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INVESTOR - STATE ARBITRATION UNDER ENERGY CHARTER TREATY

  • Journal of International Business Transactions Law
  • Abbr : IBT
  • 2016, (15), pp.63-92
  • Publisher : The Institute for Legal Studies Dong-A University
  • Research Area : Social Science > Law > Private Law > International Commercial Transactions Law

KIM DAEJUNG 1

1동아대학교 국제전문대학원 국제중재학과

Candidate

ABSTRACT

The Energy Charter Treaty (ECT) was initiated by European countries including Russia, the EU and it was opened for signature in Lisbon on December 17, 1995. The ECT is by far the most widely ratified investment protection agreement as to an important economic sector, energy. The ECT differs from other multilateral investment treaties, which are regional in nature, in that the Treaty has a potentially global reach. The ECT provides substantive protections to foreign investors when they invest in the ECT, thereby stimulating foreign investment by protecting investors from abroad. Article 26 of the ECT provides the procedures for an investor of a investor-state arbitration and it states host state’s unique unconditional consent to an arbitration with only a few exceptions. Investors choose to submit the dispute for resolution among ICSID, UNCITRAL Arbitration Rules and the Arbitration Institute of the Stockholm Chamber of Commerce. A landmark ECT arbitration Yukos Universal Ltd. v. Russian Federation was ruled in November 2009 pursuant to the Energy Charter Treaty on the allegations including expropriation, and decision to reject Russia's objections to the arbitral Tribunal's jurisdiction and the admissibility of the claims. Nykomb's claim was based on a disagreement as to the appropriate tariff applicable under a contract for the production of energy. Nykomb asserted that non-payment of the double tariff amounts constituted indirect or creeping expropriation under the ECT Article 13(1). Petrobart claimed that the Kyrgyz government intervened in the judicial proceedings and executive decrees that ordered KGM's reorganization failed to provide a Fair and Equitable Treatment(FET) under Article 10(1) of the ECT. Although the ECT may be considered to be one of the most successful international investment treaties, many of the prominent energy consuming and exporting states such as the US and Canada are still not parties to it. Unconditional consent to an arbitratiotn under Article 26 should be more closely analyzed for the benefit of both investor and host state. In this perspective, NAFTA jurisprudence will serve best given the aggregate number of arbitral decisions. The ECT is sill in its initial phase to progress, and the number of investor-state arbitration is still growing. Our concern now could be as to when and how Korea will join the ECT and how Korea will use the dispute settlement mechanism wisely. This could further help Korea initiate a Northeast Asian energy cooperation regime in the near future.

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