Clark, 'Transit and the Energy Charter Treaty: Rhetoric and Reality'

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Transit and the Energy Charter Treaty: Rhetoric and Reality

Bryan Clark,

Copyright © 1998 Bryan Clark.
First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

Summary

The break-up of the former Soviet Union [FSU] has heralded a new dawn of opportunity for Western investment in many hitherto unavailable and largely untapped oil and gas reserves. The success of such investment initiatives will to a large degree by predicated, however, by the ability of investors to ensure freedom of energy transit. Against this backdrop, this paper examines the provisions of the 1994 Energy Charter Treaty [ECT] which seek to facilitate such transit access. The author concludes that despite the undeniable fact that the ECT transit provisions represent a step in the right direction, given the deep rooted political and economic nature of transit disputes in the FSU much more remains to be achieved if Western investment plans are to be realised.

Introduction

Whilst the dust settled in the aftermath of the break-up of the Soviet Union, an initiative set in motion by the former Dutch Prime Minister, Ruud Lubbers, sought to facilitate trade and co-operation between the energy sectors of Western Europe, the Former Soviet Union (FSU) and Eastern European nations. The plan espoused during a meeting of the European Council in Dublin in June 1990, to develop open and competitive markets in energy products and materials, was underpinned by the realisation of an interdependency that subsisted between the Eastern and Western European energy sectors (Dore 1995, p 1.1). First, it was recognised that to facilitate economic transformation in accordance with Western ideals, the energy sectors of Eastern Europe and the FSU were in dire need of injections of capital, markets, technical nous and legal and institutional framework restructuring. Whilst Western Europe was in a position to supply such capital and technological investment and expertise, given its own concerns relating to security of energy supply⁽¹⁾, it was simultaneously anxious to secure access to the potentially rich Eastern energy markets, in particular gas reserves in the FSU (Dore 1995, p. 1.1).

The child of the Lubbers plan was the European Energy Charter, a non-binding political expression of intent which was signed by a consortia of forty-nine nations and the EU at the Hague on 16-17 December 1991. Whilst initially a conclusively European initiative, other nations such as the USA and Japan entered the fray; keen to ensure that their own potential access to Eastern European energy markets would not be usurped by the imposition of an Eastern/Western European closed shop (Dore 1995; Walde 1994a, p. 88).

This declaration of political intent was the cornerstone upon which the ensuing Energy Charter Treaty (ECT) was founded. This binding multi-lateral treaty was finally signed in Lisbon on 17 December 1994, some two years beyond the initial draft timetable for completion of the negotiations thereto (Dore 1995). The ECT sets out a sectoral legal framework for energy; comprising some fifty articles, it deals inter alia with issues pertaining to investment, trade, transit, competition and environmental concerns. As Walde & Andrews-Speed (1996, p 3) observe, "[t]he ECT is the most ambitious attempt to date to set up an international regime for both investment and trade".

Those party to the on-going negotiations leading up to the inception of the Treaty were acutely aware that the success of any attempt to open up the energy markets in Eastern Europe and the FSU would surely be predicated to a great degree by the ability to secure freedom of energy transit. As Jenkins (1996, p 187) explains, "[i]t is not an exaggeration to say that the success of all western oil and gas investment in the [FSU] effectively hangs on the reliable provision of economically viable transit routes from point of production to hard currency markets". This concern is particularly pertinent in the context of the subsisting legal framework and political climate within the FSU where transit laws remain largely `non-existent or immature' and many potential transit routes cross `hostile terrain' (Walde and Andrews-Speed 1996, p 34). Indeed, the raft of deep-rooted transit disputes in recent years involving Russia, other FSU states and Eastern European countries has been well documented (see eg. generally, Luciani 1997; Ogutcu 1996, p 68).

Political matters aside, a number of economic issues particular to the energy sector heighten the cause for concern surrounding transit provisions within this industry. As Fatouros (1998) asserts, "carriage of energy materials, petroleum and especially gas, require costly investments, sometimes as costly or costlier than the investments needed for production". The inordinate costs involved and technical expertise required dictate a long-term approach which requires the comfort of a stable legal framework within which to develop. Fatouros (1998) continues, "[t]his is precisely what the [ECT] seeks to establish, by providing a special sectoral international legal regime for energy".

Despite the laudable objectives of the ECT, much ink has been spilled and concern voiced, however, in respect of the fact that far from being a document of universal consensus, this Treaty is in many senses a compromise agreement; a manifestation of some three years of protracted negotiation, bargaining and compromise (see generally, Dore 1995; Walde 1994a). It has therefore been argued that in light of political sensitivities and concern over State sovereign interests, many of the guiding philosophies enshrined in the Charter have been diluted to the point as to which their efficacy can be placed in question (Walde 1994a; Walde and Andrews Speed 1996).

It is against this backdrop that this paper seeks to examine the transit provisions articulated in the ECT. A number of salient questions can be addressed: first, do the ECT provisions add value to international transit laws?; secondly, are there adequate provisions for dispute resolution to protect security of transit?; and thirdly, given the deeply entrenched political nature of the transit issue in the FSU, can the rhetoric of the ECT transit provisions be transformed into the reality of freedom of access to the eastern European energy sector?

Freedom of Transit

The principle of freedom of transit, is not of course a particularly new or novel idea. Cognisance has been lent to this notion since the 17th century when Grotus opined that there was a general right of transit across the territory of another State in the interests of the community of nations (Lauchterpact 1958-59). In more modern times this principle has been underpinned by multi-lateral agreement: by virtue of the Barcelona Convention and Statute on Freedom of Transit of 21 April 1921 and augmented by the New York Convention on transit trade of Land-Locked States, of 8 July 1965. Article V of the General Agreement on Tariffs and Trade (GATT)⁽²⁾ which sets out the general international legal framework pertaining to transit has provided inter alia that "...there shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international travel". Further to this, Article V (2) (second sentence) sets out the non-discriminatory manner in which transit should take place: "[n]o distinction shall be made based on the flag of the vessel, place of origin, departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of vessels, or of other means of transport". Moreover, by virtue of Articles V (5) and V (6) any transportation or administrative charges may only be levied at reasonable and non-discriminatory charges.

Prior to discussing the transit provisions of the ECT it should be borne in mind, however, that freedom of transit has never been an absolute right. Nor is it likely to become so. Indeed, the cornerstone of State sovereignty provides an abiding subtext to assertions of rights of transit. The two make uneasy bedfellows. In light of this, Article 7 of the ECT articulates a set of provisions which attempt to strike a balance between these competing notions.

Article 7 ECT - A GATT-Plus Approach?

Despite the measures of GATT V and its antecedents, until the inception of the ECT no major multi-lateral agreement had hitherto sought to directly address the complex and multi-faceted political, economic and legal problems of energy transit (Fatouros 1998, p 4; Roggenkamp 1996, p 499.

Indeed it has been questioned whether GATT can be applied to the transit of energy and energy products given that neither may be able to be considered `a good'. On a strict interpretation of GATT and the Barcelona Convention, it is unlikely these pre-ECT provisions encompass access to an existing pipeline or electricity grid and certainly not the building of a new pipeline (although for a contrary argument see Roggenkamp 1996, p 506-507).

Following the general approach enshrined in GATT, transit is referred to in the ECT as "carriage through the Area of a Contracting Party [CP], or to or from port facilities in its Area for loading and unloading, of Energy Materials and Products⁽³⁾ originating in the Area of another state and destined for the Area of a third State, so long as either the other state or the third state is a [CP]" (Article 7 (10) (a) (i)). The term under the ECT has an additional meaning, however - it also encompasses the transit of goods originating in and destined for the same CP where these goods have passed through another CP.⁽⁴⁾

Article 7(1) sets out the guiding philosophy underpinning the ECT provisions; freedom of transit and non-discrimination. This paragraph states that "[CP's] shall take measures to facilitate the freedom of transit of Energy Materials and Products consistent with the principle of freedom of transit and without distinction as to the origin, destination or ownership of such Energy Materials or Products or discrimination as to pricing on the basis of such distinctions, and without imposing any unreasonable delays, restrictions or charges".⁽⁵⁾

This paragraph is based on the principle of freedom of access and non-discrimination enshrined in Article V GATT.⁽⁶⁾ The ECT provisions do, however, deviate from GATT in a subtle, albeit arguably significant manner. Whereas Article V GATT espouses the passive provision that there "shall be freedom of transit", Article 7(1) states that "[CP's] shall take the necessary measures to facilitate energy transit...consistent with the principle of freedom of transit" (emphasis added).

Roggenkamp (1996, p 509) has argued that the wording of paragraph 7(1) renders its provisions weaker than those enshrined within GATT V - on the basis that to take necessary measures to `facilitate' transit is lower in normative intensity than to ensure that there `shall be freedom of transit'. Interestingly, other commentators have interpreted the paragraph 7(1) in a different light. Whilst, Bamberger, Legal Counsel of the IEA (1995, p 17) takes the view that Article 7 ECT is merely a direct reference to Article V GATT, Fatouros (1998, p 6) has asserted that "Article 7...goes considerably beyond, the affirmation of the [GATT] principles of freedom of transit and non-discrimination". The rationale underlying this assumption is that parties must take requisite measures to `facilitate' free access - a positive requirement as opposed to the hitherto passive requirement merely to allow free access (Fatouros 1998, p 6). It remains to be seen how this provision will be interpreted by CP's in practice.

Article 7(2) builds upon 7(1) and sets out the proposition that CP's "shall encourage relevant entities" to co-operate in developing, operating, modernising and facilitating the interconnection of energy transport facilities and take measures to mitigate the effects of interruptions in energy supply.⁽⁷⁾

These provisions appear at first blush to substantially augment those set out in 7(1). Whilst it is plausible that 7(2) the phrase "shall encourage" articulates a legally binding obligations, these provisions would, however, seem to be `soft' in nature and couched in somewhat opaque language. It seems likely therefore that any actions brought under 7(2) would not be justiciable. This is compounded by the fact that the term `relevant entities' is not defined in this context.⁽⁸⁾ As Liesen (1998, p 8) notes, the more likely object of this provision is to act as "...a motor for general co-operation on an international scale and [to address] issues going far beyond transit problems".

Recognising the pressing need for the construction of new infrastructure to facilitate trade, arguably one of the most novel of the transit provisions, Article 7(4), stipulates that if existing fixed facilities are not sufficient for providing energy transit on commercial terms, "[CP's] shall not place obstacles in the way of new capacity being established, except as may be provided in applicable legislation which is consistent with paragraph [7](1) (i.e. consistent with freedom of transit and non-discrimination)". Based on an understanding to this paragraph in the Final Act of the negotiating Conference, legislation relative to land use, safety or technical standards or environmental matters would fall under the ambit of this exception.

This (albeit qualified) right to construct new or additional transit facilities, prima facie, seems to introduce a new element to international transit laws. As Roggenkamp (1996, pp 510-511) suggests, however, although Article V GATT does not expressly include such a right, it could be interpreted in such a manner. In addition, such a right is expressly provided for in the convention on 1923 Transmission in Transit of Electric Power and has in practice been established by a number of regional transit conventions.

In addition to the `applicable legislation' exception to the general proposition espoused in 7(4), another qualification is set out in 7(5). By virtue of this provision, the transit state does need not adhere to the obligations conferred under 7(4) if it can demonstrate to other CP's that such adherence would "endanger the security or efficiency of its energy systems, including the security of supply". In permitting exceptions in respect of applicable legislation and relative to transit State security of supply concerns, it seems prima facie that the ECT is countenancing the fundamental principle of State sovereignty. Given the fact that such exceptions may de facto be somewhat limited, however, it can be argued that these exceptions do no more than pay lip-service to sovereign interests.

Nonetheless the political sensitivity of the main thrust of Article 7(4) been recognised by the fact that transitional dispensations have been provided for in relation to State adherence thereto even where the circumstances pertaining to the aforementioned exceptions do not exist. This transitional arrangement relates to interim dispensations that can be claimed by States with `economies in transition'. This is based on the need for these countries to introduce new, or amend existing national energy legislation prior to giving effect to Article 7(4).⁽⁹⁾

To conclude the discussion of Article 7(4) it should be noted, however, that it is to be read in the light of the somewhat ambiguous provisions of Article 7(9) which state that transit provisions must not be so interpreted as to "oblige any [CP] which does not have a certain type of Energy Transport Facilities used for Transit to take any measure under the Article with respect that type of Energy Transport Facilities (sic)". Such a [CP] is, however, "obliged to comply with [Article 7 (4)]". At first glance, it appears that Article 7(9) is anathema to 7(4) and quite how this conundrum, clearly a product of the political compromise which has imbued the Treaty provisions, can be resolved is unclear. In an attempt to rationalise this apparent contradiction, Fatouros (1998, p 7) has suggested that the net effect of the relationship between Articles 7(4) and 7(9) is that transit States may be permitted some discretion as to the particular mode of Energy Transport Facilities to be introduced.

Article 7(5) articulates the important provision that "[CP's] shall subject to paragraphs (6) and (7), secure established flows of Energy Materials and Products to, from or between the Areas of other [CP's]". Articles 7(6) and (7) are perhaps the most far-reaching and unusual of the ECT transit provisions. Furthermore they have been described as the "most operationally relevant" (Bamberger 1997, p 16).

Article 7(6) provides that the transit State "shall not, in the event of a dispute over any matter arising from that Transit, interrupt or reduce, permit any entity subject to its control to interrupt or reduce, or require any entity subject to its jurisdiction to interrupt or reduce the existing flow of Energy Materials and Products prior to the conclusion of the dispute resolution mechanism set out in paragraph (7)".⁽¹⁰⁾

Notwithstanding the undoubted importance of this article for investors in respect of securing existing transit and reducing the de facto control of the transit State over other State's exports, it has been asserted that transit States may nonetheless encounter intractable difficulties in attempting to adhere to this provision - particularly in territories imbued by political strife and upheaval. As Baragona (1995, p III) explains, "...it is a significant obligation which could end up being costly, time consuming and difficult for a transit State to fulfil. The obligation could end up being particularly burdensome to the newly independent transit State which...finds its energy transport facilities subjected to terrorist actions because it is transiting energy materials and products to Republics which are undergoing civil strife or are at war".⁽¹¹⁾

Prior to discussing the substantive provisions of the Article 7(7) dispute resolution procedures, it should be noted that this procedure can only be invoked when the disputants have exhausted all other contractual or previously agreed dispute resolution mechanisms. Such mechanisms would include contractual arbitration mechanisms either by virtue of an intergovernmental agreement or enshrined within a specific pipeline contract (see Walde 1994b, p 20.) It is unclear here whether Article 7(7) can be invoked to effectively challenge an award determined under a contractual arbitration mechanism.⁽¹²⁾

Dispute Settlement

By virtue of article 7(7) any CP's involved in a dispute relating to existing transit may refer the matter to the Secretary General of the Treaty Secretariat.⁽¹³⁾ The emphasis of the special procedure is clearly on expediency - the Secretary General then has a thirty day period within which to appoint a conciliator⁽¹⁴⁾ to resolve the dispute referred.⁽¹⁵⁾

The conciliator's role is to act as a vehicle through which the disputing parties can craft their own negotiated resolution to their impasse. If, however, no agreed resolution is forthcoming within 90 days of the conciliator's appointment, then by virtue of Article 7 (7) (c) and (d) must then recommend an interim solution, including tariffs, terms and conditions to be applied which the parties are bound to adhere to for at least a period of 12 months or earlier if the matter can be resolved by some other means.

As Fatouros (1998, p 8) has asserted, "[t]he...procedure...must be seen to be a major achievement. One should take into account that this is the first arrangement for an international dispute resolution procedure concerning disputes over transit of energy materials". Despite such sentiments, however, the fast-track procedure articulated in Article 7(7) is one which this writer approaches with a combination of discomfort and allure. Clearly the major benefit of the new procedure is that States will no longer be able to disrupt the continuance of transit through their territory at the time of a dispute and moreover, utilise that spectre as a means to move the goal-posts and extort a greater amount of remuneration from those seeking to transport energy through their territory. The conciliation procedure and twelve month period within which the interim award of the conciliator must be adhered to provides a window of opportunity within which disputing parties may be able to craft a resolution to what are often deeply entrenched political impasses.

Some of the main difficulties with the conciliation procedure may emanate, however, from the fact that if no consensual agreement can be reached, the conciliator, hitherto a non-adjudicative neutral, dons a new hat and acts in a judicial manner. It should be noted that there is, however, a clear distinction between the respective roles of the conciliator and the adjudicator. This flows from the fact that whereas the essence of adjudication is founded on adherence to legal norms, conciliation is no more than a quasi-judicial process based primarily on maximisation of mutual political interests. The scope for the success of such non-adjudicative forms of dispute resolution is to a great degree predicated on the candour of the parties to the proceedings and in particular, information flows to and from the conciliator. Parties, aware that sensitive information tendered to the conciliator may be used against them in a subsequent interim award, may find that `the shadow of the law' stifles their candour. The scope therefore for a facilitated settlement may be reduced.

Against this backdrop, the question remains as to what will occur after a 12 month period has lapsed and no agreement has been reached. At this stage it seems clear that the transit State's obligations to adhere to the interim solution imposed and continue the flow of transit cease to exist. What options remain seem to be one of academic debate and dissension. Whereas writers such as Walde & Andrews/Speed (1996) have asserted that at this juncture the general State/investor and State/State dispute resolution procedures enshrined in articles 26 and 27 respectively can be invoked, others have eschewed this notion and taken the view that the only remaining course of action is to recommence the Article 7(7) procedures - which hardly seems a satisfactory solution (Fatouros 1998, p 8).

Furthermore, as Bamberger (1996) has pointed out, given the political sensitivities which imbue this intractable area, much ambiguity concerning these provisions remain. In particular, the relationship between the Article 7(7) procedures and the ECT's general dispute resolution procedures which can be invoked in relation to new or additional transit remain unclear and unexplored. Moreover, the procedures serve to act as a `fall back' position once parties have "exhausted all relevant contractual or other dispute resolution remedies previously agreed between the [parties]..." (Article 7(7)). It remains a moot point whether or not they can be invoked by one party in the face of an undesirable settlement by arbitration or other agreed contractual mechanisms. It is trite to remark that this inherent uncertainty surely cannot help raise confidence levels amongst FSU states and prospective investors.

The ECT, EC Transit Directive and Third Party Access

Despite the fact that prior to the ECT no multi-lateral agreement had sought to tackle the issue of transit of energy materials, this issue had hitherto been tackled on an EC level. The European Natural Gas Transit Directive (91/296/EEC) and Electricity Transit Directive (90/547/EEC) emanated from a rag-bag of proposals based on the European Commission's 1988 working document, "The Internal Energy Market" (COM (808) 238 final). The directives themselves have been brought under the aegis of Article 100A of the EEC Treaty and constituted the first phase in the establishment of an internal market for the production, distribution and transmission of energy designed to increase energy efficiency and transparency of cost within the EC energy sector.

By virtue of Article 1 of both directives, EC Member States are bound to facilitate transit of gas and electricity through high pressure grids (gas) and high voltage electricity grids. The requirements of transit are broadly similar to those enshrined in Article V GATT; conditions of transit shall be non-discriminatory and fair for all parties concerned (Article 3 of both Directives).

The EC transit directives apply solely to States and do not present individuals, including industrial and energy distribution companies with any right of transit; they make provision merely non-discrimination in respect of conditions of transit. For the next stage of liberalisation, however, the European Commission studied the possibilities of mandatory third party access (TPA) to grid systems, whereunder incumbent transmission and distribution companies would be obliged to offer access to their networks to certain customers at reasonable rates. These discussions were rather predictably shrouded in a great deal of debate; some of the main concerns centred over the fact that third party access would produce internal energy market chaos and endanger security of supply. The proposals have nonetheless been crystallised in the guise of the Electricity Directive (96/92/EC) and the draft Natural Gas Directive (COM (91) 548).

It is clear that the EC discussion on TPA clearly influenced the debate and expectations on the ECT transit provisions. Against this backdrop it is perhaps worthwhile to briefly analyse whether Article 7 ECT itself articulates some sort of proto-TPA to pipelines or transportation grids. Article 7 does arguably impose a general obligation to grant a transit request by reference to "the principle of freedom of transit". Despite the fact that it is well recognised that non-discrimination and the absence of unreasonable transit conditions are features of international transit laws, it remains a moot point as to whether there is such an unfettered principle of international law as freedom of access to transit (Liesen, 1998, p 8). By merely referring in a multi-lateral agreement to a principle of international law, it does not necessarily follow that such a principle exists.

Mandatory TPA under the ECT would cause intractable difficulties for those transit countries who in the face of limited transport facilities and new requests for transit are compelled to reduce existing transit in order to accommodate the new requests. This in itself would of course run contrary to subsisting transit agreements. Indeed recognising these difficulties, any claim that Article 7 engenders mandatory TPA is clearly anathema to the stipulation articulated in the interpretative notes (understandings) annexed to Treaty that the ECT does not oblige any Contracting Party to introduce mandatory third party access (Understanding 1 under b(i)).

Conclusion - Transit in the FSU

In certain respects the ECT can be viewed as `GATT-plus'. It is the first multi-lateral agreement specifically governing transit within the energy sector. Perhaps the most salient provision of the ECT is the cornerstone of non-disruption of existing transit, backed up by the presence and availability of dispute resolution mechanisms. These, augmented by obligations on transit States to permit new or additional transit facilities, are clearly steps in the right direction along the rocky path to freedom of energy transit. In this sense the ECT transit provisions are clearly welcomed.

Despite these positive aspects, it would be misleading to suggest that the ECT provisions should in any way be viewed as a panacea for the ills of energy transit in the FSU. Given the deep-rooted political nature of such disputes, the inception of a somewhat opaque international legal framework is unlikely per se to be able to unravel many of the transit problems in the FSU. Mere protestations that countries such as Russia `facilitate' the transit of oil and gas through their territories may not be sufficient to ensure Western access to these natural resources.

Indeed, over recent years, Russia has continued to limit or refuse the right of transit to FSU republics such as Kazakhstan, Uzbekistan and Turkmenistan. It must be seriously doubted whether the ECT transit provisions will provide any immediate remedy for these energy-rich but land-locked nations - cold comfort for those who have invested heavily in these regions.

Andrews-Speed (1996, p 375) has suggested that impasses over the construction of new pipelines through politically unstable regions would best be served by "local solutions which are quite beyond the scope of the [ECT]". Quite how such local solutions can be arrived at, however, is difficult to determine. This may be particularly pertinent given the inclement political climate that pervades the FSU; and in particular, the backdrop of Russia's technical stranglehold over its FSU neighbours, the Russian authorities' efforts to consolidate its own oil companies and GAZPROM's desire to secure and augment its own market share of Western gas markets (Andrews-Speed 1996, p 375).

One factor, however, which may serve to force Russia's hand on the transit issue is the fact that whilst it continues to limit or refuse the right of transit to nations such as Kazakstan and Uzbekistan, it is itself simultaneously dependent on transit through nations such as the Ukraine in order to reach Western energy markets (Luciani 1997). This clearly places Russia in a somewhat ambivalent position. It is interesting to note the report of the BBC Monitoring Summary of World Broadcasts (19 February 1996) that in relation to a dispute between Russia and Ukraine over Druzhba oil pipeline transit charges, a Russian Deputy Prime Minister reportedly threatened to invoke these provisions. The future response of the Russian oil administration to the transit issue is awaited with interest.

To resolve the deep-rooted transit difficulties in the FSU, Carver (1995) has argued for the introduction of an International Pipeline Organisation. Such an organisation could take responsibility for the design, construction, financing, operation and maintenance of all pipelines within a given region; and provide a forum for the resolution of transit disputes (Carver 1995, p 7.5). It is argued that by taking these matters away from the hands of sovereign states and imposing common tariff levels, much of the `political and economic logjam' that has stifled energy transit between Central Asia and the West can be unlocked (Carver 1995, p 7.6). This common sense approach is based on the largely successful model of existing European waterway commissions.

It is hoped that initiatives such as Carver's can be considered at the ongoing Energy Charter Conference discussions. Clearly the ECT remains a `work in progress' - and this applies to the transit provisions as much as any other (for a perusal of recent developments see Bamberger and Walde 1998). Only practical experience under a fully ratified ECT will tell us how much work remains to be done.⁽¹⁶⁾

BIBLIOGRAPHY

Andrews-Speed, P (1996) `The Energy Charter Treaty : Its Importance to Western European Energy Companies' 9 Oil and Gas Law and Taxation Review 373.

Bamberger, C (1995) The Energy Charter Treaty - a description of its provisions, International Energy Association.

Bamberger, C (1996) Selected Legal Aspects of the Energy Charter Treaty, in International Bar Association, 12th Biennial Conference on International Energy and Resources Law, Prague, 24-29 March.

Bamberger. C (1997) The Energy Charter Reaches a New Phase, unpublished manuscript.

Baragona, K (1995) `Transit rights under the Energy Charter Treaty' 5 Energy Law (special supplement).

Cameron, P (1991) `The European Energy Charter: A Magna Carta for Energy?' 7 Oil and Gas Law and Taxation Review 207.

Carver, J (1995) `The Energy Charter and Transit' in Walde, T and Christie, K (eds.) Energy Charter Treaty : Selected Topics (Dundee: Centre for Petroleum and Mineral Law and Policy).

Dore, J (1995) `The Negotiating History of the European Charter Treat' in Walde, T and Christie, K (eds.) Energy Charter Treaty : Selected Topics (Dundee: Centre for Petroleum and Mineral Law and Policy).

European Commission, DG XVII (1996) European Community Gas Supply and Prospects, Information Energy Europe.

Jenkins D (1996) `An Oil and Gas Industry Perspective', in Walde, T (ed.) The Energy Charter Treaty : An East-West Gateway for Investment and Trade (London/Hague/Boston: Kluwer Law International).

Lauchterpact, E (1958-59) `Freedom of Transit in International Law', in Problems of Public and Private International Law (London: Grotius Society: vol. 4).

Luciani, G (1997) The Energy Charter: A View from the Oil and Gas Industry, Centre for Energy Policy Studies, Business Policy Report No. 5.

Ogutcu, M (1996) `Eurasian Energy Politics and Prospects : Need for a Longer Term Western Strategy' in Walde T. (ed.) The Energy Charter Treaty : An East-West Gateway for Investment and Trade (London/Hague/Boston; Kluwer Law International).

Roggenkamp, M (1996) `Transit of Network-bound Energy : the European Experience in Walde, T (ed.) The Energy Charter Treaty : An East-West Gateway for Investment and Trade (London/Hague/Boston; Kluwer Law International).

Walde, T (1994a) `The Energy Charter is Watered Down', Petroleum Economist 88.

Walde, T (1994b) `Investment Arbitration under the 1994 Energy Charter Treaty', in, Competition in European Energy Markets : Threats, Challenges and Opportunities Conference, Richards Butler, London, 24-25 September.

Walde, T (1996) `Investment Arbitration under the Energy Charter Treaty - From Dispute Settlement to Treaty Implementation', 4 Arbitration International 429.

Walde, T and Andrews-Speed, P. (1996) `Will the Energy Charter Treaty help international investors?', 12th Biennial Conference on International Energy and Resources Law, International Bar Association, Prague, 24-29 March.

(1) Most EU countries remain highly dependent on non-European Oil exports - see Information Energy Europe, European Commission, DG XVII, September 1996. European Community Gas Supply and Prospect.

(2) Opened for signature on 30 October 1947 and entered into force on 1 January 1948.

(3) The definition of `energy materials and products' can be found by reference to the definitions article - Art 1. (4). This article in fact then refers to the standard classification systems of the Customs Co-operation Council and the EC - articulated in Annex EM.

(4) Art 7(10) (a) (ii). States can opt out of this, however, by their inclusion in Annex N. For the time being this is largely irrelevant given that only Canada and the USA (neither of whom have ratified the treaty) are listed here.

(5) The principle of non-discrimination espoused in paragraph 7(1) is again alluded to in Article 7(3) which stipulates that in the absence of an international agreement to the contrary, a CP undertakes that national provisions relating to the transport of energy should not treat energy in a less favourable manner than internal energy transport.

(6) Indeed, Article 4 stipulates that the ECT shall not derogate from the provisions of GATT. If CP's are not yet signatories to GATT, the net effect of the ECT provisions is that as far as energy matters are concerned they will be treated as such (Article 29) (see Roggenkamp 1996, p 508).

(7) Art 7 10 (b) enumerates a list of `Energy Transport Facilities' which includes but is not limited to, "high pressure gas transmission pipelines, high-voltage electricity transmission grids and lines, crude oil transmission pipelines, coal slurry pipelines and oil product pipelines.

(8) Article 22 (3), however, may provide a useful point of reference. In relation to State entities this article refers to those `established or maintained by a contracting party that are entrusted with regulatory, administrative or other governmental authority

(9) These countries are listed in ECT Annex T and include Azerbaijan, Belarus, Bulgaria, Georgia, Hungary and Poland. Transition periods range from one to six years. As Fatouros (1998, p 7) notes, the fact that only six out of a possible twenty-four States with economies in transition...have asked for such a transition period can be seen as a reflection of the serious and committed spirit in which countries in transition have approached the ECT."

(10) Except where this is specifically provided for in a contract or other agreement governing such Transit or permitted in accordance with the conciliator's decision in the subsequent `fast-track' conciliation procedure. - Art 7(7).

(11) Other commentators, on a literal interpretation of Art. 7(6) have taken the view that this provision is in fact very limited in the sense that transit disruption caused by any conflict other than arising from the transit itself would not be in contravention of this clause see for example Liesen (1998, p 9).

(12) Furthermore, where redress is available through the transit state's domestic courts, it remains a moot point as to whether recourse must be sought in these fora prior to invoking Article 7(7). Given, however, that such fora exist as a matter of general law and are not `agreed' as such, it has been suggested that as such this question should be answered in the negative - see Walde, (1997, 20) supra n. 37. For a detailed analysis of these issues see Walde (1996).

(13) Disputes concerning the inauguration of new transit will be referred to the general ECT dispute resolution measures enshrined within Arts 26 and 27.

(14) In relation to qualifications and expertise, the ECT specifies that such a conciliator will have a firm grounding in the subject matter of the dispute in the interests of neutrality must not be a citizen, resident or national of any of the countries in dispute - Art. 7 (7) (b).

(15) The Secretary General may decide, however, not to appoint a conciliator if in his judgement the dispute refers to transit that already is or has been the subject of these dispute resolution procedures - Art. 7 (7) (e).

(16) The author has been made aware that ECT Secretariat, DG XVII has inaugurated a working group to analyse the issue of transit and the ECT. At this time the author has been unable to ascertain the status and scope of this study.

United Kingdom Journals

Transit and the Energy Charter Treaty: Rhetoric and Reality