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European Commission's Proposal to Suspend the Energy Charter Treaty with Russia and Belarus: Legal Complexities
European Commission's Proposal to Suspend the Energy Charter Treaty with Russia and Belarus: Legal Complexities
Introduction:
The European Commission's "Proposal for a Council Decision on the partial suspension of the application of the Energy Charter Treaty (ECT) between the Union and any legal entity controlled by citizens of Russia or Belarus" (the "Proposal") has raised significant legal questions. These questions concern both the European Union's (EU) institutional powers and the application of the ECT within the framework of public international law. This article delves into the Proposal's structure and content, assessing its legal basis and the international legal implications.
Structure and Content of the Proposal:
The Proposal consists of two main components: an explanatory memorandum outlining the background and motivation, and the "Proposal for a Council Decision." The European Commission suggests that the Council direct the Commission to issue a Declaration, purportedly under paragraphs (1) and (2) of Article 17 of the ECT. This Declaration aims to deny the benefits of Part III of the ECT to Russian and Belarusian entities to the maximum extent legally permissible. The Proposal operates on the assumption that Russia and Belarus are not Contracting Parties to the ECT, treating them as third states under Article 17.
Legal Basis in EU Law:
The Proposal is grounded in Articles 207 and 218(9) of the Treaty on the Functioning of the European Union (TFEU). Article 207 encompasses the EU's competence in "common commercial policy," including foreign direct investment, while Article 218(9) allows the Council to decide on suspending the application of an agreement. However, the Proposal's interpretation of "suspension" raises questions. While the ECT's Article 17 allows the denial of benefits, it does not explicitly offer a temporary suspension, and the Proposal does not suggest the effects are temporary, contradicting the intuitive meaning of "suspension."
Denial of Benefits or Suspension?:
The Proposal's intent to deny benefits under Article 17 is not a traditional suspension, which implies a temporary cessation. Instead, the EU would still apply the ECT but deny its benefits to certain investors. Moreover, the Proposal does not follow the Vienna Convention on the Law of Treaties' procedure for suspending a treaty, which includes notifying other Contracting Parties and allowing objections.
EU's Competence to Deny Benefits on Behalf of Member States:
The Declaration claims to act on behalf of the EU, Euratom, and all EU member states that are ECT Contracting Parties. However, it is debatable whether the EU can exercise Article 17 rights for its member states. For instance, Germany's Article 17 notice suggests that member states retain individual competence in this regard.
International Legal Aspects:
The Proposal relies on paragraphs (1) and (2) of ECT Article 17, which serve different purposes. Paragraph (1) prevents free-riding by denying benefits to claimants without substantial business activities in their incorporation state, while paragraph (2) allows the denial of benefits to investments from states with which diplomatic relations are severed or sanctions are applied. The broad application of paragraph (1) to all Russian and Belarusian investors, as opposed to only sanctioned entities, raises legal questions.
Timing of Denial of Benefits:
The timing of the Article 17 notice is contentious. Some argue it should be prospective, affecting future investments or disputes, while others believe it can apply retroactively, even after disputes have arisen. This issue is likely to be litigated in future arbitration proceedings.
Conclusion:
The European Commission's Proposal to partially suspend the ECT concerning Russia and Belarus introduces numerous legal complexities. Its implementation will likely lead to extensive litigation and arbitration, scrutinizing both the EU's institutional powers and the broader international legal framework. This Proposal underscores the intricate interplay between EU law and international treaty obligations, setting the stage for significant legal debates in the coming years.
- The Proposal operates on the assumption that Russia and Belarus are not Contracting Parties to the ECT, treating them as third states under Article 17.
- However, the Proposal's interpretation of structure and content, assessing its legal basis and the international legal implications.
- The Declaration claims to act on behalf of the EU, Euratom, and all EU member states that are ECT Contracting Parties.
