Journal of Energy & Natural Resources Law August 2009

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Stability of Contract in the International Energy Industry
Peter D Cameron

In a seminal article written more than a decade ago, Thomas Wälde and George Ndi argued that generous promises were being made to investors in energy projects by host governments which would not stand the test of time. The large number of energy cases that are currently pending before international tribunals may seem to confirm their doubts. However, there are grounds for taking a more positive view of the legal framework for energy investor protection. The legal mesh that surrounds investments is now usually a complex, multi-tiered one that – as the Duke Energy case illustrates – can involve the legal doctrine of the host state in ways that assist the investor's case. The framework of international investment agreements by and large appears to be one that shows a trend to contributing more to that sense of stability. Perhaps ironically, it has nonetheless underlined the continuing importance of the traditional mechanism, the stabilisation clause. 

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The Potential Contribution of International Investment Protection Law to Combat Climate Change
Anatole Boute

The architecture of the Kyoto Protocol gives the private sector a central role to play. It will most probably continue to occupy an important place in the post-2012 climate regime. However, one essential aspect for private investors is often overlooked during the ongoing climate talks: the protection of low-carbon investments against regulatory changes by host countries. Investors' perception that the 'rules of the game' governing their investment could change may make it more difficult and more expensive to attract low-carbon investments thereby compromising the goal of emission reductions. This article identifies risks of regulatory changes that are inherent to the regulations designed to promote renewable energy sources and energy efficiency, as well as to implement the flexible mechanisms of the Kyoto Protocol. It analyses the extent to which the protection standards of international investment law offer adequate protection against these changes but also questions if these same standards represent a threat to the implementation of national climate policies.

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Thomas W Wälde and Fair and Equitable Treatment
Rachel A Hird

The fair and equitable standard of treatment in international investment law has been the focus of recent arbitral awards and commentary. Professor Thomas Wälde offered one of the most expansive interpretations of the content and scope of the fair and equitable treatment standard in his Separate Opinion in the Thunderbird arbitration. A review of Wälde's opinions on fair and equitable treatment from his first writings on the subject through to Thunderbird reveals his increasingly expansive understanding of the standard. This article suggests that Professor Wälde's opinions on fair and equitable treatment coincide with an increasingly teleological approach to interpreting the fair and equitable treatment standard in international investment agreements. 

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Energy Charter Treaty and the European Union: Is Conflict Inevitable?
Graham Coop

The European Union (EU) is a venerable institution. Today's EU is the result of continuing development, becoming both wider and deeper over more than half a century. And yet the EU cannot live in isolation. The EU imports vast quantities of energy from third states and is also both a significant exporter and a significant importer of capital investment. It is, therefore, not surprising that numerous investment protection treaties exist, both between EU member states inter se and between EU member states and third states. The Energy Charter Treaty (ECT) was intended to foster energy exchanges in the Eurasian context, particularly between the developed economies of Western Europe and Japan and the emerging economies of the former CIS. The ECT contains extensive investment protection provisions and is a mixed agreement to which the European Communities and their 27 member states are parties, alongside 24 non-EU members. The present article is intended to review the implications of this in relation to the key area of investment protection. In several respects, the competence exercised by EU institutions in this area is undergoing expansion. The key question is whether this must inevitably lead to conflict between EU and other institutions which to a large extent share common objectives, or whether, with moderation and mutual understanding, an accommodation is possible.

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Law and Policy in the Russian Oil and Gas Sector
Kaj Hobér

Since the beginning of this century, Russian policy in the oil and gas sector has been clearly articulated. There are two key sources for our knowledge in this respect: (i) Vladimir Putin's scholarly writings and (ii) the 2003 Russian Energy Strategy. The Leitmotifs are state control and integration with Russia's national security policy. These two policy objectives permeate Russian legislation in this field, including eg, the Law on the Subsurface, The Law On Gas Export and the Law On Foreign Investors in Strategic Sectors. The Russian policy has also manifested itself in the treatment of private investment in the oil and gas sector and in the handling of the most recent gas war between Russia and Ukraine. Since Russia's policy is unlikely to change within the foreseeable future, it must be taken into account in any negotiations with Russia.

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Gas Transit in Eurasia: Transit Issues between Russia and the European Union and the Role of the Energy Charter
Andrey A Konoplyanik

This paper deals with the structure of the legal relationship relating to gas supplies and, specifically, to gas transit issues between Russia and the EU. The first section examines the evolution of the contractual structure of Soviet/Russian gas supplies to Europe, based on the Groningen (Dutch) concept of long-term gas export contract (LTGEC). The second section analyses new transit risks, both within and outside the EU, in the gas value chain of Russian gas supplies to Europe (within the area of responsibility of Russian exporters); these transit risks appeared after dissolution of the COMECON and the USSR. The paper then provides a more specific analysis in the third section of the new transit risks outside the EU which reflects the result of steady move from political to market-based pricing within CIS and, in section four, new transit risks within the EU which reflect the liberalisation processes within, and enlargement of, the EU energy market. Solutions for transit risks and where they are best provid ed - within WTO or ECT and its draft Transit Protocol – are examined in section five and section six examines, one by one, the key debated transit issues and draft solutions within Energy Charter framework, including the new Russian initiative (of 21 April 2009) on the new international energy order. The conclusions contain a road map to finalise the draft Transit Protocol to allow Russia to ratify the ECT. 

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Adjudicating Bribery and Corruption Issues in International Commercial Arbitration
William Fox

Traditional international commercial arbitration has always taken a somewhat narrow view of the issues that are properly subject to arbitration. There is no question that claims such as breach of warranty, failure to deliver, force majeure and the like are arbitrable. This article raises the question of whether it is proper, in the context of an international commercial arbitration proceeding, to raise issues of bribery and other forms of corruption that may have impeded – or entirely halted – the performance of a contract. The article concludes that such issues should be permitted to be raised in arbitration. The nowsignificant number of international treaties and conventions on bribery and corruption demonstrates that the international community does not tolerate such practices. Moreover, there appears to be nothing intrinsic or inherent in the doctrine or processes of international commercial arbitration that would prohibit the raising of these issues. A party who suffers because of acts of bribery and corruption should have his or her voice heard in arbitration.  

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Game Theory and International Environmental Cooperation
Moshe Hirsch

Game theory has recently been employed by international law scholars. Game theoretical models and concepts provide a valuable tool for analysing the phenomenon of cooperation. The employment of game theory may well enhance the prospects of international environmental cooperation for the long run. Game theoretical analysis requires us to examine the factors that motivate national decision-makers to cooperate with others. Identifying these critical factors may assist scholars and policy-makers to anticipate which environmental domains are more susceptible to collective action failure. More importantly, having understood the impact of these factors on the emergence of cooperation, game theoretical analysis may offer appropriate legal mechanisms to modify the structure of problematic settings in order to improve the prospects of environmental cooperation. This article discusses some of the principal factors that influence the emergence and maintenance of environmental cooperation and offers examples to illustrate the potential contribution of game theory to enhance the effectiveness of international environmental regimes.

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