The Future of the EU Energy Union and Energy Charter Treaty

On 6 February 2015, the Energy Union Conference in Riga, Latvia (the “Conference”), signalled the start of the Riga Process towards forming the key dimensions and actions of the new EU Energy Union (the “Energy Union”). During the Conference, the Secretariat General of the Energy Charter Treaty[1] spoke of its relevance to the Energy Union.

In this article, Catherine Karia, an Associate at Covington & Burling LLP, considers the potential future interplay between the Energy Union and the Energy Charter Treaty.

What is the Energy Union?

The Energy Union, encompassing the EU and its 28 Member States, has been described by the European Commission as “a fundamental step towards the completion of single energy market and reforming how Europe produces, transports and consumes energy”. The content of the Energy Union will develop during the Riga Process. Five key dimensions to the Energy Union strategy were articulated at the Conference:

    •    Stronger emphasis on security of supply including by means of solidarity, trust and speaking with one voice;

    •    Completed energy market to connect the whole of Europe;

    •    Moderation of demand for security in line with principles of competitiveness;

    •    Decarbonising the energy mix and making Europe the global leader in renewables and other low-carbon   technologies; and

    •    Leading efforts in research, innovation and green growth.


What role will the Energy Charter Treaty play in the future of the Energy Union (and vice versa)?

According to the Secretary General of the Energy Charter Treaty, Dr. Urbán Rusnak, the Energy Charter Treaty is compatible with, and vital to, the building of the Energy Union. In his speech at the Conference, Dr. Rusnak identified the relevance of the Energy Charter Treaty to each of the five dimensions of the Energy Union outlined above. Dr. Rusnak emphasised that “the foundation for the external policy of an Energy Union has already been laid by the establishment of the Energy Charter Treaty”.

The message emerging from the Energy Charter Treaty Secretariat (the “Secretariat”) emphasises the potential benefits of the Energy Charter Treaty to the Energy Union at the extra-EU level. This approach is notable, and perhaps unsurprising, given that the European Commission has recently intervened in several Energy Charter Treaty arbitrations involving intra-EU investors and Member States. In the European Commission’s view, the Energy Charter Treaty should not apply to intra-EU claims.

Additionally, the Riga Progress coincides with an important stage in the planned global expansion of the Energy Charter Treaty. The Secretariat has developed a new initiative, the International Energy Charter 2015 (the “IEC”), a declaration that is intended to promote “mutually beneficial energy cooperation among nations for the sake of energy security and sustainability”. In May 2015, up to one half of the UN member states will meet in the Hague to formally adopt and sign the IEC.

The Secretariat is hopeful that signing of the IEC will encourage non-members to consider acceding to the Energy Charter Treaty. However, it recognises that “strong support from its long-standing members, in particular the EU and its Member States, will be necessary to convince countries worldwide to join the Energy Charter Process”.

The Secretariat’s recent statements indicate that a synergistic and cooperative relationship between the Energy Charter Treaty and Energy Union would be mutually beneficial for the future of both initiatives. The IEC has been described by the Secretariat as “a powerful political vehicle to promote cooperation under a common legal framework”, and by Dr. Rusnak as a “vital component of implementing the strategy for the Energy Union”.

In return, the EU’s outlook on the role of the Energy Charter Treaty in building the Energy Union currently remains unclear. At the 25th Meeting of the Energy Charter Conference in November 2014, Maroš Šefčovič, Vice-President for the Energy Union, confirmed that the European Commission “will continue to work in close cooperation with the EU Member States and all contracting parties and signatories to ensure that the new Charter and the Energy Charter Treaty continue to be regarded as corner stones of global energy architecture”. Mr. Šefčovič then discussed the five building blocks for the Energy Union, without making further reference to the Energy Charter Treaty.
 

Catherine Karia is an associate in the dispute resolution practice group in the London office of Covington & Burling LLP,, focusing in particular on energy disputes. Ms. Karia can be contacted at ckaria@cov.com

This article was originally posted on Covington’s Inside Energy and Environment blog