Denial of Benefits Under Article 17 of the Energy Charter Treaty - Chapter 08 - Leading Practitioners’ Guide to International Oil & Gas Arbitration

Author(s):

Philippe Pinsolle

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22 pages

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August, 2015

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I. INTRODUCTION

Article 17 of the Energy Charter Treaty is often considered as

belonging to the so-called general category of “denial of benefits”

provisions. This category encompasses other well-known treaty

provisions, such as Article 1113 of the NAFTA Treaty or Article 19

of the ASEAN Treaty. In addition, many bilateral treaties contain a

denial of benefits provision, which often applies to tax matters. Such

treaties include for example the Treaty between the United States of

America and the Republic of Ecuador concerning the Encouragement

and Reciprocal Protection of Investment signed on 27 August 1993

(Article (I)(2)), the Treaty between the Government of the United

States of America and the Government of the Republic of Georgia

concerning the Encouragement and Reciprocal Protection of

Investment signed on 7 March 1994 (Article XII), the Agreement

between the Lebanese Republic and the Republic of Austria on the

Reciprocal Promotion and Protection of Investments signed on 26

May 2001 (Article 10), and the Agreement between Canada and the

Republic of Peru for the Promotion and Protection of Investments

signed on 14 November 2006 (Article 18).

The Energy Charter Treaty does contain a specific tax carve-out

in Article 21. For its part, Article 17 serves a different purpose. This

purpose is primarily to ensure that investors coming from States

which would not otherwise benefit from the provisions of the ECT

do not have recourse to a Trojan horse in order to indirectly acquire

these benefits. Consistent with the principles enunciated by the

Vienna Convention on the Law of Treaties, this purpose will be

taken into account along with the treaty’s language and object.

Article 17 has already given rise to a certain number of academic

studies.1 It has also been applied in a number of public cases.2 It

follows that since its enactment 20 years ago in 1994, Article 17 has

now been both studied and applied sufficiently to give us some

comfort in the manner in which this article is to operate.

This chapter does not propose to discuss the topics that have

already been analyzed by the various existing academic studies devoted

to Article 17. Rather it aims at providing a roadmap of the application