Offshore pipelines as an investment under the Energy Charter Treaty

Nikolaos Giannopoulos

Phd Candidate, University of Athens

Fragmented Legal Framework Regulating Offshore Pipelines

• International Agreements Specific to Pipelines

• Regional Framework Agreements ▫ Umbrella Agreement on the Institutional Framework for the Establishment of

Interstate Oil and Gas Transportation System (still on paper)

• Multilateral Environmental Agreements▫ the 1992 Convention on Biological Diversity, ▫ the 1971 Ramsar Convention on Wetlands of International Importance

• Soft Law Documents of International Organizations

• United Nations Law of the Sea Convention: traditional legal framework regulating the construction, operation, protection and decommissioning of offshore pipelines, but not aligned to investment protection

• Energy Charter Treaty: comprehensive general legal framework for long-term cooperation in the energy field

Models of offshore pipelines

National pipelines model:

patchwork of national regimes

International model:

single integrated entity

Intergovernmental Agreements

(IGAs)

Host Government Agreements

(HGAs)

Case Study: Investment protection of offshore pipeline under the ECT

Investor - State Dispute

Jurisdictional conditions under Article 26 of the ECT:

a. the dispute relates to an alleged breach of an obligation of a Contracting State under Part III of the ECT

b. the dispute relates to an “Investment”, c. the “Investment” must have been made in the “Area” of

the Contracting Stated. the claimant must be an Investor of a Contacting State,

other than the Contracting State in which the investment was made

e. the events which lie at the basis of the claim must have taken place when the ECT was in force between the parties.

Case Study: Investment protection of offshore pipeline under the ECT

“Investment”: broad definition, virtually any right, property or interest in money or money’s

worth

The second of the ECT’s Understanding on Economic Activity in the Energy Sector includes:

“land transportation, distribution, storage and supply of Energy Materials and Products,

e.g., by way of transmission and distribution grids and pipelines or dedicated rail lines, and

construction of facilities for such, including the laying of oil, gas and coal-slurry pipelines”

“Area”: not only territory, but also marine areas where State exercises jurisdiction or jurisdictional rights

Provisional Application: Article 45(1) ECT

• Kardassopoulos v. Georgia, ICSID Case No. ARB/05/18, Decision in Jurisdiction, 6 July 2007

• Yukos Universal Limited v. the Russian Federation, PCA, Jurisdiction and Admissibility, Case No. AA27, 30 November 2009

Regulatory Expropriation: degree of interference and effect on investor’s interests

Non – pecuniary remedy: Possibility of withdrawal of detrimental regulatory measures

Investment Protection of offshore pipeline under the ECT within the EU

EU law applicable to offshore pipelines (Gas Directive, Gas Regulation, Third Energy Package) affects the protection of investments

ECT applies to intra-EU cases – no “disconnection clause” in the Treaty

European Commission’s view:

• Arbitral tribunals should decline jurisdiction / admissibility in intra-EU disputes

• EU law is applicable law under Article 26(6) of the ECT

• EU law confers “equivalent protection” to investors, thus ECT cannot be violated when EU law is enforced

Can Investors have legitimate expectations in regard to the consequences of the implementation by an EU member state of EU law?

• Electrabel v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012

Concluding Remarks: Towards an uncertain future for the ECT?

International Energy Charter signed in May 2015• 66 signatories, among them China• potential for more coherent global energy governance

But will the ECT survive in Europe?

• recent withdrawal of Italy• wave of intra-EU disputes under the ECT• arbitral awards may dissuade other States from acceding to ECT

Thank you for your attention!

This paper was prepared under the Research Project “Energy at Sea” within the Research Funding Program

ARISTEIA II, funded by the Greek Secretariat for Research and Technology