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The Energy Charter Treaty and its Role in Central and South Asia Harriman Institute, Columbia Univer

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A framework encouraging state-to-state relations, confidence-building, ... encourages cross-border projects ... encourages amicable settlement. provides a ... – PowerPoint PPT presentation

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Title: The Energy Charter Treaty and its Role in Central and South Asia Harriman Institute, Columbia Univer


1
The Energy Charter Treaty and its Role in
Central and South Asia Harriman Institute,
Columbia UniversityNew York, 13 November 2007
  • Mohammad Ali Raza
  • Advisor, Relations with Non-Signatories
  • Energy Charter Secretariat

2
Objective
  • Access to reliable energy supplies for all
  • A framework encouraging state-to-state relations,
    confidence-building, multilateral energy
    cooperation ensuring energy security and
    sustainable development

3
Trends
  • Increase in demand
  • Need for increase in supply
  • Increase in indigenous production and/or
  • cross border projects
  • Investments Vulnerability to
    supply interruptions

4
Response to the challenges
  • Challenge to meet the regions long term energy
    needs
  • Secure investments Foster cross-border gas
    and power supply
  • Collective approach to harmonise mutual
    dependency
  • Increase security decrease vulnerability

5
Solutions
  • Tackle unpredictability through multilateral rule
    of law
  • Greater sense of mutuality among producers,
    consumers and transit within a multilateral forum
    which
  • provides a composite dialogue on all issues
  • addresses security strategies as alternative to
    tit-for-tat response
  • is a confidence building process
  • ENERGY CHARTER PROCESS

6
Tool
  • A multilateral legal framework
  • With a binding set of minimum rules on energy
  • Trade
  • Transit
  • Investment
  • Environment
  • supported by dispute settlement
  • Leaving member states in the driving seat
    because no one size fits all
  • ENERGY CHARTER TREATY

7
Energy Charter History
8
Energy Charter Constituency
  • Signatory
  • Observer

9
Energy Charter Institution
ENERGY CHARTER CONFERENCE (governing body)
Energy Charter Secretariat (HQs Brussels)
Budget Committee
Investment Group
Energy Efficiency Group
Trade Transit Group
Industry Advisory Panel
10
ECT Key Provisions
  • Art 5/29 gt trade
  • Art 7 gt transit
  • Art 10-15 gt investment
  • Art 18 gt sovereignty
  • Art 26-28 gt disputes settlement
  • ECT does NOT impose
  • national energy policies (ie the stage of
    development of the internal energy market is
    irrelevant)
  • privatisation
  • third party access

11
ECT Transit Provisions
  • Reduce politicisation of transit and guarantee
    security of income/supply
  • Offers a number of multilateral depoliticised
    procedures for
  • discouraging transit states to use the transit
    stronghold
  • Extract excessive transit rent
  • Disrupt and obstruct commercially sensible
    transit requests

12
Investment provisionsUnderlying Principle
  • Enhancing credibility, creditworthiness and
    reducing political risk gt more FDIs gt
  • Attracting FDIs by sending signals to foreign
    investors that
  • risk is reduced
  • country prepared to abide by their contractual
    commitments to investors (pacta sunt servanda)
  • Protection of investments abroad

13
State-State Dispute Settlement
Consultations on disputes concerning the
application or interpretation of ECT
if this fails
ECTArbitration
Ad-Hoc Arbitration
Application of ECTand principles of
international law
Award final and binding
Award enforceable
14
Investor-State Dispute Settlement
Consultations (3 months)
Previously agreed DS procedure
Domestic courtsof host country
ECT Arbitration
ICSID
Ad-Hoc Arbitration under UNCITRAL rules
Procedures according to host country laws
Stockholm
Application of IIA and International Law
Award final and binding
Award enforceable
15
Oil and Gas Pipelines in the Region Realities
and Concepts
16
Challenges to multilateral energy cooperation
  • Sovereignty
  • Political barriers
  • Security of supplies
  • Governance of the global energy economy
  • Multilateral framework

17
Challenges to energy transit the IPI Gas
Pipeline Project
  • Common challenges
  • The legal structure of the project
  • Regional Volatility political vicissitudes among
    the countries
  • Indias concerns
  • Interruption of transit
  • Interruption of supply (reserve production
    downgrades, termination of production licenses,
    )
  • Over-dependence on Pakistan
  • Project financing (Public/Private) (for the
    Indian segment)
  • Protection of the Indian investment in Pakistan
    and Iran
  • Pakistans concerns
  • Interruption of supply (reserve production
    downgrades, termination of production licenses,
    )
  • Promote foreign investment
  • Securing recovery of transit fee
  • Protection of the Pakistan investment in Iran
  • Creation of economic imbalance in the region
  • Irans concerns
  • Depletion of indigenous resources
  • Project financing (Public/Private) (for the
    Iranian wells and pipe segment)
  • Protection of the Iranian investment in Pakistan

18
Response to these challenges
  • a multilateral framework/forum which
  • reduces political risks
  • gives minimum legal guarantees
  • encourages cross-border projects
  • leaves the parties free to work out their
    detailed contractual arrangements
  • encourages amicable settlement
  • provides a composite and constant dialogue
  • share knowledge
  • addresses security strategies as alternative to
    tit-for-tat response
  • confidence building process

19
Conclusion
  • Bilateral agreements alone do not adequately
    respond to todays needs
  • A comprehensive universal framework is required
    to
  • facilitate energy transit,
  • encourage diversification of supply, and
  • enhance energy security
  • ECT is the only international binding framework
    in the energy sector

20
Thank you
raza_at_encharter.org
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