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On 8-11 September 2020, the Second Negotiation Round on the modernisation of the Energy Charter Treaty (ECT) was held by videoconference.1
Taking into account the list of agreed topics for modernisation of the Energy Charter Treaty (see Conference Decision CCDEC 2018 18) and the suggested policy options for modernisation of the ECT (see Conference Decision CCDEC 2019 08), the Modernisation Group has discussed this Round the following topics:
Definition of ‘transit’
Access to infrastructure (including denial of access and available capacities)
Definition and principles of tariff setting
• Sustainable development and corporate social responsibility
• Dispute settlement
Security for costs
Third party funding
Valuation of damages
• Remaining topics from the previous negotiation round
The Modernisation Group discussed the aforementioned issues on the basis of text proposals submitted by the delegations. The goal of this Round was to explain and clarify the proposals and find common ground for the discussion without prejudice to any delegation’s final position.
The discussion on ‘Transit’ was based upon comments submitted by delegations pertaining to possible amendments of Article 7 ECT. These initial considerations focused in particular on the possible modification of the definition of “transit” with a view to reflecting recent developments. It was also suggested to introduce new language to clarify the main principles of tariff setting for the transit of energy resources, and on access to existing infrastructure, as well as grounds for denying this access.
In connection with ‘Sustainable development and corporate social responsibility’, delegations considered objectives related to sustainable development, environment, climate change and corporate social responsibility. The discussions included comments and proposals on the right to regulate, relevant multilateral environmental agreements, climate change and the clean energy transition such as the Paris Agreement, international standards of labour protection, responsible business practices, the conduct of environmental impact assessment and good governance (transparency).
During the deliberations on ‘Dispute Settlement’, several delegations took the view that a modernised ECT should reflect modern trends in treaty practice pertaining to the topics encompassed in the list of topics for modernisation of the Energy Charter Treaty (CCDEC2018 18), including discussions taking place in UNCITRAL and ICSID. Some delegations presented proposals to ensure the expedited disposal of unmeritorious and/or abusive claims and to avoid costs linked to the litigation of such claims. An initial discussion took place on proposals to regulate the issues of Security for costs and Third Party Funding in the context of the Energy Charter Treaty. It was generally felt that the Modernisation Group should further explore the possibility of increasing transparency in investor-State dispute settlement. The Group discussed if and to what extent the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration could be integrated. Some delegations stressed the need for maintaining a balance between transparency on the one hand, and other legitimate interests on the other. Discussions also took place on a proposal to regulate interventions by non-disputing parties and third parties to cases under the ECT. The Modernisation Group also had a preliminary discussion on questions relating to the valuation of damages.
Under the item ‘Remaining topics from previous negotiation round’, delegations availed themselves of the possibility to seek clarifications on comments and proposals discussed during the first round of negotiations (6-9 July 2020; see Public Communication). In this context, inter alia, a provision on Public Debt was discussed.
The Third Negotiation Round will take place by videoconference on 3-6 November 2020. The Modernisation Group envisages to address the following topics:
Remaining topics from previous negotiation rounds.
After the third round, the Modernisation Group will present a first progress report to the Energy Charter Conference.
No consensus was reached on a request by one delegation to discuss a broader reform of ISDS beyond the list of topics for modernisation (CCDEC2018 18).
1 On 6 November 2019 (see Conference Decision CCDEC 2019 10), the Energy Charter Conference established and mandated the Modernisation Group to start negotiations on the modernisation of the Energy Charter Treaty, with a view to conclude negotiations expeditiously. The First Negotiation Round on the Modernisation of the Energy Charter Treaty took place on 6-9 July 2020.
Download Public Communication on the Second Negotiation Round in English
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On 3-6 November 2020, the Third Negotiation Round on the modernisation of the Energy Charter Treaty (ECT) was held by videoconference.
Taking into account the list of agreed topics for modernisation of the ECT (see Conference Decision CCDEC 2018 18) and the suggested policy options (see Conference Decision CCDEC 2019 08), during the Third Negotiation Round held by the Modernisation Group, the following topics were addressed:
· Obsolete provisions;
· Remaining topics from the previous negotiation rounds.
The Modernisation Group discussed the aforementioned topics on the basis of submissions and comments provided by the delegations before and during the negotiation round. The goal of this round was to explain and clarify the positions and find common ground for the discussion without prejudice to any delegation’s final decision.
The discussion on ‘Pre-investment’ was based on a discussion paper as well as positions expressed by delegations during the meeting, taking into account that the current Energy Charter Treaty provides that Contracting Parties shall endeavor to provide non-discriminatory treatment to investors from other Contracting Parties in the making of investments.
In connection with Regional Economic Integration Organisation (REIO), delegations considered whether it was necessary to clarify the legal relationship between members of a REIO under the ECT. Currently, one REIO – the European Union – is a member of the Energy Charter Conference. Some ECT Contracting Parties and Signatories are members of other REIOs.
Further, the delegations addressed the potential ‘Obsolete provisions’ included in the policy options approved by the Conference in 2019 (CCDEC 2019 08), such as Article 32 on transitional arrangements, and requested the Secretariat to provide some text proposals.
The Modernisation Group availed itself of the possibility to revert to the ‘Remaining topics from the previous negotiation rounds’ to seek clarifications on comments and proposals discussed during the first and the second round of negotiations. In particular, the Modernisation Group discussed the following topics: definition of investment, definition of investor, right to regulate, most constant protection and security, frivolous claims, third party funding, security for costs. The Group discussed the possible consolidation of proposals on, for example, the definition of investment and investor, most constant protection and security, and the right to regulate, as there appears to be common ground between the texts proposed. Some Contracting Parties expressed support for the textual proposals made by other delegations. One Contracting Party presented a proposal for a possible combined format of the texts tabled at previous rounds on the issues of frivolous claims, security for costs and third-party funding. The Group had an initial discussion on the possible future format of the negotiation texts. Different Contracting Parties welcomed this proposal as a possible basis for discussion at future rounds but indicated that they would need more time to review and assess it in detail, and pointed out that the format of future proposal should not be restricted. Some delegations who submitted text proposals signalled their willingness to discuss ahead of the next round the possibility to find a possible format on how to combine their respective text proposals on these issues.
Finally, an initial discussion took place on the reporting to the Energy Charter Conference. The mandate for negotiations on modernisation of the ECT (point n of Conference Decision CCDEC2019 10) envisages that in December 2020 “the Conference should take stock of the progress made”. This year, the Energy Charter Conference will take place on 16-17 December 2020 under the Chairmanship of Azerbaijan.
On 18 December 2020, the Modernisation Group will hold a meeting to consider and adopt the agenda for the negotiations to be held in 2021.
 On 6 November 2019 (see Conference Decision CCDEC 2019 10), the Energy Charter Conference established and mandated the Modernisation Group to start negotiations on the modernisation of the Energy Charter Treaty, with a view to conclude negotiations expeditiously. The First Negotiation Round and the Second Negotiation Round on the Modernisation of the Energy Charter Treaty took place on 6-9 July and 8-11 September 2020 respectively.
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