A Comparative Analysis of the ECT and BITs in Light of Evolving EU Policy - Chapter 09 - Leading Practitioners’ Guide to International Oil & Gas Arbitration

Author(s):

Graham Coop

Bernhard Maier

Page Count:

58 pages

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Published:

August, 2015

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Originally from The Leading Practitioners' Guide to International Oil & Gas Arbitration

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I. INTRODUCTION

With the entry into force of the Treaty on the Functioning of the

European Union, as amended by the Lisbon Treaty (the “TFEU”), in

2009, foreign direct investment became part of the exclusive

competence of the European Union (the “EU”). Five years later, the

EU has begun to exercise its newly allocated power. For example,

the European Commission has recently negotiated a 512-page

comprehensive trade and investment agreement with Canada,

threatened that it would “pursue every appropriate legal avenue” to

stall enforcement proceedings in an intra-EU bilateral investment

treaty (“BIT”) dispute and asserted that the Energy Charter Treaty

(the “ECT”) does not create obligations among EU Member States

inter se.

These actions have generated considerable controversy. This

flows in part from the different approaches taken by the international

and the European lawyer respectively as regards the natures of

international and European law. Whereas the European Court of

Justice (the “Court of Justice”, the “Court” or the “ECJ”) and the

European Commission maintain that European law constitutes a

separate legal order, public international lawyers insist that European

law remains a subsystem of international law.

Inherent in the conclusion of bilateral and multilateral investment

agreements (and investor-State dispute resolution in particular) is a

certain scepticism towards other States’ political, regulatory and legal

framework. By contrast, the European Union is a “highly integrated

international supranational organisation”1 based on democracy,

equality and the rule of law, intended to offer its citizens “an area of

freedom, security and justice without internal borders”.2

Initially, the conflict appeared to be between the proponents of

BITs (and investor-State arbitration), on the one hand, and the

European institutions, on the other. Today, the debate has become

increasingly multidimensional. Not only is the EU encroaching upon

Member States’ ability to conclude investment agreements and to

engage in arbitrations thereunder, but the investment arbitration

system as a whole has become subject to increasing public criticism.

Opponents of investment arbitration claim that international

investment agreements grant special privileges to multinational

companies, limit governments’ scope to legislate in the public

interest, and are inherently undemocratic and should therefore be

done away with.

The state of flux resulting from these conflicting

multidimensional considerations has the potential to affect the

practical application of the provisions of intra-EU and extra-EU

BITs, as well as the ECT, in disputes involving oil and gas. States

and investors alike remain unsure whether these frameworks remain

applicable in their present form and how to manage this uncertainty
in practice.