ABOUT TDM Sample article This is a free sample article available at transnational-dispute-management.com If you are interested in these articles why not take a subscription? Or read our other free articles & newsletters. Subscription fees start at 75 euro per year, see our subscription page for more details... Contribute? Read our Submission guidelines for more information. About TDM Focussing on recent developments in the area of Investment arbitration and Dispute Management, regulation, treaties, judicial and arbitral cases, voluntary guidelines, tax and contracting. TDM is supported by CEPMLP / Dundee, the International Bar Association and other law firms, international organizations and companies. Editor-in-Chief Editor-in-Chief is Thomas Wälde, Professor of International Energy Law (and former Executive Director) of the Centre for Energy, Petroleum and Mineral Law and Policy (CEPMLP) at the University of Dundee, the internationally leading graduate school in oil, gas and energy law and policy. Professor Wälde is the former principal UN adviser on oil, gas, energy and investment law.

Arbitral proceedings between states and investors based on Art. 26 Energy Charter Treaty

Book review by Thomas W Wälde, CEPMLP

Richard Happ, Schiedsverfahren zwischen Staaten und Investoren nach Art 26 Energiechartavertrag (Arbitral proceedings between states and investors based on Art. 26 Energy Charter Treaty), Peter Lang, Frankfurt, 2000, isbn 3-631-36734-1, 220 pages, bibliography

Art. 26 of the Energy Charter Treaty allows foreign investors (from member states) to litigate directly, without prior arbitral agreement, against ECT member states (50 plus EC) for breaches of the "investment disciplines" by host states. These include expropriation and "equivalent" action, national treatment - non-discrimination, breach of governmental commitments, non-repatriability of revenues.

This "arbitration without (direct) privity" has been modelled on recent bilateral investment treaties and chapter XI of the North-American Free Trade Agreement - with much, interesting and controversial arbitration practice now taking place against Mexico, Canada and the USA ( www.naftaclaims.com ). Art. 26 therefore covers energy investment made in the 50+ EU member states, in the main the European countries, the countries of the former USSR, Mongolia, Australia and Japan and the European Community. The US did not sign the treaty; Russia signed, is currently considering ratification, but is found through provisional application (See: Bamberger/Linehan/Wälde, in JENRL 2000). This book focuses on Art. 26. It originated in a doctoral dissertation at the University of Kiel, Germany.

It places the Energy Charter Treaty and this novel, and potentially very far-reaching, arbitral facility into the context of globalisation. With globalisation, the role of the state and traditional inter-state only public international law weakens. Multinational companies, and all foreign investors, gain direct rights under international law. They can now use the facilities of international commercial arbitration, well established and well protected by the 1958 New York Convention, to call host states to account on an equal level, with no recourse to the host state's unilateral sovereign powers or its influence over national judiciaries. The book traces the story of international investor-state arbitration mainly post WW II, the significant series of arbitrations (Libyan, US-Iran); it discusses (mainly based on my edited book on the Energy Charter Treaty, London 1996) the history and context of the Treaty.

In the latter chapters, the author discusses in particular doctrinal disputes about the nature of investment arbitration and the role of applicable law, with controversy between the "lex loci arbitri" (place of arbitration) on one hand and "international law" on the other. He considers that when the ICSID arbitration facility is selected (one of the options in Art. 26), the applicable law is international, while otherwise one needs to discern applicable law from the intentions of the treaty; in the case of Art. 26 non-ICSID venues (Ad-hoc arbitration under UNCITRAL rules; Stockholm Chamber of Commerce arbitration), he suggests lex loci arbitri and a private-law character of the arbitration.

The book is short; concise; well researched and very clearly written and structured. It would have benefited from an English summary. In my view, there is space for more extensive analysis of this significant mechanism. First, I would like to see a much closer analysis of the relevance of GATT/WTO jurisprudence, in particularly for "national treatment" for the ECT principles which are justiciable under Art. 26. Second, there are numerous problems of a practical and procedural nature in implementing Art. 26, in particular the relations of Treaty-based arbitration relying on the selected disciplines in part III of the Treaty, with arbitration based on contractual arbitration clauses and jurisdiction of national courts. These, plus the interaction between a specific contract, the Energy Charter Treaty and the selected arbitration rules - plus the lex loci arbitri and the New York Convention - still await in-depth analysis.

Third, there is now an emerging body of precedent for the Energy Charter Treaty arising out of the parallel, but somewhat earlier Chapter XI of the NAFTA. Most of the questions there, both procedural and substantive will inevitably constitute relevant and persuasive precedent for the ECT (does the arbitration impose a traditional "minimum standard" discipline - or is the reference to "fair and equitable treatment" rather a reference to contemporary good regulatory governance practice? Is the US doctrine of "regulatory taking" incorporated through the "equivalent" and "tantamount" to expropriation reference in the Energy Charter Treaty?)

Finally, the surprising actions of the Canadian government in trying to deny recognition to NAFTA chapter XI investment awards should raise procedural and substantive lessons for a solid - and enforceable - arbitration under Art. 26 ECT.