The Energy Charter Treaty plays an important role as part of an international effort to build a legal foundation for energy security. What have your key successes been over the past 20 years?
The Energy Charter Treaty (ECT) was signed in December, 1994, and entered into legal force in April, 1998. Today, it includes 54 members and more than 30 observers. The Treaty applies to all energy forms (oil, gas, electricity, nuclear, coal, and renewables) and to all stages of the supply chain (resources, production, transport, trade, consumption, and energy efficiency).
The fundamental aim of the Energy Charter Treaty is to strengthen the rule of law in the energy sector by promoting regulatory stability and market confidence, thereby mitigating energy investment and trade risks. There are several institutions which promote energy co-operation, but the Energy Charter Treaty is the only one established as a legally-binding multilateral instrument. Multilateral rules, such as those within the ECT, provide a balanced and effective framework for international co-operation and for strengthening domestic policies.
The Charter provides a policy platform between its signatories and observer states to discuss political and legal aspects of energy reforms. The key success of the International Energy Charter over the last 20 years is the fact that the Energy Charter Treaty has significantly improved and stabilised the functioning of the energy markets of our Member States. The Treaty has been also instrumental in providing necessary investment protection under international law to foreign investors. Since the Energy Charter Treaty entered into force, we have observed a rapid growth of investments within our constituency.
The Treaty contains a system for settling disputes on energy matters. Could you briefly explain it to us?
Yes, indeed. At the time the Treaty was negotiated, all the objectives and values related to the establishment of free markets, such as liberalisation, equal treatment, and the protection of national sovereignty over national resources, required the means to make them enforceable in the form of a binding document.
Due to these reasons, the Member States created a two–sided dispute resolution system, one for state–to–state arbitration and another for investor–state arbitration. The latter system establishes different steps for investors and states to proceed with the resolution of disputes. The system includes prior consultations, the choice between international and domestic dispute settlement, and also different arbitration forums such as the International Centre for Settlement of Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL) and the Stockholm Chamber of Commerce.
In either case, the arbitration should be decided under the provisions of the Treaty and the principles of international law, and it is always binding. The Treaty provides that any party may request the arbitration to take place in a State that is part of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. It also includes dispute resolution in other areas, e.g. trade, and transit.
One of the Treaty’s priorities is to promote reliable international transit flows. How do you see the role of infrastructure in this plan, especially the North–South Corridor?
Transit is an important pillar of the Energy Charter Treaty. Under the ECT, the transit of energy goods and products must be performed under the principle of free transit flows. Ensuring secure energy supply is shared by all governments. They also have goals for diversifying energy sources, increasing energy trade and transit. For this, great investment is required. Thus, modernisation and the deployment of energy infrastructure play a crucial role here, and governments need to ensure the necessary flows of investments, capital and technologies. Investments are essential to build modern and interconnected regional energy markets.
The North–South Corridor is an excellent example of the idea of a common vision and a long-term strategy of connecting different markets in Central and South East Europe. The International Energy Charter supports the integration of these markets, which certainly increase the security of supply and enable access to new energy sources. Cross-border interconnectivity is an important prerequisite to promote energy trade and regional co-operation.
All the countries involved in the development of the North–South Corridor are ECT Contracting Parties, and I am confident that the commitment of governments to provide necessary protection to all investors engaged in this project, have an added value on the various stages of planning and construction. We will be monitoring the progress of the North–South Corridor, and hopefully this part of Europe will soon benefit from a harmonised and fluid energy market.
The Treaty requires that all Member States act to minimise the harmful environmental impact of energy-related activities. What main challenges do you see in that field?
In recent months and years, the Secretariat has been involved in several actions, such as the promotion of low-carbon investments; deployment of renewable energy sources; support for the implementation of the UN Sustainable Development Goals; and today, we are heading towards supporting our constituency in climate change mitigation and the implementation of COP21 goals. The International Energy Charter activities are mainly based on the Protocol for Energy Efficiency and Related Environmental Aspects, and provide significant support to governments in identifying best practices in energy efficiency policy options.
We maintain a forum, in which countries share their experiences and policy advice on energy efficiency and renewable energy issues. We try to identify and prioritise the main drivers for energy efficiency and renewables investment demand (e.g. existing policies, regulations, regulatory stability, etc.) and the rationale guiding the supply and delivery of sustainable energy investment. We will also continue to try to ensure energy access to sustainable and affordable energy for all.
What are the main challenges that you see in the energy markets of our Member States?
In geopolitical terms, our organisation, since its foundation, has been a common platform to promote European values in the Euro-Asian region, in particular the former Soviet Union and Eastern Europe. Today, with the globalisation of the energy sector, the challenges across the world have become very similar. That’s the reason why the International Energy Charter Declaration, which was adopted on May the 20th, 2015, in the Hague has appealed to countries beyond the Euro-Asian region.
What are the countries’ needs across the world? They need foreign investors in the energy sector. There is not enough energy aid assistance to finance large developments related to energy. Countries have different policy choices, but they need to remember that investments have to last for decades, whilst normally, governments don’t last that long.
The energy challenges of the 21st century, which the International Energy Charter addresses, include the growing weight of developing countries for global energy security, the conflict between energy security, economic development and environmental protection, the role of enhanced energy trade for sustainable development, as well as the need for diversification of energy sources and routes.
What are your policy principles and forms of guidance regarding energy efficiency?
The International Energy Charter possesses a special Protocol dedicated only to energy efficiency and related environmental aspects. It also establishes key principles to be followed by the signatory states regarding the formulation and development of policies and activities related to energy efficiency, the definition of short-and long-term measures to adjust the energy cycle to the energy efficiency policies, the promotion of international co-operation, and the achievement of energy efficiency goals. Moreover, we are also very much involved in the promotion of financial measures for energy efficiency to be adopted by the Member States.
Together, with other international organisations and stakeholders, we assist countries to explore ways to pursue synergies in policies to improve energy access, and energy efficiency as a tool, to increase the level of energy services that can be provided by existing infrastructures, reducing energy costs, and avoiding the use of inefficient technologies and practices.
We also have a special working group dedicated to energy efficiency environmental issues which discusses and develops in-depth energy efficiency review reports. So far, the International Energy Charter has developed and released close to 30 energy efficiency country reviews. Those reviews are the key mechanism to assess the Protocol’s obligations to develop, implement and update energy efficiency policies and programmes, as well as to provide guidance and recommendation for improving the policy planning and implementation, with regard to energy efficiency.