Originally from Energy Dispute Resolution: Investment Protection, Transit and the Energy Charter Treaty

If the drafters of the Energy Charter Treaty (‘Treaty’) have been pleasantly surprised at the growing use and practical impact of the Treaty’s provisions on investment protection, they will surely have been disappointed at the contrasting fortunes of the transit provisions in the Treaty. Even without any knowledge of the Treaty’s drafting history, it is clear from the final text that much effort was expended in developing provisions that establish a legal framework for the peaceful management of transit disputes.1 The collapse of a single state, the Soviet Union, into fifteen sovereign states, linked by interdependent transportation systems for energy, was clearly going to give transit an importance it had not previously enjoyed. Yet, ironically, the existence of these provisions in the Treaty did not led to their utilisation in the most serious transit dispute to date, that between Russia and Ukraine in January 2009. Indeed, in this instance each of the parties de facto rejected the Treaty provisions on transit, raising the question of why they might have chosen to do this. Soon afterwards, Russia elected to withdraw from provisional application of the Treaty altogether, raising the further question of what this means in terms of the effects which such termination might have on future transit disputes, if any. In this chapter, I shall consider the legal issues on transit and the Treaty that arise from the January 2009 interruption of gas supply to Europe, and consider whether the events at that time have made the Treaty's provisions on transit redundant or not. The first section, however, will review some of the institutional, historical and contextual features that shaped the dispute.