Energy Charter Treaty

The Energy Charter Treaty (ECT) is an international agreement originally based on integrating the energy sectors of the former Soviet Union and Eastern Europe at the end of the Cold War into the broader European and world markets.

The original Energy Charter 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 binding treaty.

The legally-binding Treaty itself 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 was also agreed that month.

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 states, and - in the case of investments - between investors and host states;
* the promotion of energy efficiency, and attempts to minimise the environmental impact of energy production and use.

Russia, the region's energy superpower, has signed but so far failed to ratify the Treaty, though it has accepted provisional application of the Treaty pending ratification. This means that Russia has agreed to apply the provisions of the Energy Charter Treaty to the extent that they are consistent with Russia's constitution, laws and regulations.

Russia has linked the ratification of the ECT to negotiations on an Energy Charter Transit Protocol. 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 (the organisation's governing and decision-making body) 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 have been taking place since the autumn of 2004.

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. [ [http://www.iht.com/articles/2006/12/12/news/energy.php Russia gets tough on energy sales to Europe: No foreign access to pipelines, official says] , by Judy Dempsey, International Herald Tribune 12 December 2006] MEPs in the European Parliament's foreign affairs committee said in early September 2007 that the EU should only support Russian membership of the World Trade Organisation (WTO) if it adheres to the Energy Charter Treaty. [ [http://euobserver.com/9/24687 EUobserver.com ] ]

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.

Important to note

* The Energy Charter Treaty includes an obligation on member countries to facilitate energy transit across their territory, in line with the principle of freedom of transit, and an obligation to secure established transit flows. At the same time, an understanding included in the Treaty makes it clear that the Treaty provisions “do not oblige any Contracting Party to introduce mandatory third party access”.

* 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). Each member 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.

* 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. There is no obligation to privatise state-owned energy companies, or to break up vertically integrated energy companies.

Membership

The Energy Charter Treaty and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects were signed in December 1994 and entered into force in April 1998. To date, the Treaty has been signed or acceded to by fifty-one states, the European Community and Euratom (the total number of its members is therefore fifty-three).

All members have ratified the Treaty except for five: Australia, Belarus, Iceland, Norway, and Russia. Belarus and Russia have accepted provisional application of the Treaty, which means that – pending ratification – they have agreed to apply the Treaty to the extent that it is consistent with their own constitutions, laws and regulations.

All members are represented in the Energy Charter Conference (the organisation's governing and decision-making body) and its subsidiary bodies. The Conference 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.

Members of the Energy Charter Conference

Energy Charter Conference

The Energy Charter Conference is the organisation's governing and decision-making body. The Chairman of the Energy Charter Conference is Takekazu Kawamura, Japan, and the Vice-Chairmen are Anatoliy Yanovskiy, Russian Federation, and Aymo Brunetti, Switzerland. The Energy Charter Conference has following subsidiary bodies:

* Ad Hoc Group on Strategy
* 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.

ecretariat

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 2006, the Secretary General is André Mernier. Vladimir Rakhmanin became Deputy Secretary General in July 2008.

ee also

*Energy policy of the European Union
*Energy policy of Russia

References

External links

* [http://www.encharter.org/index.php?id=1&L=0 the Energy Charter website]
* [http://www.ren21.net REN21]