CYIL vol. 12 (2021)

CYIL 12 (2021) THE MODERNIZATION OF THE ENERGY CHARTER TREATY TO ENABLE CLIMATE… unanimity of the contracting parties. 42 Among the signatories are states dependent on export of fossil fuels, such as Kazakhstan, Turkmenistan, and Uzbekistan, which have low motivation to change the current system. According to commentators, Eastern European countries take a rather restrained view on the ECT’s modernization. For example, Slovakia expressed concerns of undermining existing investments in the gas infrastructure. The Czech Republic supports the modernization of the ECT. 43 If the negotiation talks are not successfully finished by the end of this year, ideally before the COP26 summit in November 2021, the modernization efforts might vanish. The EU Parliament is especially critical to the ECT and some of its members questioned the very existence of the ECT given the development of the energy markets and Russia’s termination of its provisional application of the treaty in 2009. 44 If not all, some EU member states might withdraw from the ECT like Italy did in 2014. 45 The recent fourth and fifth rounds of negotiations occurred in March and June during which the definition of ‘economic activities in the energy sector’ was discussed for the first time. The wording of this definition is a key for preserving or carving-out of the investments in fossil fuels from the protection under the modernized ECT as will be explained below. Distinction between low carbon and high carbon investments? The current text of the ECT covers all types of energy sector investments and so does the modernized ECT. Distinguishing among low and high carbon investment, as proposed by some authors, 46 is not part of the reform process. Such distinction would go against the core non-discrimination principle of the ECT. The approach chosen by the reformers is to exclude certain categories of investment from the coverage of certain protection by the ECT. This shall principally lead to the same result as suggested by the above authors. The ECT defines ‘ Investment ’ in broad terms similarly as other international investment agreements. Investment includes ‘any kind of asset owned or controlled directly or indirectly by an investor’. 47 The investment under the ECT must however be associated with an ‘ Economic Activity in the Energy Sector’ which is defined as an ‘economic activity concerning 42 Article 36 of the ECT. 43 See e.g., Minutes of meeting of the Committee on Protection of Environment of the Czech Parliament regarding a new authorization for the European Commission to enter into negotiations on modernisation of ECT on behalf of Euroatom. 8 September 2021. [online]. Available at . Visited on 8 September 2021. 44 Statement on the modernisation of the Energy Charter Treaty. Undated. [online]. Available at: < https://www. euractiv.com/wp-content/uploads/sites/2/2020/09/Statement-on-Energy-Charter-Treaty-ENG_080920.pdf>. Visited on 1 June 2021. 45 With effects as of 1 January 2016. 46 See e.g., Bernasconi-Osterwalder, N., Brauch, M.D.: Redesigning the Energy Charter Treaty to Advance the Low-Carbon Transition. TDM 1 (2019). [online], pp. 11–12. Available at: < https://www. transnational-dispute-management.com/article.asp?key=2632>. Visited on 1 June 2021. The authors suggest that ECT shall discriminate between carbon-intensive energy investments and low-carbon energy investments, each affording different standards of treatment. See also Cima, E., Retooling the Energy Charter Treaty for Climate Change Mitigation: Lessons from Investment Law and Arbitration, Journal of World Energy Law and Business , 2021, 14, pp. 80–81. 47 Article 1, paragraph 6 of the ECT. 2. Selected Proposed Amendments to the Substantive Provisions of the ECT

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