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European Energy Charter

The Energy Charter Treaty establishes a framework for international cooperation between European countries and other industrialised counties with the aim of developing the energy potential of central and Eastern European countries and of ensuring security of energy supply for the European Union. The Protocol on energy efficiency and related environmental aspects aims to promote energy efficiency policies that are compatible with sustainable development, to encourage more efficient and sound use of energy and to promote cooperation in the field of energy efficiency.

ACT

Council and Commission Decision 98/181/EC, ECSC, Euratom of 23 September 1997 on the conclusion, by the European Communities, of the Energy Charter Treaty and the Energy Charter Protocol on energy efficiency and related environmental aspects.

SUMMARY

Background

At the Dublin European Council (June 1990), the Prime Minister of the Netherlands suggested establishing cooperation in the energy sector with the eastern European and former Soviet Union countries, with the aim of stimulating economic growth and improving the EU's security of supply. The Council invited the Commission to look into the best way of establishing cooperation, and in 1991 the Commission proposed the European Energy Charter. Negotiations on this Charter began in Brussels in July 1991 and culminated in the signature of a concluding document at The Hague on 17 December 1991.

The 51 signatories of the European Energy Charter undertook to pursue the objectives laid down in the Charter and to establish cooperation under a legally binding basic agreement, which became the Energy Charter Treaty. The purpose of this Treaty is to promote East-West industrial cooperation through legal guarantees concerning investments, transit and trade. The Energy Charter Treaty and the Energy Charter Protocol on energy efficiency and related environmental aspects were signed in Lisbon on 17 December 1994 by all signatories to the 1991 Charter except for the United States and Canada. The EU and its Member States are signatories to the Treaty and the Protocol.

The Energy Charter Treaty and the Energy Charter Protocol on energy efficiency and related environmental aspects were approved by this Decision on behalf of the European Coal and Steel Community (ECSC), the European Community (EC) and Euratom (European Atomic Energy Community).

The Decision sets out the methods for establishing the position which the EU may be required to take within the Energy Charter Conference. It also indicates the method for establishing the position to take on behalf of the ECSC and Euratom.

Energy Charter Treaty

The aim of the Treaty is to establish a legal framework to promote long-term cooperation in the energy sector based on the principles enshrined in the European Energy Charter.

The key provisions of the Treaty concern the protection of investment, trade in energy materials and products, transit and dispute settlement.

As regards completed investments, Contracting Parties must promote and create stable, favourable and transparent conditions for foreign investors and apply the most-favoured nation principle or offer the same treatment that is given to national investors, whichever arrangement is the most favourable. However, for pre-investments the principle of national treatment will be applied in two stages. In accordance with the Treaty, the first stage is to apply the "best efforts" clause. Then, and subject to the conditions to be defined in a supplementary treaty (currently under negotiation), it will become legally binding to offer national treatment regarding investments.

Trade in energy materials and products between Contracting Parties is governed by the GATT rules. This means that the signatories to the Treaty must apply the GATT rules on trading energy materials and products even if they are not members of the WTO or GATT.

Regarding transit, each party must take the necessary steps to facilitate the transit of energy materials and products in line with the principle of free transit without distinction made on the origin, destination or ownership of such energy materials or products, nor discriminatory pricing on the basis of these distinctions, and without imposing delays, restrictions or unreasonable taxation.

All parties undertake to ensure that the provisions on the transit of energy materials and products and the use of energy transit equipment treat energy materials and products in transit in a manner that is no less favourable than that regarding materials and products originating in their area, save where otherwise provided in an international agreement.

The transit of energy materials and products of energy materials and products may not be interrupted or reduced in the case of a dispute on transit arrangements before the relevant dispute settlement procedures have been followed.

Other provisions prevent countries through which energy materials and products transit from opposing the creation of new capacity.

The Treaty provides for strict procedures for settling disputes either between countries or between private investors and the state in which the investment has been made. In the case of a dispute between an investor and a country, the investor may decide to submit the dispute to international arbitration. In the case of a dispute between countries, and if diplomacy is unsuccessful, an ad hoc arbitration tribunal may be set up. The settlement solutions provided by these mechanisms are binding.

The Treaty sets out the following provisions on competition, transparency, sovereignty, taxation and the environment.

Competition: all parties must take steps to combat market distortions and barriers to competition in economic activities in the energy sector. They must ensure that their legal framework includes provisions to address any unilateral or concerted anti-competitive behaviour in economic activities in the energy sector.

Transparency: Contracting Parties must nominate at least one inquiry point to which requests for information on laws, regulations, legal decisions and general administrative decisions regarding energy materials and products may be addressed.

Sovereignty: all Contracting Parties exercise sovereignty over their energy resources in accordance with and subject to international law. They also have the right to choose the geographical areas in their territory to be made available for exploration and exploitation.

Environment: the "polluter pays" principle is enshrined in the Treaty. This favours market-led pricing which fully reflects environmental costs and benefits. Contracting Parties must reduce, in an economically effective manner, any environmentally harmful impact caused by any operations in the energy cycle in their territory, in compliance with security standards.

Taxation: the Treaty does not establish new fiscal rights or obligations. Direct taxation remains a matter for the national legislation of each country or for applicable bilateral agreements.

State enterprises and privileged bodies: all State enterprises or bodies that are granted exclusive or special privileges by the Contracting Party must comply with Treaty obligations.

The Treaty has a protection clause to maintain the preferential treatment resulting from the treaties establishing the European communities. Therefore under the clause on economic integration agreements (EIAs), a signatory that is party to an EIA has no obligation to extend to another Contracting Party that is not party to the EIA the preferential treatment provided for in that EIA.

Not all the provisions of the Treaty apply immediately to all signatories upon ratification and entry into force of the Treaty. Countries with transition economies benefit from some provisional arrangements.

The Treaty sets out the organisation, structure, tasks and financial provisions for the Energy Charter Conference.

The Treaty provides for the withdrawal of any Contracting Party, subject to compliance with a deadline (five years from the entry into force of the Treaty).

Energy Charter Protocol on energy efficiency and related environmental aspects

This Protocol was adopted in accordance with the Treaty, which clearly provided for the negotiation of protocols and declarations aimed at achieving the objectives and principles laid down in the Charter.

The objectives are:

  • to promote energy efficiency policies compatible with sustainable development;
  • to create the conditions for encouraging producers and consumers to use energy in a more economic, efficient and environmentally sound manner;
  • to encourage cooperation in the field of energy efficiency.

The Contracting Parties undertake to frame energy efficiency policies and legal and regulatory frameworks that promote effective market mechanisms, including market-led pricing.

The Energy Charter Treaty and the Energy Charter Protocol on energy efficiency and related environmental aspects both entered into force on 16 April 1998.

REFERENCES

Act

Entry into force - Date of expiryDeadline for transposition in the Member StatesOfficial Journal
Decision 98/181/EC, CECA, Euratom23.9.1997-OJ L 69 of 9.3.1998

RELATED ACTS

Council Decision 2001/595/EC of 13 July 2001 on the conclusion by the European Community of the Amendment to the trade-related provisions of the Energy Charter Treaty [Official Journal L 209 of 2.8.2001].
By this Decision the European Community adopted the amendment to the trade-related provisions of the Energy Charter Treaty, which had been provisionally adopted in July 1998. The amendment introduces references to provisions applicable to the WTO instead of the 1947 GATT and inserts a list of energy equipment into the trade provisions.

Energy Charter Conference - rules concerning the conduct of the conciliation of transit disputes [Official Journal L 11 of 16.1.1999].

Last updated: 30.01.2007
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