Making the investment provisions of the Energy Charter Treaty sustainable development friendly

Abstract

The International Energy Agency estimates that $16 trillion of investment will be needed to meet world energy requirements from 2003 to 2030. The world's poorest countries, where some of the fastest rates of increase in energy production are expected, will require a significant portion of this investment. Energy investment, both as a source of foreign exchange and to expand local access to electricity and other forms of energy, is integral to socioeconomic development. It is reasonable to expect that this anticipated investment will witness a significant number of disputes between investors and host governments. A fair and just dispute settlement system can help promote the needed investment and sustainable development. The Energy Charter Treaty (ECT) takes a comprehensive approach to the international energy sector, including coverage of trade, transit, competition and the environment, but its investment provisions have proven most significant with three international arbitral tribunals having issued decisions under the treaty and more disputes pending. While much of the ECT's effort has been to bridge the former East–West economic divide, the Treaty's scope of application is potentially worldwide, and given the inextricable link between energy, development and the environment it makes sense that the Treaty process forge a developing-country regime, one that promotes the development of energy resources and sustainable development. Drawing upon the work of Konrad von Moltke and the International Institute for Sustainable Development (IISD) and in light of tribunal decisions to date, this essay maintains, inter alia, that the ECT should impose basic transparency and good faith requirements on investors and create a special developing-country regime, promoting sustainable development.