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Litigation under Energy Charter Treaty (ECT)
The Energy Charter Treaty is a multilateral treaty completed in 1994 and signed by 51 States, including Russia, and ratified so far by 46 States. The Energy Charter Treaty's Web site states:
"The fundamental aim of the Energy Charter Treaty is to strengthen the Rule of Law on energy issues, by creating a level playing field of rules to be observed by all participating governments, thus minimizing the risks associated with energy-related investments and trade."
"The Treaty's provisions focus on five broad areas: the protection and promotion of foreign energy investments, based on the extension of national treatment, or most-favoured nation treatment (whichever is more favourable); free trade in energy materials, products and energy-related equipment, based on WTO rules; freedom of energy transit through pipelines and grids; reducing the negative environmental impact of the energy cycle through improving energy efficiency; and mechanisms for the resolution of State-to-State or Investor-to-State disputes."
Although Russia has not yet ratified the Treaty, it has agreed to be provisionally bound by the treaty. Moreover, Russia has played a leadership role in the ECT's governing body: In December 2004, Russia's Deputy Minister of Industry and Energy, Ivan Materov, was appointed Vice-Chairman of The Energy Charter Conference, "an inter-governmental organization and the governing and decision-making body for the Energy Charter process, established by the 1994 Energy Charter Treaty"¹.
If you hold YUKOS ADRs or ordinary shares, are a citizen of one of the countries which is a signatory to the ECT, and would like to learn more about how to take legal action under this treaty, please contact the YUKOS Minority Shareholder Coalition.
The Energy Charter Treaty contains provisions very similar to those contained in Bilateral Investment Treaties as to the protection of investments in member states and as to dispute resolution:
Fair and Equitable Treatment
Each Contracting Party (signatory state) "shall encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal."
Provisions Against Expropriation
Moreover, the Treaty provides that investments of Investors of one signatory state in the area of any other signatory state shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation ("Expropriation"), except where such expropriation is:
(a) for a purpose which is in the public interest;
(b) not discriminatory;
(c) carried out under due process of law; and
(d) accompanied by the payment of prompt, adequate and effective compensation, amounting to the fair market value of the Investment expropriated at the time immediately before the Expropriation or impending Expropriation became known in such a way as to affect the value of the Investment.
Dispute Resolution
As is the case with the Bilateral Investment Treaties, Russia expressly waives Sovereign Immunity under the ECT, and agrees to international arbitration as the means for dispute resolution. Disputes between a signatory state and an investor of another signatory state which cannot be settled amicably within three months may be submitted for resolution by the affected investor to arbitration under (a) The International Centre for Settlement of Investment Disputes (ICSID), (b) a sole arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or (c) an arbitral proceeding under the Arbitration Institute of the Stockholm Chamber of Commerce.
Members of the Energy Charter Conference and Signatories of the Treaty
Albania, Armenia, Austria, Australia*, Azerbaijan, Belarus*, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Cyprus, Denmark, Estonia, European Communities, Finland, France, Georgia, Germany, Greece, Hungary, Iceland*, Ireland, Italy, Japan, Kazakhstan, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Mongolia, Netherlands, Norway*, Poland, Portugal, Romania, Russian Federation*, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, The former Yugoslav Republic of Macedonia, Turkey, Turkmenistan, Ukraine, Uzbekistan, United Kingdom.
* - denotes state in which ratification of the Energy Charter Treaty is still pending
Read the full-text of Energy Charter Treaty »
Energy Charter Treaty Web site »
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