Title: The ECT and Dispute Settlement of Transnational Energy Pipelines
1The ECT and Dispute Settlement ofTransnational
Energy Pipelines
- Prof. Dr. Yang Zewei
- Law School, Wuhan University
- P.R. China
2Contents
- Types of Disputes over Transnational Energy
Pipelines and Their Causes - The ECT the Main Intl Legal System of Dispute
Settlement on Transnational Energy Pipeline - Particular Mechanisms to Settle Disputes on
Transnational Energy Pipelines - What Is Important to China?
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3I. Types of Disputes over Transnational Energy
Pipelines and Their Causes
- Various types of disputes over transnational
energy pipelines - Causes for disputes over transnational energy
pipelines
4Various types of disputes over transnational
energy pipelines
- Based on subjects of dispute
- --disputes between contracting parties
- --state-state dispute
- --investor-state dispute
- Based on objects of dispute
- -- trade disputes
- --transit disputes
- --investment disputes
- --disputes related to environment
5Main causes for disputes over transnational
energy pipelines
- Technology
- Commercial and economical reasons
- Disputes over damage on ecology and environment
caused by transnational energy pipelines - Threat to interrupt pipeline caused by political
reasons
6II. The ECT the Main Intl Legal System of
Dispute Settlement on Transnational Energy
Pipeline
- The Energy Charter Treaty
- The Energy Charter Protocol on Transit
- The Model Agreements
7 The Energy Charter Treaty
- The ECT is comprised of a preamble and 50
articles divided into 8 parts - Article 26 provides procedure on settlement of
disputes between investor and a contracting party - Article 27 provides for a special procedure for
disputes between contracting parties - Article 29 and Annex D include a mechanism for
settling trade disputes over energy trade between
member countries - Article 7.7 provides a specialized mechanism for
transit disputes - Article 19 is about environmental issues, as
well as disputes over competition is Article 6.7
8 The Energy Charter Protocol on Transit
- The draft text of the Transit Protocol, with a
preamble and 8 parts, has 34 articles - Article 21 (Part VI), Settlement of Disputes
Between Contracting Parties
9The Model Agreements
- the Inter-Governmental Model Agreement on
Cross-Border Pipelines (IGA Model Agreement) - the Host-Government Model Agreement on
Cross-Border Pipelines (HGA Model Agreement)
10 III. Particular Mechanisms to Settle Disputes
on Transnational Energy Pipelines
- Diplomatic or Political Means
- Arbitration and adjudication of intl judicial
bodies - A Specialized Conciliation Mechanism under the
ECT - The Energy Charter Conference
11 Diplomatic or Political Means
- Negotiation
- Good Offices
- Mediation
- Conciliation
- International Investigation
- Measures Taken under the UN
12 Arbitration and adjudication of intl judicial
bodies
- Arbitration under the ECT
- --the Intl Centre for Settlement of
Investment Disputes - --the Additional Facility for the
Administration of Proceedings - --a sole arbitrator or ad hoc arbitration
tribunal - --the Arbitration Institute of the
Stockholm Chamber of Commerce - Awards of intl judicial bodies
- --the International Court of Justice
- --the International Tribunal for the Law
of the Sea
13A Specialized Conciliation Mechanism under the
ECT
- According to Article 7.7 of the ECT, when
contracting parties have exhausted all relevant
contractual or other dispute resolution remedies
previously agreed - (a) A Contracting Party party to the dispute may
refer it to the Secretary-General by a
notification summarizing the matters in dispute.
The Secretary-General shall notify all
Contracting Parties of any such referral - (b) Within 30 days of receipt of such a
notification, the Secretary-General, in
consultation with the parties to the dispute and
the other Contracting Parties concerned, shall
appoint a conciliator. Such a conciliator shall
have experience in the matters subject to dispute
and shall not be a national or citizen of or
permanently resident in a party to the dispute or
one of the other Contracting Parties concerned. - (c) The conciliator shall seek the agreement of
the parties to the dispute to a resolution
thereof or upon a procedure to achieve such
resolution. If within 90 days of his appointment
he has failed to secure such agreement, he shall
recommend a resolution to the dispute or a
procedure to achieve such resolution and shall
decide the interim tariffs and other terms and
conditions to be observed for Transit from a date
which he shall specify until the dispute is
resolved - (d) The Contracting Parties undertake to observe
and ensure that the entities under their control
or jurisdiction observe any interim decision
under subparagraph (c) on tariffs, terms and
conditions for 12 months following the
conciliators decision or until resolution of the
dispute, whichever is earlier
14The Energy Charter Conference
- According to Article 34.3 of the ECT, the Energy
Charter Conference is a body of discuss,
consider, and settle disputes. If any dispute is
referred to the Conference Secretariat by a
contracting party, the Secretariat shall make
investigations and informal mediation so as to
coordinate the parties to the dispute to reach
informal or formal settlement
15IV.What Is Important to China?
- In May 2006, China-Kazakhstan oil pipelines
starting oil transmission - In July 2007, the China-Turkmenistan natural gas
purchase and sale agreement - In July 2008, the China-Kazakhstan gas pipeline
has started construction
16IV.What Is Important to China?
- 1. China should establish and develop a friendly
relationship with different countries - 2.The best choice to settle a dispute is through
a diplomatic or political means - 3.Multilateral Mechanism is an important channel
- 4.Legal methods are the last resort
17 1. China should establish and develop a friendly
relationship with different countries
- Firstly, the history that all 8 transnational oil
pipelines in the Middle East were interrupted
more than once because of political antagonism
has proven this - Secondly, the reality is another proofthe
Russia-Ukraine dispute over natural gas prices in
the turn of 2005 and 2006 is essentially a
conflict of their strategies on foreign affairs
after the Color Revolution - Lastly, in practice, legal obligations always
give way to political needs some countries play
energy card as a political tool by threatening
to interrupt transit energy pipelines
182.The best choice to settle a dispute is through
a diplomatic or political means
- Firstly, the ECT attaches great importance to
diplomatic and political means to settle
transnational energy pipeline disputes - Secondly, a diplomatic or political mechanism is
comparatively flexible and economic - Thirdly, many disputes over transnational energy
pipelines have been settled successfully through
diplomatic or political mechanisms
193.Multilateral Mechanism is an important channel
- In 2002, some scholar had pointed out the
Peoples Republic of China are contemplating
joining the Energy Charter process by signing the
European Energy Charter as a first step of
possible accession to the Treaty itself. - At present, China is an observer state of the
Energy Charter Conference. As the latest
multilateral international organization
specialized on energy, the Conference is valuable
for Chinese government to settle disputes over
transnational energy pipelines - Besides, the Specialized Conciliation Mechanism
under the ECT not only is a flexible means to
settle disputes, but also can be utilized as a
practical tactics since no country should impede
the energy pipeline during this process
204.Legal methods are the last resort
- Legal methods are always the last resort to
settle disputes over transnational energy
pipelines, since legal mechanisms inflexibility
and protracted procedures would affect the normal
operation of pipelines. However, they really can
play a positive role - Take arbitration as an example, investors choose
arbitration as a means to reduce their political
risks in host states so that they can focus on
commercial and industrial risks meanwhile, host
governments take arbitration as a means to create
more competition for foreign direct investment
opportunities in the host state, hence
increasing investors willingness to invest,
thereby obtaining more favorable terms and
maximizing benefits from national inward
investment opportunities
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