The inclusion of the notion of transparency in different forms of international investment agreements aims to promote the inclusion of transparent practices at the host-state national level. The Energy Charter Treaty refers to the notion of transparency only in the context of specific national measures. These measures are legislative, judicial and administrative decisions made by a Contracting Party which could affect foreign trade and investments in the energy sector, and which are protected under the ECT. The ECT Secretariat has further explained and clarified the notion of transparency in the context of the scope of ECT Article 20, where transparency is a vehicle to remove barriers to energy investments and therefore promote a more predictable and stable energy sector at a national level. The objective of this provision is to use transparency as a vehicle to addressed national concealed protectionism and inefficiencies.
The State’s right to regulate is a right that often needs to be balanced against the investor’s substantive protections. In the context of tax measures, ECT Article 21 safeguards the State’s right to regulate when exercising bone fide tax measures that could have an effect on foreign energy investors. Article 21 is often described as a ‘carve-out’ provision as it protects the State’s regulatory tax measures against possible challenges made by foreign investors. This means that the ECT does not create rights nor imposes obligations in relation to taxation measures, however, there are some conditional limitations. ECT Article 21(5)(b) provides that when there is a question on whether a tax measure constitutes expropriation and discrimination the issue should be referred to competent tax authorities
Costantino Grasso and Gloria Alvarez
This chapter illustrates a series of exceptions provided by Article 24 of the Energy Charter Treaty, which have been inspired by the exceptions from trade rules that are contained in the General Agreement on Tariffs and Trade framework (GATT) of 1994. Such exceptions give the Contracting Parties the possibility of derogating from treaty rules for various reasons. The chapter offers a critical analysis of such exceptions focusing on issues like the acquisition or distribution of energy materials and products in conditions of short supply arising from exceptional causes; the possibility of establishing privileges for investors who are aboriginal people or socially or economically disadvantaged individuals; the possibility of establishing or joining free-trade areas or customs unions, the protection of essential security interests; the implementation of national policies related to the non-proliferation of nuclear weapons; and the maintenance of domestic law and order.
Costantino Grasso and Gloria Alvarez
This chapter offers a commentary to Article 25 of the Energy Charter Treaty, which sets out rules to be applied where a Contracting Party is also party to an Economic Integration Agreement (EIA). The chapter deals with the difficulties of defining and regulating this kind of international legal instruments, whose scope may vary significantly and that may be established at the multilateral, regional, interregional, plurilateral or bilateral level. It then explains how Article 25 provides a general exception establishing that the provisions of the treaty cannot be interpreted in a way to oblige a Contracting Party, which is also party to an EIA, to extend, by means of most-favoured-nation treatment, to another Contracting Party which is not a party to that EIA, any preferential treatment applicable between the parties to that agreement.