Article 27 of the Energy Charter Treaty

Laurent Gouiffès

Article 27 of the Energy Charter Treaty: the role of State–to–State dispute resolution Ad hoc arbitration under ECT Article 27 and potential relevance to investment disputes

Introduction

 Article 27 of the Energy Charter Treaty provides for a State-to-State dispute resolution mechanism  It is the standard dispute resolution clause for the whole ECT

 The surge in Investor-to-State arbitrations  The role of article 27  The role of State-to-State dispute resolution

Outline

1. State-to-State dispute resolution mechanism under article 27 of the ECT 2. The use of State-to-State dispute resolution mechanisms: past experience and parallels with other treaties 3. Relevance of article 27 of the ECT in investment disputes

1. State-to-State dispute resolution mechanism under article 27 of the ECT

1.1 Definition and Scope of article 27 of the ECT 1.2 The mechanism for settling State-to-State disputes under article 27 of the ECT 1.3 Application of article 27 and potential issues within the European Union: a parallel with the Mox Plant Case

1.1 Definition and Scope of article 27 of the ECT  Applicable to all breaches of the ECT  Contrast with article 26: breaches under part III only  Exceptions  Competition issues (art. 27(2) and art. 6)  Environmental issues (art. 27(2) and art. 19)  Some investment disputes (last sentence of article 10(1)) for states listed in Annex IA  Matters under article 29 and article 5, subject to express consent of the parties (art. 28)

1.2 The mechanism for settling State-to-State disputes under article 27 of the ECT

 Diplomatic channels  Ad hoc tribunal  Applicable law  Availability of awards to the public

1.3 Application of article 27 and potential issue within the European Union: a parallel with the Mox Plant Case

 Only one known dispute under article 27 which remained at diplomatic stage

 Potential ECT/ECJ jurisdiction conflict: a parallel with the Mox Plant case

2. The use of State-to-State dispute resolution mechanisms: past experience and parallel with other treaties

2.1 Past experience 2.2 Parallel with other MITs

2.3. Parallel with some BITs

2.1 Past experience  Before the 1960’s  “Diplomatic protection” granted by states to their investors  Great Britain v. Costa Rica (Tinoco Case, ICJ, 18 October 1923)  Italy v.Venezuela (Martini Case, ICJ, 3 May 1930)

 After the 1960’s  Development of BITs with Investor-to-State dispute resolution mechanisms  Decrease of use of State-to-State dispute resolution mechanisms in investment disputes

2.2 Parallel with other MITs  NAFTA  Two dispute resolution mechanisms: Investor-to-State mechanism (chapter 11), State-to-State mechanism (chapter 20)  Use of those mechanisms

 ASEAN  Two dispute resolution mechanisms: an Investor-to-State mechanism (article 10 of the 1987 agreement) and a belatedly introduced State-to-State dispute resolution mechanism (article IX of the 1987 agreement as modified in 1996)

 Project for a multilateral agreement on investment  Dispute settlement mechanism project very similar to article 27 mechanism

2.3. Parallel with some BITs  The U.S. model BIT  Article 37 on State-to-State dispute resolution  Originality: State-to-State intervention within Investor-toState arbitration (article 28.2)  The UK-France BIT on the Channel Tunnel  Same dispute resolution mechanism for all type of conflicts (article 19 of the Treaty of Canterbury)  Supremacy of the States over the Investors  The AUFSTA  All dispute settlements at a State-to-State level (article 21)  No Investor-to-State provision

3. Relevance of article 27 of the ECT in investment disputes?

3.1 Articles 27 and 26 mutually exclusive regarding investment disputes ? 3.2 From the investor’s point of view 3.3 From the state’s point of view

3.1 Articles 27 and 26 mutually exclusive regarding investment disputes?

 Article 26 especially tailored for investments (part III)

 Article 27 is essentially meant to be used in all other disputes regarding ECT

3.2 From the investor’s point of view

 When political pressure is more efficient  Enforcement of the award  State-to-State dispute resolution mechanisms as safeguard of the awards rendered in Investor-toState Disputes

3.3 From the state’s point of view

 The Saluka investments B.V. v. the Czech Republic case  A state can start an arbitration against an Investor only on a contractual basis  Relevance of State-to-State arbitration

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