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The Nexus Between the WTO and the ECT in Global Energy Governance

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Abstract

This article discusses the nexus between the ECT and the WTO in global energy governance. The two treaty-based regimes each cover an area of the global energy governance patchwork. Moreover, they are connected in substance. While the former is concerned with providing a framework for the regulation of trade in virtually all goods and services, the latter offers a specialized regime for energy trade and investment regulation. Apart from discussing the origins of the ECT and its relationship to the WTO, the article examines where the treaties overlap and where they are at tension with each other. It does so in view of the changes that have taken place over the past two decades of their existence.

This is an adapted version of a journal article published by the author in the Journal of World Investment and Trade (JWIT), see Marhold (2015).

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Notes

  1. 1.

    The Energy Charter Treaty (entered into force 18 April 1998) 2080 UNTS 100; the World Trade Organization (WTO) was established on 1 January 1995. For the texts of the WTO agreements, see https://www.wto.org/english/docs_e/legal_e/legal_e.htm.

  2. 2.

    General Agreement on Tariffs and Trade (GATT), Geneva, 21 November 1947, entered into force 29 July 1948, 55 UNTS 194.

  3. 3.

    Preamble, Marrakesh Agreement Establishing the World Trade Organization.

  4. 4.

    Marhold (2013).

  5. 5.

    The inauguration of the ECT was in 1994—right before establishment of the WTO in 1995. The term “semi-distinct” is used here because the treaties are partly connected in substance through arts 4 and 29 ECT.

  6. 6.

    Investment and its dispute settlement are regulated in ECT Parts III and V, and the ECT additionally houses a Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA).

  7. 7.

    See Annex EM ECT. Art 1.5 ECT incorporates “Economic Activity in the Energy Sector” and art 7.10(b) ECT explicitly groups gas pipelines as “Energy Transport Facilities”.

  8. 8.

    Energy Charter Secretariat (2001) and Energy Charter Secretariat (2003).

  9. 9.

    Frasl (1996), pp. 460–461.

  10. 10.

    Ibid.

  11. 11.

    Arts 4 and 29 ECT.

  12. 12.

    The GATT and several WTO agreements are incorporated into the ECT “by reference” through art 4 ECT, but important exceptions exist.

  13. 13.

    Pauwelyn (2003), pp. 327 ff.

  14. 14.

    Energy products are taken up in WTO Members’ Schedules of Concessions, services are taken up in Members’ Schedules of Specific Commitments.

  15. 15.

    ECT, Annex EM.

  16. 16.

    ECT, Annex D, and arts 26 and 27.

  17. 17.

    See https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm (accessed 4 March 2016).

  18. 18.

    Major energy producing, exporting and/or transporting States who joined the WTO after 1995 are Angola (1996), China (2001), Ecuador (1996), Oman (2000), Qatar (1996), Russia (2012), Saudi Arabia (2005), Ukraine (2008) and the United Arab Emirates (1996).

  19. 19.

    See http://www.opec.org/opec_web/en/about_us/25.htm (accessed 4 March 2016).

  20. 20.

    Investments made during the period of provisional application (1998–2009) are protected until 29 October 2029.

  21. 21.

    WTO doc. WT/ACC/RUS/70, WT/MIN(11)/2, Report of the Working Party on the Accession of the Russian Federation to the World Trade Organization—Restricted, 17 November 2011.

  22. 22.

    Desta (2003), p. 539.

  23. 23.

    Governed by the rules of the WTO Dispute Settlement Understanding (DSU).

  24. 24.

    WTO (2010a), p. 54.

  25. 25.

    A case in point here is electricity: there is still no conclusive categorization of electricity in the WTO, although “electrical energy” is registered under code 2716 of the Harmonized System Convention (adopted 14 June 1983, entered into force 1 January 1988, 1503 UNTS 167); in EU law, however, electricity is explicitly considered a “good” and not a “service”. In ECJ, Case C-393/92 Almelo v Energiebedrijf IJsselmij [1994] ECR I-1477 [28] and Case C-158/94 Commission v Italy [1997] ECR I-5789 [17], the European Court of Justice has ruled that electricity, despite its intangible character, should be treated as a “good”.

  26. 26.

    Konoplaynik and Waelde (2006), p. 529; Waelde (1996).

  27. 27.

    Art 29 ECT sets out temporary trade rules for ECT parties in the process of WTO accession.

  28. 28.

    See art 7.10(b) ECT, at 1: “‘Energy Transport Facilities’ consist of high-pressure gas transmission pipelines, high-voltage electricity transmission grids and lines, crude oil transmission pipelines, coal slurry pipelines, oil product pipelines, and other fixed facilities specifically for handling Energy Materials and Products”.

  29. 29.

    ECT PEEREA.

  30. 30.

    Art 4 ECT reads “Nothing in this Treaty shall derogate, as between particular Contracting Parties which are parties to the GATT, from the provisions of the GATT and Related Instruments as they are applied between those Contracting Parties”.

  31. 31.

    Supra, n. 9.

  32. 32.

    ECS (2003) viii.

  33. 33.

    Art 29.1 ECT.

  34. 34.

    Art 4 ECT.

  35. 35.

    Art 29.2(a) ECT. The exceptions are listed partly in Annex W of the ECT Trade Amendment, partly in art 29.2.b of the ECT and most importantly relate to the dispute settlement system of the WTO, which cannot be used for non-WTO Members. In their case, it is replaced in Annex D by a panel-based dispute resolution mechanism inspired by the DSU, less “heavy”.

  36. 36.

    Annex W(A) ECT.

  37. 37.

    Arts 29.3–29.5 ECT. However, export tariffs, which are highly relevant for the energy sector and utilized for “dual energy pricing”, also remain largely unregulated in the WTO, with the exceptions of some recent bindings on them in selected accession protocols (e.g. Russia and China).

  38. 38.

    In WTO law, it is still debated whether art V GATT covers fixed infrastructures such as gas pipelines. See on this issue Azaria (2009).

  39. 39.

    Frasl (1996), p. 484.

  40. 40.

    See the most recent informal text of the “Transit Protocol” dated 22 October 2010, TT87 22/01/2010.

  41. 41.

    Annex W (A)(b) ECT.

  42. 42.

    Annex W (A)(c) ECT.

  43. 43.

    Annex W (A)(iv) ECT. See also Defilla (2003).

  44. 44.

    Art 1.5 ECT.

  45. 45.

    ECT Parties made a commitment to provide protection of intellectual property rights, laid down in the Final Act of the International Conference and Decision by the Energy Charter Conference in Respect of the Amendment to the Trade-Related Provisions of the Energy Charter Treaty, Joint Declaration on Trade-Related Intellectual Property Rights.

  46. 46.

    Art 5 ECT “Trade-Related Investment Measures”, linked to Annex D and art 26 ECT.

  47. 47.

    Through Annex W (A) para 2.a ECT.

  48. 48.

    Agreement Establishing the World Trade Organization, art XII.1 and Annex W(A)(1) ECT.

  49. 49.

    GATS art 1.2(c).

  50. 50.

    Annex W (A)(b) ECT.

  51. 51.

    Art 10.3 ECT “Promotion, Protection and Treatment of Investments”.

  52. 52.

    See definitions of respectively “Economic Activity in the Energy Sector” and “Investment” in arts 1.5 and 1.6 ECT.

  53. 53.

    Mavroidis et al. (2010), pp. 802–819.

  54. 54.

    GATS art I.2.

  55. 55.

    GATS art II “General Obligations and Disciplines” and art XVII “National Treatment”.

  56. 56.

    Mavroidis (2013) and Molinuevo (2011).

  57. 57.

    Marceau (2011), p. 26.

  58. 58.

    Energy services identified by Members in WTO doc. TN/S/23, Report by the Chairman to the Trade Negotiations Committee, 28 November 2005. See WTO doc. MTN.GNS/W/120, Services Sectoral Classifications List, 10 July 1991.

  59. 59.

    See WTO doc. S/C/W/311 Energy Services—Background Note by the Secretariat, Doc, 12 January 2010, CPC [883].

  60. 60.

    Ibid., CPC [5115].

  61. 61.

    Ibid., CPC [887].

  62. 62.

    Ibid., p. 14.

  63. 63.

    See GATS arts II and XVI.

  64. 64.

    Dolzer and Schreuer (2008), p. 80.

  65. 65.

    See Table 1 below.

    Table 1 Resolution of conflict, issue-area and procedural overlap—a comparison between the WTO and the ECT
    Full size table
  66. 66.

    Art 3.2 DSU.

  67. 67.

    See connection with art 4 ECT.

  68. 68.

    McRae (2004), p. 3.

  69. 69.

    WTO doc. WT/DS412AB/R, WT/DS426/AB/R, Appellate Body Report, Canada—Certain Measures Affecting the Renewable Energy Generation Sector, Canada—Measures Relating to the Feed-in Tariff Program, 6 May 2013; WTO doc. WT/DS412/R, WT/DS426/R, Panel Report, Canada—Certain Measures Affecting the Renewable Energy Generation Sector, Canada—Measures Relating to the Feed-in Tariff Program, 19 December 2012.

  70. 70.

    Cosbey and Mavroidis (2014), p. 9.

  71. 71.

    Art 27 ECT; this article does explicitly not apply to energy trade disputes, see art 28 ECT.

  72. 72.

    Art 26 ECT.

  73. 73.

    Art 7.7 ECT.

  74. 74.

    ECT art 29 and Annex D.

  75. 75.

    ECT arts 6 and 19.

  76. 76.

    Frasl (1996), p. 478.

  77. 77.

    Art 4 ECT and Energy Charter Secretariat (2003), p. viii.

  78. 78.

    In conjuncture with art 29.7 ECT.

  79. 79.

    As set out in arts 17 and 20 DSU. See also Frasl (1996), p. 479.

  80. 80.

    Ibid.; Frasl (1996), p. 495; Energy Charter Secretariat (2001), p. 37, and Azaria (2009).

  81. 81.

    Art 7.7(b) and (c) ECT.

  82. 82.

    See Azaria (2009), p. 589.

  83. 83.

    Ibid., p. 591, referring to the traveaux preparatoires of the ECT: European Energy Charter Conference Secretariat 22.4.94/2647.

  84. 84.

    Meyer (2012), p. 390.

  85. 85.

    Left out are the ECT countries who apply the ECT provisionally, or have applied it provisionally in the past: Russia, Belarus, Australia, Iceland and Norway.

  86. 86.

    See Table 1.

  87. 87.

    It goes without saying that rules on TRIMs, TRIPs and GATS within the WTO are much more elaborate than the rules provided on these topics in the ECT.

  88. 88.

    Part III ECT.

  89. 89.

    Note, however, that in the case of art 26 of the ECT, the investor would be the litigating party, while under the DSU it would be a State, namely a WTO Member.

  90. 90.

    Pauwelyn (2003), p. 443 and art 1.1 DSU.

  91. 91.

    WTO doc. WT/DS413/R, Panel Report, China—Certain Measures Affecting Electronic Payment Services, 16 July 2012.

  92. 92.

    In contrast, see the extensive list of dispute settlement cases litigated under the ECT, “Investor-State Dispute Settlement Cases” on http://www.energycharter.org.

  93. 93.

    In fact, in case parties to a dispute failed to settle it amicable pursuant to art 26.1 ECT, art 26.2 ECT gives the investor three options for submitting the dispute for resolution: “(a) to the courts or administrative tribunals of the Contracting Party to the dispute; (b) in accordance with any applicable, previously agreed dispute settlement procedure; or (c) in accordance with the following paragraphs of this Article” (the latter referring to the ad hoc dispute settlement procedure provided for in the ECT).

  94. 94.

    Pauwelyn (2006), [25], citing Wolfrum and Matz (2003), pp. 159–163.

  95. 95.

    Wolfrum and Matz (2003), pp. 159–163.

  96. 96.

    Ibid., p. 161.

  97. 97.

    Ibid.

  98. 98.

    Ibid., p. 159.

  99. 99.

    Energy Charter Secretariat (2001, 2003).

  100. 100.

    WTO, WTO News, Lamy Calls for Dialogue on Trade in Energy in WTO, 29 April 2013, http://wto.org/english/news_e/sppl_e/sppl279_e.htm (accessed 4 March 2016).

  101. 101.

    International Energy Charter, Agreed Text for Adoption in The Hague at the Ministerial Conference on the IEC on 20 May 2015, http://www.energycharter.org/fileadmin/DocumentsMedia/Legal/IEC_EN.pdf (accessed 31 May 2016).

  102. 102.

    The 1991 Energy Charter, also known as the European Energy Charter, was the founding document for the Energy Charter Treaty and provides the political foundation for the Charter process.

  103. 103.

    See Preamble to the text of the 2015 Charter.

  104. 104.

    Ibid.

  105. 105.

    International Energy Charter (2015) Title I—Objectives [1].

  106. 106.

    Ibid.

  107. 107.

    Wolfrum and Matz (2003).

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  1. Tilburg Law School, Tilburg University, Tilburg, The Netherlands

    Anna Marhold

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  1. Department of International, Legal, Historical and Political Studies, University of Milan, Milan, Italy

    Giovanna Adinolfi

  2. Faculty of Law, University of Leiden, Leiden, The Netherlands

    Freya Baetens

  3. Doctoral College of Law and Economics, University of Hamburg, Hamburg, Germany

    José Caiado

  4. Department of International, Legal, Historical and Political Studies, University of Milan, Milan, Italy

    Angela Lupone

  5. Department of International, Legal, Historical and Political Studies, University of Milan, Milan, Italy

    Anna G. Micara

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Marhold, A. (2017). The Nexus Between the WTO and the ECT in Global Energy Governance. In: Adinolfi, G., Baetens, F., Caiado, J., Lupone, A., Micara, A. (eds) International Economic Law. Springer, Cham. https://doi.org/10.1007/978-3-319-44645-5_11

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