Sea Energy Policy Conference. Learn about the Energy Charter Treaty and its role in securing trade and investment opportunities in energy.

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Energy Charter Treaty: Legal Framework for Energy Investments

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  1. Black Sea Energy Policy Conference “Energy Investments and Trade Opportunities” Athens, 8-9 October 2008 Energy Charter Treaty as a Multilateral Framework for Energy Investments: Legal Aspects of Investment Promotion and Protection Dr. Sedat ÇAL Senior Expert, Energy Charter Secretariat The views expressed in this presentation are those of the author only and not necessarily of the Energy Charter Secretariat or any party to the Energy Charter Treaty

  2. A Brief History of the Energy Charter Process • European Energy Charter (December 1991): a political declaration for energy cooperation in the post-Cold War era. Western/Central/Eastern European and the FSU countries, plus the US, Canada, Australia and Japan, gathered in the Hague, Netherlands • Energy Charter Treaty (December 1994): Inter-governmental agreement to provide legal framework to protect investment and secure trade and transit in the energy sector. Entry into force by April 1998

  3. Dispute Settlement Investment Energy Efficiency Transit Trade Energy Charter Treaty European Energy Charter • The Energy Charter Process 3

  4. What does ECT provide for? • Basic principles • First multilateral investment agreement • Energy sector-specific • Principle of non-discrimination/national treatment/MFN for established investments • Best endeavour clause for investments in the making • Respect for sovereignty over natural resources • A discussion forum for energy investment issues • Privatization not required • Aims at establishing a level playing field • Designed to take out political/legal risks associated with energy investments • Critical for investments and therefore for energy security

  5. Political/legal risks Related regulations Profit transfer Taxes Changes in terms and conditions of the agreement Expropriation Jurisdiction Energy Charter Treaty designed to take out political/legal risks associated with energy investment Economic risks Prices Marketing Construction Operation Inflation Foreign currency Exchanges Other risks Natural disasters Civil unrests, wars Strikes Risks Associated with Energy Investment

  6. Main features of the ECT • Principle of non-discrimination • Most Favored Nation (MFN) clause • National treatment clause • Fair and equitable treatment clause • The most constant protection principle • Security of investments made • Security for investors through settlement of dispute mechanisms, including binding international arbitration • Conclusion: ultimate goal of securing a level playing field to promote and protect energy investments

  7. Dispute Resolution Procedures • An opportunity for amicable settlement • In failing the amicable settlement; • Investor-to-state disputes (Article 26) • UNCTRAL • SCC • ICSID • State-to-state disputes (Article 27)

  8. ECT and the regional framework approach • ECT: The first multilateral framework established under international law • Wide and diverse geographic coverage: 51 states party to the ECT, including, inter alia, the EU, Russian Federation, Australia and Turkey (see the slide below for geographic coverage) • Broader context for energy security • Possible synergies with regional frameworks, including the South East Europe Regional Energy Market Initiative

  9. Geographic Coverage of the Energy Charter Constituency Member CountriesObservers

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