ECT modernization: Energy Charter Conference adopts mandate, confirms December talks
On November 6, 2019, the Energy Charter Conference confirmed that it would hold the first session of its “Modernization Group” on December 12, 2019, kicking off the process to revise the decades-old ECT.
The decision setting out the start date and mandate also includes a tentative timetable for subsequent negotiating sessions. These will be held in April, July and October 2020, after which the Conference will convene for a December 2020 stocktaking session. Each meeting will span approximately four days, and the negotiating documents will be restricted, though brief public summaries will be issued after each meeting if all parties agree. Aside from the December 2019 meeting, which will be held in Albania, the location of the other meetings has not yet been confirmed.
The news comes just one month after the Energy Charter Conference circulated a 57-page document laying out proposed policy options for consideration in the upcoming “modernization” talks, compiling submissions from various ECT signatories on how the agreement should evolve, if at all.
The range of views expressed in that document is varied. Some signatories, such as Japan, have suggested that the ECT’s terms do not require any changes. Others, such as the EU (in line with its negotiating directives) have outlined a detailed set of changes, and have suggested that the energy-focused treaty modernization should also incorporate potential changes to investment law and policy being discussed in other forums, such as the deliberations at UNCITRAL Working Group III on ISDS reform. Five signatories—including Albania, Azerbaijan, Luxembourg, the EU and Turkey—refer specifically to the need to align the ECT with climate change goals under the Paris Agreement.
The document is broken down into various sections, including opening summary statements from some signatories. There are also dedicated sections to various topics, of varying levels of ambition: among these are sections on the pre-investment phase, the right to regulate, the MFN clause, a clarification on “most constant protection and security,” compensation for losses, the umbrella clause, denial of benefits, transfers related to investments, frivolous losses, transparency, security for costs, valuation of damages, third-party funding, sustainable development and corporate social responsibility, access to infrastructure, and the legal relationship between the ECT and members of a regional economic integration organization (REIO).
Also under consideration is whether certain ECT provisions are obsolete and should be dropped entirely or changed, with a subsequent question detailing various provisions that may be considered obsolete and suggested approaches on how to address them specifically.
Other sections of the document are devoted to how certain terms in the ECT are defined, such as charter, economic activity in the energy sector, investment, investor, FET, indirect expropriation, transit, and tariff-setting and related principles.
The sections are built around the list of topics for modernization endorsed in November 2018, and each section includes any issues that specific signatories have raised, their reasoning for doing so and their proposals going forward.