Security of Energy Supply: The Approach in the European Union and the Contribution of the Energy Charter Treaty
| Author | Anna Papaioannou |
| DOI | 10.1177/1023263X9500200104 |
| Date | 01 March 1995 |
| Published date | 01 March 1995 |
| Subject Matter | Article |
Anna Papaioannou
Security
of
Energy Supply: the Approach in the European
Union and the Contribution
of
the Energy Charter Treaty
§1. Introduction
The core objectives of a country's energy policy are the development of energy
resources in an economically efficient way while helping to ensure a secure and reliable
supply. Yet, security of supply is not an easy focus for the policy maker and for the
legislator: its definition and the methods to achieve it are dependent on variable factors
of
ageopolitical, economic and technological nature.
In the European Union (EU), the lack of a common energy policy keeps matters concer-
ning security
of
supply within national competence. It is natural therefore that the recent
attempts to create an internal market in electricity and gas have raised controversy about
the scope of national protectionist measures allegedly securing supply. Security of
supply is expected to be one of the positive outcomes of the internal market in energy.
It is considered, however, that the
EU's
security
of
supply is not the sum of the
Member States' security
of
supply. Therefore certain methods to ensure it, when
designed strictly according to the national needs, may function as stumbling blocks to
fair competition for the energy industry.
Security of supply is also a question of external conunercial and political relations for
the EU as a whole. Its dependency on energy imports, the political and military
instability in the countries which traditionally provide it with energy resources, and the
opening of the markets in Central and Eastern European countries (CEEC) favoured the
idea
of
the first international treaty on energy trade and cross-border investment. The
proposal was put forward at the European Council in Dublin on 25 June 1990 by the
Dutch Prime Minister Ruud Lubbers. It led to the signing by 48 states
of
anon-binding
*Research Fellow, Internationaal Instituut voor Energierecht, Rijksuniversiteit Leiden. I wish 10 thank
Dr Peter Came!on for his comments on previous versions of this paper.
34 MJ 2 (1995)
IAnna Papaioannou
Energy Charter at the Hague Conference of 17 December 1991. Following negotiations
conducted by the European Commission the legally binding Energy Charter Treaty
(ECT) was signed in Lisbon on December 17, 1994. 1
The ECT has two broad economic objectives: the creation of investment opportunities
for western companies disposing
of
the necessary know-how, technology and capital and
the tangible contribution to the economic development
of
CIS and CEEC by concentra-
ting on the energy sector which offers real prospects for quick economic benefits on
both sides. However, the strategic objective which underpins the ECT is to improve the
security
of
supply prospects for those Contracting Parties, mainly western, central and
eastern European countries, which are energy consumers and dependent on imports. 2
The ECT includes provisions on trade of energy materials and products, state sover-
eignty over resources, transit, promotion and protection of investments and a dispute
settlement procedure. It stipulates that trade shall be governed by GATT rules which
will apply
mutatis
mutandi
also to
non-GAIT
members. The signatories shall ensure
non-discriminatory and transparent exploitation of their resources, facilitate market
access and stimulate competition. The protection given to investors applies for the time
being only to the post-investment stage. That is the situation once the exploitation has
already started. The Contracting Parties agree to concede at least national treatment at
this stage. They also agreed to resume negotiations on a second 'supplementary' treaty
providing for such treatment at the pre-investment stage (Art. 10
(4».
The
Treaty complements the GATT Agreement since the latter, even as extended in
1994, does not cover energy specifically. 3In this context the ECT acquires a historical
relevance. Besides adding to the relatively new but rapidly evolving corpus of
international law on cross-border investment and environmental protection, 4it also
t. FinalAct ofthe European Energy Charter
Conference,
AF/EECH/en I, 17 December 1994, Council
Decision 94/998, [1994]
OJ.
L380/1 on the provisional application of the Energy Charter Treaty by
the European Community (The text of thetreaty and its annexes isattached to this Decision). The EU,
the countries of the Commonwealth of Independent States (CIS), the countries of central and eastern
Europe (CEEC), Japan and Australia are among the signatories. The USA took part in the negotiations
but did not sign the Treaty. The Treaty is open to signature until 16 June 1995.
2. The
Gulf
War was a timely event which underlined the necessity for Europe to seek resources others
than those controlled by OPEC.
3. This Round was concluded with the Agreement Establishing the World Trade Organization (WTO) a-
dopted by the EC and 124 countries on 15April 1994 in Marrakesh. The WTO Agreement binds into
a single legal framework 200 previous GATT Agreements, the General Agreement on Trade in
Services (GATS) and the Agreement on Trade Related Intellectual Property Rights (TRIPs). The
electricity sector is particularly affected by the Government Procurement Agreement as extended in
Marrakesh to include the supply of generation equipment to electricity utilities.
4. IBRD and World Bank, Legal
Framework
for the
Treatment
of
Foreign
Investment, (The World Bank,
1992); OECD, Guidelines for Multinational Enterprises, (OECD, 1986); the instruments and binding'
international agreements adopted at the UN Conferenceon Environment and Development, held in Rio
de Janeiro, Brazil, 3-14 June
1992,31
International Legal Materials, 545.
MJ 2 (1995) 35
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