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E-Book

Multilateral Investment Treaties: Is the energy charter treaty an effective instrument for protecting international investments?

AutorShamsu Yahaya
VerlagGRIN Verlag
Erscheinungsjahr2010
Seitenanzahl67 Seiten
ISBN9783640519125
FormatPDF/ePUB
Kopierschutzkein Kopierschutz
GerätePC/MAC/eReader/Tablet
Preis29,99 EUR
Masterarbeit aus dem Jahr 2009 im Fachbereich Jura - Zivilrecht / Handelsrecht, Gesellschaftsrecht, Kartellrecht, Wirtschaftsrecht, University of Abertay Dundee (Centre for energy, petroleum and mineral law and policy), Sprache: Deutsch, Abstract: The end of the cold war signalled an emerging need for economic integration between Western European countries and those countries which comprised the former Soviet Union. The energy sector was considered a perfect starting point for pursuing such cooperation mainly due to the fact that Eastern European countries were considered rich in oil and gas reserves. For this purpose, the Energy Charter Treaty as well as the Energy Charter Protocol were signed in December 1994 and came into effect on 16th April, 1998. The aim of the Treaty was to establish a comprehensive legal framework for promoting long-term cooperation between signatory countries in the energy sector. Indeed, the treaty is considered a powerful tool for investors as it grants direct right to initiate arbitration proceedings against host governments where there are alleged breaches of investment obligations. The purpose of this dissertation is to take a critical look at the effectiveness or otherwise of the treaty as regards the protection of international investments in the energy sector. A historical background leading up to the signing of the charter will be rendered. Also, the provisions of the treaty regarding investment protection and arbitration taking certain case studies of causes of action brought under the treaty will be discussed. Furthermore, a critical look at the shortcomings of the treaty will be attempted. The research findings will show that several successful cases have been concluded under the treaty; but criticisms and limits to the effectiveness of the treaty will be highlighted.

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2. INVESTMENT PROTECTION REGIME IN THE ECT


 

2.1  Introduction


 

In the previous chapter, the historical circumstances leading up to the signing of the Energy Charter Treaty were discussed. This chapter will commence the discussion of the provisions of the ECT relating to investment protection. The aim in this chapter is to demonstrate that the ECT has a very comprehensive and pro-active investment protection regime.

 

The ECT takes a balanced approach to investors’ access to natural resources. On the one hand, the Treaty explicitly confirms sovereignty over energy resources; each state is thus free to decide how its national resources will be developed, and the extent to which its energy sector will be available to foreign investments. On the other hand, it is required that rules on the exploration and development of resources are publicly available, transparent and non-discriminatory.[18]

 

In an attempt to answer the question whether the ECT is an effective instrument for protecting investments, it is pertinent to discuss the provisions of the Treaty on the issue of investment safeguards. This chapter will thus discuss the definition of who is an investor, what constitutes an investment as well as the investment protection mechanisms found in the treaty, in comparison with other international BITs.

 

2.2 What is an investment in the Treaty?


 

Article 1(6) of the ECT Treaty lists the types of assets which can be termed investments in the Treaty. It goes further to specify the date from which ‘an investment’ can benefit from the Treaty’s investment protection provisions. The Article stipulates that investment refers to any form of investment relating to economic activity in the energy sector, which is consistent with the sectoral nature of the ECT.[19] Economic activity in the energy sector has two classes of definition: products and materials on one hand and the nature and character of activity on the other.

 

Included in the list of investments in the Treaty[20] are property or property rights such as mortgages, leases, liens, pledges, a company or business enterprises, stock, shares or other kinds of equity participation; also included are intellectual property rights, returns, rights conferred by law or through contracts by virtue of licences and permits aimed at undertaking economic activities in the Energy Sector etc. Such economic activities concerns the exploration, refining, production, transportation, distribution and marketing of energy materials  and products.[21]

 

The term investment in the Treaty includes all investments, whether made or existing as at the time of entry into force of the Treaty. [22] The Treaty has thus adopted a similar approach to many other BITs and thereby extended its coverage to all kinds of assets.[23]

 

The wide nature of investments as provided in the ECT has been taken into cognisance in Plama v. Bulgaria[24] which is the premier decision reached under the auspices of ICSID regarding the issue of jurisdiction under the ECT. It was held in that case that Article 1(6) of the ECT is a broad and non-exhaustive list comprising different forms of assets including any property rights , interest in money or rather money’s worth.[25]

 

It can thus be seen from the above analysis that the ECT Treaty went to great lengths so as to ensure that all valid investments enjoy Treaty protection so as to build investor confidence.

 

2.3 Who is an investor in the Treaty?


 

Article 1(7) of the ECT Treaty renders us with a definition of who is an investor under the Treaty. An investor is therein defined as a natural person possessing the citizenship or nationality of a Contracting Party or is a permanent resident; also, a company or other form of organisation formulated in consonance with the relevant applicable law in that Contracting Party is considered an investor.[26]

 

It is a trite principle of international law that the definition of nationality is based on each country’s domestic laws. Natural persons covered by the ECT are thus defined based on each state’s domestic laws regarding citizenship or nationality. The Treaty also includes permanent residents as investors which is quite in agreement with other BITs[27] and the notion of the ECT which aims to create a single energy zone or area.

 

Legal entities are also defined by reference to the domestic law applicable in each Contracting State with regards to the organisation of legal entities in each state. In this vein, the ECT takes a different approach from some other multilateral investment treaties which tend to restrict their coverage by including additional requirements which may include place of effective management[28] or rather the place where the headquarters of the company in question is situated.[29] These treaties, unlike the ECT, extend their range of coverage to companies which are incorporated in third countries as long as the controlling shares are vested in investors located in a Contracting State.[30] The coverage provided by the ECT is broader as it only requires that a legal entity be organised in a manner consistent with the laws of a Contracting State.[31]

 

It should be noted that under the ECT, a legal entity defined as an investor in Article 1(7) is considered a national of the host state. Where such an entity decides to bring a claim under the Washington Convention, the requirement of Article 25(2) (b) that of the Convention that such entity be considered a national of another contracting state has to be met. The ECT resolves this situation in Article 26(7) which stipulates that a legal entity which is incorporated in the host state is to be treated as a national of another Contracting State so as to meet the requirements of Article 25 (2) (b) of the Washington Convention where such a legal entity is controlled by investors of another Contracting State.

 

It is also worth noting that Article 17(1) of the ECT provides that each Contracting Party has the right to deny the advantages accruing from this part to a legal entity where it is owned by the nationals of a third state and where that legal entity has no significant business dealings within the territory of the Contracting Party.  Some commentators have analysed this provision as limiting the scope of protection for investors provided in the ECT.[32] 

 

The provision of Article 17 was tested in the Plama v. Bulgaria case.[33] The decision of the Tribunal in this case provides us with some guidance as to the application of Article 17. Emphasis in this case was placed on the effect of consent by a state to arbitrate investment disputes under the provisions of Article 26 of the ECT. The tribunal found that Article 26 provisionally applies from the date a state becomes a signatory except that state had declared itself to be exempt from provisional application under Article 45(2) (a) of the Treaty. It was appropriately concluded that Bulgaria had made no such declaration. It was also stated that Article 17(1) of the ECT does not act as an avenue for denying all the benefits under the Treaty granted to investors, but only limited to the denial of advantages provided in Part III of the Treaty. Thus, the circumstances mentioned in Article 17 cannot be utilized to impede the operation of Article 26 of the ECT.

 

From the above comparison between the ECT and other BITs regarding the definition of investors and investments under the ECT, it can be seen that the ECT Treaty has made attempts to include a wide range of areas not ordinarily covered by other BITs so as to give more confidence in the Treaty to investors.

 

2.4 Limits to protection of investments and investors


 

A foreign investor under the ECT is entitled to instigate a claim that a host state violated its obligations[34] which are contained in Part III of the Treaty. Such claim is by arbitration utilising ICSID or ICSID Additional Facility Rules or Via an Ad hoc arbitral tribunal utilising the UNCITRAL rules, or via a tribunal under the auspices of the SCC Arbitration Institute.[35]

 

With regards to ICSID, a claim has to satisfy the notion of investment to meet the jurisdictional requirements of the ICSID Convention. The problem is that investment is not defined in the ICSID Convention. It has even been suggested that Article 25 of the ICSID Convention covers a range of almost any kind of economic activity.[36] Other authors have even asserted that the omission is intentional so as not to limit the scope of the Convention.[37] The ICSID Secretary General has in few instances, even refused to register claims for arbitration on the grounds that they do not relate to an...

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