Originally from World Arbitration Reporter (WAR) - 2nd Edition

A. Purpose

The Energy Charter Treaty of 1994 is one of the most significant multilateral treaties currently in force. It is unique as it regulates the biggest, and often most politically sensitive, industry in the world, energy. Its purpose is stated in Article 2 of the treaty “to establish a legal framework in order to promote long-term cooperation in the energy field ....” Article 2 confirms that this will be achieved “in accordance with the objectives and principles of the Charter,” in this way incorporating the provisions of the European Energy Charter signed on 17 December 2001. The preamble of the Energy Charter Treaty (ECT) makes it clear that the primary aim was to encourage economic growth through the adoption of “measures to liberalise investment and trade in energy.” It is an ambitious treaty in terms of its aim to regulate cooperation and development in the energy sector covering trade, competition, transit, environment, access to capital and investment protection. The ECT also gives the right to investors to take a claim directly against a host state. Previously, in the petroleum industry each company would have had to negotiate an arbitration provision in a concession agreement.

Since then, there has been a significant change in the international legal framework relating to foreign investment. There are now almost 3,000 bilateral investment treaties in place many of which would also cover energy investment. However, the ECT is the only multilateral treaty relating to the energy sector and as such will continue to gain prominence. The ECT is expected to be relied on in the future to ensure the security of energy supplies; create a stable and predictable legal regime for disputes that arise under Part III;1 and also to assist and encourage methods of energy production that will combat climate change.