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Natural Resources and Energy Regulation in Australia: The Energy White Paper in Context Read chapter Read first chapter

2016 | OriginalPaper | Chapter

18. International Energy Trade and Investor-State Arbitration: What Role for Sustainable Development?

Author : Susan L. Karamanian

Published in: Emerging Issues in Sustainable Development

Publisher: Springer Japan

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Abstract

Energy trade entails more than the purchase and sale of sources of power. It involves transactions involving equipment for production, international shipping and transmission, and an array of sophisticated financial products that seek to reduce risk or costs. Accompanying the internationalization of the energy market is an increasing number of international investment agreements (IIAs), which have facilitated the global growth of the industry. In addition to providing protection to investors from State Parties to treaties when they invest in corresponding State Parties, IIAs may also allow an aggrieved investor to arbitrate a claim against a Host State.
Concerns have been raised that IIAs and investor-state arbitration are at odds with a perceived competing international norm, sustainable development. This chapter analyzes the applicable international legal regime with a specific focus on the text of IIAs, interpretive standards, and arbitral awards. It argues that in a number of IIAs there is room for arbitral tribunals to apply international law and give effect to sustainable development principles. The challenge is for tribunals to conduct an analysis in a disciplined way. The chapter sets forth three rules to help guide tribunals in this effort.

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previous chapter Subsidies Issues in Renewable Energy Trade
next chapter Comment to “International Energy Trade and Investor-State Arbitration”
Footnotes
1
See Yergin (1992).
 
2
See, e.g., Brunet and Shafe (2007).
 
3
The Energy Charter Treaty, Dec. 17, 1994, 2080 U.N.T.S., 34 I.L.M. 360 [hereinafter “ECT”].
 
4
UNCTAD (2016).
 
5
See Sect. 2.
 
6
But see UNCTAD (2014 b) Reform of Investment Treaties.
 
7
See Leal-Arcas and Abu Gosh (2014), pp. 9–10.
 
8
Vattenfall AB v. Federal Republic of Germany, ICSID Case No. ARB/12/12.
 
9
Vattenfall.
 
10
See UNCTAD (2014a) Recent Developments.
 
11
For an assessment of competing interests, see Elbin (2014).
 
12
International Convention for the Prevention of Pollution from Ships, 1973, 12 I.L.M. 1319 [Marpol Convention].
 
13
ECT Art. 6(1).
 
14
ECT Art. 6(1).
 
15
ECT Art. 6(1).
 
16
ECT Art. 10(1).
 
17
ECT Art. 10(1).
 
18
ECT Art. 10(3).
 
19
ECT Art. 13.
 
20
ECT Art. 26(4).
 
21
ECT Art. 26(6).
 
22
ICSID Convention, Mar. 18, 1965, ch 1, § 1, art. 42, 17 UST 1270, 1273, 575 UNTS 159, 62.
 
23
ICSID Arbitration Rules (as amended Apr. 10, 2006) Rule 37(2).
 
24
See, e.g., Glamis Gold Ltd. v. United States, UNCITRAL Arb., Submission of the Quechan Indian Nation (Oct. 16, 2006).
 
25
NAFTA (Preamble), Dec. 17, 1992, 32 I.L.M. 289, 297 (1993) [hereinafter, “NAFTA”].
 
26
ECT (Preamble).
 
27
2012 US Model Bilateral Investment Treaty, Annex B 4(b) [hereinafter “2012 US Model BIT”]. See also Canadian Model BIT, Annex B.13(1) “non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, do not constitute indirect expropriation”).
 
28
Krommendijk and Morijn (2009), pp. 434–435; Mann (2008), p. 19.
 
29
2012 US Model BIT Arts. 12(2); 13(2).
 
30
Agreement for the Promotion and Reciprocal Protection of Investments, Can.-Rom. Art. XVII(2), May 8, 2009.
 
31
Agreement between Canada and the Republic of Peru for the Promotion and Protection of Investments (Preamble) (2006).
 
32
2012 US Model BIT (Preamble); Agreement Between Japan and the Socialist Republic of Viet Nam for the Liberalization, Promotion and Protection of Investment (Nov. 14, 2003) (the treaty’s investment objectives “can be achieved without relaxing health, safety and environmental measures of general application”).
 
33
Canada-Peru Free Trade Agreement Art. 810 (Aug. 1, 2009).
 
34
Alschner and Tuerk (2013), pp. 217, 227.
 
35
Chapter 9, Investment, Art. 9.16, Trans-Pacific Partnership Agreement, available at https://​ustr.​gov/​sites/​default/​files/​TPP-Final-Text-Investment.​pdf (last visited Jan. 23, 2016).
 
36
ECT Art. 19(1).
 
37
ECT Art. 19(1).
 
38
ECT Art. 19(1).
 
39
ECT Art. 19(1).
 
40
Gabčíkovo Nagymaros Case (Hung. v. Slovk.) [1997] ICJ Rep. 7, 78, para. 141 (Judgment).
 
41
Newcombe (2007), pp. 359–360.
 
42
Newcombe (2007), p. 360.
 
43
Foster (2013), pp. 398–405.
 
44
Vienna Convention on the Law of Treaties, art. 31(3)(c), 23 May 1969, 1155 U.N.T.S. 331.
 
45
See UN ILC Fragmentation Report (2006), para. 420.
 
46
AES Summit Generation Ltd. AES-Tisza Erőmű KFT v. Hungary, ICSID Case No. ARB/07/22, Award (Sept. 23, 2010).
 
47
See, e.g., ConocoPhillips Petrozuata B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Award (Sept. 3, 2013); Mobil Corp., Venezuela Holdings B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Jurisdiction (June 10, 2010).
 
48
Occidental Petroleum Corporation v The Republic of Ecuador, Award, ICSID Case No. ARB/06/11 (Oct. 5, 2012).
 
49
Plama Consortium Ltd. v. Rep. of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction (Feb. 8, 2005), para. 128.
 
50
Id.
 
51
Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award (Oct. 31, 2012).
 
52
Deutsche Bank Award, para. 14.
 
53
Deutsche Bank Award, para. 218 (quoting Article 1(1) of Germany-Sri Lanka BIT).
 
54
Deutsche Bank Award, para. 285.
 
55
Deutsche Bank Award, paras. 291–92. The tribunal also recognized that “the preliminary engagement took place in Sri Lanka and it is there too that the investment had its impact.” Id. para. 291.
 
56
See Abaclat v. Argentine Republic, ICSID Case No. ARB/0715, Decision on Jurisdiction and Admissibility (Aug. 4, 2011) (bond-holders are investors).
 
57
Methanex v. United States, Award (May 23, 2005), 44 I.L.M. 1345.
 
58
NAFTA Art. 1101(1).
 
59
Methanex Award, Part IV-Chapter E, para. 22.
 
60
Ethyl Corp. v. Canada, UNCITRAL Arb., Decision on Jurisdiction (June 24, 1998).
 
61
ECT Art. 22(1).
 
62
Lone Pine Resources Inc. v. Canada, Notice of Arbitration, UNCITRAL Arb. (Sept. 6, 2013).
 
63
See, e.g., Photovoltaik Knopf Betrievs-GmBh v. Czech Republic, UNCITRAL Arb. (2013); CSP Equity Investment S.a.r.l. v. Spain (2013).
 
64
See, e.g., Sempra Energy Int’l v. Argentine Republic, ICSID Case No. ARB/02/16, Award (Sept. 28, 2007) (later annulled); Enron Corp. Ponderosa Asset, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award (May 22, 2007) (later annulled); CMS Gas Transmission Co. v. Argentine Republic, ICSID Case No. ARB/01/8, Award (May 12, 2005).
 
65
Karamanian (2012, 2013).
 
66
Arguments in this section, along with citations, are based on the author’s analogous arguments in the human rights context. Karamanian (2013), pp. 436–438, 442–446. The text in this essay uses some of the text and footnotes from this earlier work yet it analyzes the principles in the context of sustainable development versus exclusively human rights, which was the focus of the earlier work.
 
67
VCLT Art. 53.
 
68
Phoenix Action Ltd. v. Czech Republic, ICSID Case No. ARB/06/05 Award (Apr. 15, 2009) para. 78. See also Methanex Award, Part IV, Chap. C, para. 24 (“as a matter of international constitutional law a tribunal has an independent duty to apply imperative principles of law or jus cogens and not to give effect to parties’ choices of law that are inconsistent with such principles”).
 
69
Bjorklund (2007), pp. 199–202; Choudhury (2011), pp. 677–678.
 
70
See Simma and Kill (2009), pp. 678, (“jus cogens norms impose a ‘legally insurmountable limit to permissible treaty interpretation’” (quoting Oil Platforms (Iran v USA), Merits, Judgment, Nov. 6, 2003, ICJ Reports (2003) 161, 330, para. 9 (Separate Opinion of Judge Simma)).
 
71
Wythes (2010), p. 252 (citing Peterson LE & Gray K (2003) International Human Rights in Bilateral Investment Treaties and Investment Treaty Arbitration. International Institute for Sustainable Development, Manitoba, Canada).
 
72
See Phoenix Action, Award; see also Stephan (2011), pp. 1101–1103; Shaffer and Trachtman (2011), p. 128 (noting in the context of the WTO that a customary human rights law norm could be invoked as a defense).
 
73
Brownlie (1998), pp. 516–517.
 
74
Bishop, Crawford & Reisman (2005), p. 916; El Paso Energy Int’l Co. v. Argentine Republic, ICSID Case No. ARB/03/15, Award para. 168 (Oct. 31, 2011) (noting that Professor Sornarajah has argued that permanent sovereignty over natural resources is a principle of jus cogens).
 
75
Bjorklund (2007), p. 201.
 
76
Foresti v. South Africa ICSID Case No. ARB(AF)/07/01 (Nov. 1, 2006), Request for the Registration of Arbitration Proceedings.
 
77
Jurisdictional Immunities of the State (Ger. v. It.), Judgment, para. 95 (Feb. 3, 2012). Stephan (2011), p. 1077.
 
78
VCLT Art. 31(1). See also McLachlan (2008), pp. 383–385; Choudhury (2011), pp. 705–712.
 
79
VCLT Art. 31(2.)
 
80
See note 29 and accompanying text.
 
81
Saluka Investments BV v. Czech Republic, Partial Award (Mar. 17, 2006), para. 264 (Saluka Award).
 
82
See, e.g., Krommendijk and Morijn (2009), pp. 435–436 (promotion and protection of human rights would fit within police powers clauses in BITs); Choudhury (2011), p. 791.
 
83
UN High Commissioner on Human Rights (2011) I.A.2; see also I.B.3 (states should ensure that their laws and policies “enable business respect for human rights” and that they enforce such laws).
 
84
OECD Guidelines (2009) sec. IV and commentary.
 
85
2012 US Model BIT Arts. 12, 13.
 
86
NAFTA Chap. 11 Art. 1114(2).
 
87
2012 US Model BIT Art. 13(1).
 
88
Methanex Award, Pt. II, Chap. B, para. 16.
 
89
See notes 25–26, 31–32 and accompanying text.
 
90
Grand River Enterprises Six Nations, Ltd. v. United States, UNICTRAL Arb., Award para. 69 (Jan. 12, 2011).
 
91
Saluka Award, para. 300.
 
92
Alvarez (2009), p. 33.
 
93
See Simma and Kill (2009), p. 692.
 
94
Simma and Kill (2009), p. 694.
 
95
Netherlands-Suriname Agreement on encouragement and reciprocal protection of investments (2006) Art. 3(1), http://​investmentpolicy​hub.​unctad.​org/​Download/​TreatyFile/​2085 (last visited Jan. 30, 2016).
 
96
Kläger (2011), pp. 117–119.
 
97
Glamis Gold Ltd. v. United States, UNCITRAL Arb., Award (June 8, 2009) para. 616.
 
98
Kläger (2011), pp. 117–119.
 
99
Knoll-Tudor (2009), p. 319.
 
100
UNCTAD (2012), p. 34.
 
101
Office of the United Nations High Commissioner for Human Rights (2007) Good Governance Practices.
 
102
International Thunderbird Gaming Corp. v Mexico, UNCITRAL Arb, Separate Opinion of Thomas Wälde (Jan. 26, 2006) para 27.
 
103
See Sempra Energy Int’l v. Argentina, ICSID Case No ARB/02/16, Award (September 28, 2007).
 
104
See Karamanian (2012), pp. 240–242.
 
105
US-Argentina BIT Art. XI.
 
106
Choudhury (2011), p. 711. The recent award in Philip Morris Brands SARL v. Uruguay, in which the tribunal recognized that it was within Uruguay's police power to regulate against advertisements on tobacco packaging is consistent with this approach. Philip Morris Brands SARL et al. v. Oriental Republic of Uruguay, (ICSID Case No. ARB/10/7), Award (July 8, 2016), paras. 287–291.
 
107
UN ILC State Responsibility (2001) Art. 25
 
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Metadata
Title
International Energy Trade and Investor-State Arbitration: What Role for Sustainable Development?
Author
Susan L. Karamanian
Copyright Year
2016
Publisher
Springer Japan
Book
Emerging Issues in Sustainable Development

Print ISBN: 978-4-431-56424-9

Electronic ISBN: 978-4-431-56426-3

Copyright Year: 2016

DOI
https://doi.org/10.1007/978-4-431-56426-3_18