Treaties on Transit of Energy via Pipelines and Countermeasures

1

Treaties on Transit of Energy via Pipelines and Countermeasures

DA NA E A Z A R I A

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1Introduction

1. The Scope and Significance of this Study

The need for and progress in means of communication have propelled the devel-opment of international law since the nineteenth century.1 Today, states attach to pipelines the importance they attached to rivers in the nineteenth century, to railways at the beginning of the twentieth century, and to international canals since the nineteenth century.2 Because energy is an indispensable resource for the economic development of states and the survival of their populations, the control of routes for energy transit becomes a valuable political and economic ‘asset’ for states through whose territory a pipeline crosses. Similarly, transit states them-selves depend on energy exports and imports by user states of transit pipelines. International law has, throughout the last century and in this century, witnessed a proliferation of treaties in this area: some treaties prescribe rules regarding exports, imports, and transit; others are tailor-made for a particular pipeline and contain obligations regarding energy flows through that pipeline. The trend has been towards the conclusion of multilateral treaties with dispute settlement clauses often providing for international adjudication.

1 For the development of transit obligations in international law, see chapter 2. The instru-ments adopted by the Congress of Vienna established freedom of navigation in international riv-ers in Europe. See Articles CIX–CXVII of the General Treaty of the Final Act of the Congress at Vienna (adopted at Vienna 9 June 1815) 64 CTS 453. The Reglèment for the Free Navigation of Rivers Agreed between Austria, France, Great Britain, and Prussia. Articles concerning the Navigation of the Rhine signed between Austria, Baden Baden, France, Great Britain, Hesse-Darmstadt, Nassau, the Netherlands, and Prussia (adopted at Vienna 24 March 1815) 64 CTS 13, established the Central Commission for Navigation on the Rhine (Articles IX–XXXII). P. Reuter, Introduction to the Law of Treaties (translated by J. Mico and P. Haggenmacher) (2nd ed., 1995) 5; J. Hostie, Examen de Quelques Regles du Droit International dans le Domaine des Communications et du Transit, 40 RCADI (1932) 408. About treaties concerning means of communication: C. Dupuis, Liberte des Voies de Communication: Relations Internationales, 2 RCADI (1924) 121–439. In relation to international institutions: P. Reuter, International Institutions (translated by J.M. Chapman) (1958) 53, 61–62, 207; P.J. Sands and P. Klein, Bowett’s Law of International Institutions (6th ed., 2009) 1–3, 6–8.

2 See chapter 2. For pipelines: C. Redgwell, in B. Barton, C. Redgwell, A. Ronne, and D. Zillman, Energy Security (2004) 17–46. For rivers: C. de Visscher, Le Droit International des Communications (1924); B.K.J. Vitanyi, The International Regime of River Navigation (1979); R.R. Baxter, The Law of International Waterways (1964); S.C. McCaffrey, The Law of International Watercourses (2nd ed., 2007). For international canals: Baxter, ibid. For railways: Report of the Special Committee in Competition between Railways and Waterways, League of Nations, AdvTecCom for ComTr, C.127.M.43.1929.VIII, 13 March 1929, 1929.VIII.3, 30.

Introduction2

Given this increasingly widespread treaty practice, a central question arises: what is the relationship between treaties in the field of transit of energy via pipe-lines and general international law?3 This question is epitomized in its starkest terms in the relationship between these treaties and countermeasures. Owing to the lack of a central enforcement mechanism in international law, countermeas-ures under the law of international responsibility are essential for the enforcement

3 This study does not examine customary rules concerning transit of energy via pipelines, nor the relationship between treaties establishing transit obligations and custom concerning transit of energy via pipelines. The last general study of customary ‘freedom of transit’ was in 1957: E. Lauterpacht, Freedom of Transit in International Law, The Grotius Society Transactions for the Year 1958 & 1959, vol. 44, 313–356. There is as yet no study concerning the existence and content of a customary rule concerning transit of energy via pipelines, despite its contemporary import ance, which is highlighted by the 2012 Sudan-South Sudan dispute involving oil transit through a pipe-line linking South Sudan’s deposits after its secession to the sea. See analysis in chapter 5, section 2.3.3. Literature on custom concerning freedom of transit (either preceding Lauterpacht’s study or dealing briefly with freedom of transit in relation to landlocked states): Dupuis (n.1) 270–273; D.R. Rothwell and T. Stephens, The International Law of the Sea (2010) 196; R.R. Churchill and A.V. Lowe, The Law of the Sea (3rd ed., 1999) 440–441; S.C. Vasciannie, Land-Locked and Geographically Disadvantaged States in the International Law of the Sea (1990) 198–215 particularly 209. International case law concerning custom and freedom of transit: in 1931, in the Advisory Opinion on Railway Traffic the Permanent Court of International Justice (‘PCIJ’) did not enquire whether or not there was a customary rule concerning freedom of transit nor did it examine whether the 1921 Barcelona Convention on Freedom of Transit had codified, crystallized or had been the historic source of custom. It may be presumed that the Court did not investigate custom because it interpreted the language ‘international engagements’ in the question submitted to it by the League of Nations Council as covering only international agreements. Railway Traffic, 114. In 1960, in Right of Passage the International Court of Justice (‘ICJ’) applied local custom concerning transit as lex specialis without investigating the existence of general custom. Right of Passage, 41. India explic-itly rejected the proposition that the 1921 Barcelona Convention on Freedom of Transit repre-sented custom at the time of the dispute: ICJ Pleadings, Right of Passage, ICJ Reports 1960, Vol. II, 124–125, [284]–[286]. Portugal used the Barcelona Convention and its preparatory works only to prove special custom: ICJ Pleadings, Right of Passage, ICJ Reports 1960, Vol. III, 500, [233]–[234]. Hence this state practice (pleadings) of the two parties to the dispute is not supportive of the existence or formation of a customary rule concerning freedom of transit overland and there is no evidence of opinio juris reflected in these pleadings either. For pleadings before international tri-bunals: Memorandum by the Secretariat, Formation and evidence of customary international law, A/CN.4/659, 14 March 2013, 21[29], 51[98] (as evidence of opinio juris); Statement on Principles Applicable to the Formation of General Customary International Law, Final Report, Committee on Formation of Customary (General) International Law, International Law Association, London Conference, 2000, Part IV, (‘ILA Statement on Principles Applicable to the Formation of Custom’) 14. M. Akerhurst, Custom as a Source of International Law, 47 BYIL (1977) 3–5. In 2005, in the Iron Rhine, despite the fact that the dispute involved railway transit covered by the Barcelona Convention and that both parties to the dispute—the Netherlands and Belgium—were parties to the treaty at the time of the arbitration, the Tribunal merely upheld the Netherlands’ proposition (without explaining its own reasoning) that general international law does not oblige states to guarantee freedom of transit or operate (transit) railways: Iron Rhine, [50]. The Netherlands had merely cited one article which only referred to the Railway Traffic case (1931): Counter-Memorial of the Kingdom of the Netherlands, Iron Rhine case (Belgium v. the Netherlands), PCA, January 2004, [3.1]; G. Mutz, in R. Bernhardt (ed.), Max Planck Encyclopedia of Public International Law (2002) 14. The Tribunal did not investigate contemporary state practice, which may substantially have changed since the Railway Traffic case (1931), but it was not precluded from examining other international law rules besides the treaties invoked by the parties to the dispute (according to the Arbitration Agreement ‘international law, including European [Union] law’, was the applicable law). It may be presumed that the Tribunal did not examine custom, because Belgium did not contest the Dutch argument.

The Scope and Significance of this Study 3

of obligations of transit states. At the same time, countermeasures constitute cir-cumstances precluding the wrongfulness of suspending compliance with obliga-tions regarding transit of energy. These are far from academic issues.

Despite the conclusion of treaties concerning trade and transit of energy, most of the international disputes involving transit flows of gas or oil in the twenty-first century—the facts of which are summarized and analysed in numerous chapters of this study—have involved the suspension of exports in response to interference with transit or the suspension of transit in response to interference with exports to the transit state. International press and commentary describe these incidents as ‘pipeline wars’, ‘oil wars’, and ‘gas wars’.4 Such terminology implies a pejorative view and fails to address a fundamental question: whether this conduct is lawful by reference to unilateral countermeasures against the responsible transit state or against the responsible user states of the pipeline.

This is not a new question. In the 1920s, the establishment of ‘freedom of transit’ via railways and waterways in a multilateral treaty, the Barcelona Convention on Freedom of Transit (‘Barcelona Convention’)5 which expressly subjected disputes concerning transit to the jurisdiction of the Permanent Court of International Justice (‘PCIJ’), was perceived as constituting ‘the only remedy’ to the discretion-ary practice of states vis-à-vis routes of communication.6 Nonetheless, ‘reprisals’, by the transit state in the form of interrupting transit in response to an unlawful act of the user state, did not disappear. In 1931, the PCIJ was faced with this precise question in its Advisory Opinion on Railway Traffic between Lithuania and Poland (‘Railway Traffic’) when Lithuania refused to offer Poland transit through its territory via railway in response to the illegal occupation by Poland of Lithuania’s capital, Vilna.7

The contemporary importance of this question is exemplified when consid-ering whether Ukraine’s potential responses against Russia’s unlawful use of force in Crimea in 2014 can take the form of interrupting transit of energy con-trary to Ukraine’s obligations under multilateral treaties, such as the Marrakesh Agreement establishing the World Trade Organization (‘WTO Agreement’),8 and the Energy Charter Treaty (‘ECT’).9

4 2002 Croatian oil transit measures: Balkan Oil War, 21 February 2002, BCR Issue 320: <http://iwpr.net/report-news/balkan-oil-war>. 2006 Ukraine-Russia transit-export incident: La guerre du gaz, Le Monde, 3 January 2006. 2007 Belarus-Russia oil transit incident: Loveless brothers; Russia and Belarus, The Economist, 13 January 2007. 2009 Ukraine-Russia gas transit incident: War-war, not jaw-jaw: The disappointing failure of efforts to end the gas wars, The Economist, 15 January 2009. 2010 Belarus-Russia gas transit incident: ‘Gas war’ breaks out between Russia and Belarus, The Telegraph, 25 June 2010.

5 Convention on Freedom of Transit and Statute of Freedom of Transit, 20 April 1921, 7 LNTS 11.6 G.E. Toulmin, The Barcelona Conference on Communications and Transit and the Danube

Statute, 3 BYIL (1922–1923) 170.7 Railway Traffic, 107. The pleadings of the interested states, the Court’s reasoning and findings

are analysed in chapter 3, section 3.2.8 Marrakesh Agreement establishing the World Trade Organization, 15 April 1994, 1867 UNTS 3.9 The Energy Charter Treaty (with annexes), 17 December 1994, 2080 UNTS 95. This study uses

the text of the ECT as amended by the Amendment to the Trade-Related Provisions of the Energy Charter Treaty (‘Trade Amendment’), which entered into force on 21 January 2010: Final Act of the International Conference and Decision by the Energy Charter Conference in respect of the

Introduction4

Studies have been conducted on the relationship between general international law and the WTO Agreement and on the non-suspendability of transit obligations via straits and international canals.10 However, the relationship between counter-measures, as circumstances precluding wrongfulness, and the WTO Agreement, remains relatively unexplored, and importantly a study on the relationship of the ECT and bespoke pipeline agreements with countermeasures has yet to appear in international scholarship.

This is surprising given the extensive and serious effects of interruptions of established energy flows on multiple states and populations. Transit is a type of transportation involving the physical passage through the territory of a state. It entails the existence of three generic groups of states: states of origin, transit states, and states of destination. States of destination and of origin are directly affected by interruptions of transit. Yet there is a wider group of states affected by such interruptions due to the interdependence of global and regional energy markets.11

Despite these widespread effects of interruptions of transit of energy via pipe-lines in violation of transit obligations, affected states are often silent about inter-national law and international responsibility. The European gas crisis in January 2009 is illustrative. In the midst of a harsh winter, populations in seventeen states, some of them members of the European Union (‘EU’) and others situated in the Balkan region, were left without gas and heating for thirteen days owing to a dispute between Russia and Ukraine concerning exports and transit of gas. The international press reported numerous deaths due to cold temperatures.12 All states involved were bound by agreements establishing international obligations regarding transit, imports and exports of gas, for example, the ECT and/or the WTO Agreement.13 However, the international responsibility of the transit state for a breach of its obligations regarding transit was not formally invoked.

Amendment to the Trade-Related Provisions of the Energy Charter Treaty, Annex 1, 24 April 1998, in The Energy Charter Treaty and Related Documents (2004) 167–207.

10 E. Bruel, International Straits, Vol. I (translated by C. Byriel and H.M. Pratt) (1947); Baxter (n.2); O.Y. Elagab, The Legality of Non-Forcible Counter-Measures in International Law (1988) 113–116.

11 Interference with transit affects prices of energy regionally and worldwide, as well as the avail-ability of other products, such as food and medicine.

12 According to the Associated Press, eleven people froze to death: Deal to End Russia’s Cutoff of Gas Remains Uncertain, New York Times, 9 January 2009; Deal Struck to End Gas Cut-off, New York Times, 8 January 2009; Russia Cuts Gas, and Europe Shivers, New York Times, 7 January 2009. See analysis in chapter 3, section 3.2.2.4.

13 Russia was provisionally bound by the ECT at the time of that dispute (ECT Article 45). Case law concerning ECT’s provisional application: Kardassopoulos v. Georgia, [219], [221]–[222], [228]. The provisional application of the ECT by Russia was upheld in: Yukos v. Russia (Jurisdiction and Admissibility), [394]; Hulley Enterprises v. Russia (Jurisdiction and Admissibility), [394]. On 20 August 2009, Russia expressed its intention not to become party to the ECT and since 19 October 2009 is not bound by the treaty (ECT Article 45(3)(a)). Literature on ECT’s provisional applica-tion: M. Arsanjani and M. Reisman, in E. Cannizzaro (ed.), The Law of Treaties beyond the Vienna Convention (2011) 86–102; G. Loibl, in T. Wälde (ed.), The Energy Charter Treaty (1996) 576–581. General literature on provisional application of treaties: R. Lefeber, in J. Klabbers and R. Lefeber (eds.), Essays on the Law of Treaties (1998) 81–96.

The Scope and Significance of this Study 5

Instead, some argued that disputes regarding transit of energy are ‘commercial’, technical, or political.14 This proposition may cast some doubt over the application of international law in this particular context; but such doubt is unfounded.15 The fact that disputes have political, economic, scientific, and technical aspects does not detract from their characterization as legal disputes ‘capable of being settled by the application of principles and rules of international law’.16 Some disputes, or some aspects of the disputes discussed in this study are commercial. However, the involvement of states in these disputes raises questions about the interpretation of their treaty obligations and their international responsibility. A dispute may involve a disagreement about facts, as was partly the case in the 2009 incident, but a dispute about facts does not exclude a dispute about law.17 Within international law the methods for settling a dispute may be diplomatic and/or judicial, but the settlement by non-judicial means does not mean that international law does not apply.18 The decision to invoke the international responsibility of a state may be political, but the fact that responsibility has not been invoked does not perforce mean that responsibility has not been engaged.19 Whether the responsibility of the transit state has been engaged, who may invoke it and by recourse to what means—all of these questions pertain to the architecture of treaty obligations and

14 Regarding the 2009 Ukraine-Russian gas transit incident, the Russian Head of Government characterized the dispute as commercial: War-war, not Jaw-Jaw; Russia, Ukraine and Gas, The Economist, 17 January 2009. EU officials were claiming during the dispute that it is a ‘normal bilat-eral commercial dispute’: Energy in the European Union, Gas Wars, The Economist, 8 January 2009. About commercial and political aspects: Russia, Ukraine and Gas, Pipe Down, The Economist, 8 January 2009. Some characterized it as a ‘technical dispute’: Russia, Ukraine and gas, Pipe down, The Economist, 8 January 2009; Official Statement of the Energy Charter Secretary-General, Russia-Ukraine Gas Dispute: Secretary General Appeals for Conciliation Efforts, 14 January 2009: <http://www.encharter.org/index.php?id=21&id_article=167&L=0>.

15 See criticism of the non-justiciability of political disputes by illustrating that all legal dis-putes have political elements: H. Lauterpacht, The Function of Law in the International Community, Reprinted (2012) 165–173.

16 Wall case, [41]; Nicaragua v. Honduras, [51]–[52], [54]–[56]; Certain Expenses of the United Nations, 155; Hostages in Iran case, [36]–[37]; Legality of the Threat or Use of Nuclear Weapons, [13]. J.G. Collier and A.V. Lowe, The Settlement of Disputes in International Law (1999) 10–16. Overview of the ICJ and investment arbitration case law on the subject: C.H. Schreuer, in I. Buffard, J. Crawford, A. Pellet, and S. Wittich (eds.), International Law between Universalism and Fragmentation (2008) 965–970.

17 J.G. Merrills, in M.D. Evans (ed.), International Law (3rd ed., 2010) 560. According to the PCIJ, ‘dispute is a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons’: Mavromatis Palestine Concessions, 11.

18 J.G. Merrills, International Dispute Settlement (5th ed., 2011) 290–291. For the advantages of judicial means in terms of (legal and actual) finality over non-judicial means, such as concili-ation: Lauterpacht (n.15) 276. Judicial and non-judicial means of settlement may run in paral-lel: Aegean Sea Continental Shelf, [29]; Aerial Incident of 1988, 10. Merrills (n.17) 561.

19 Text of the draft articles on responsibility of States for internationally wrongful acts with commentaries thereto, Report of the Commission to the General Assembly on the work of its fifty-third session, ILCYB 2001-II, 31–143 (‘ILC ASR Commentary’), 116, 117[2] . Non-invocation may mean that the relevant state has made the determination that there is no breach, but it may be due to numerous other (e.g. political and/or economic) reasons. However, when a state invokes the responsibility of another it has implicitly made its own determination that responsibility has ensued from an internationally wrongful act.

Introduction6

to their relationship with the law of international responsibility. These themes form the focus of this study.

In 1995, Jeremy Carver and Greg Englefield in their paper ‘A new regime of international pipelines from Central Asia’ criticized the option of bilateral inter-state agreements for the regulation of a transit pipeline from Central Asia to the Mediterranean Sea as unlikely to succeed, because a transit pipeline is an ‘international vehicle’. Instead they advocated the creation of an international organization modelled after the transboundary river commissions, which thrived in the nineteenth century.20 However, first their proposal was limited to the form of the treaty to be used (one plurilateral treaty, as opposed to multiple bilateral treaties). By contrast, this study examines the nature of obligations created by treat-ies governing transit of energy via pipelines. Second, although they suggested that ‘pipeline states’ should resolve their disputes within the framework of the pipe-line commission, their proposal did not scrutinize thoroughly the relationship between such dispute settlement mechanisms and unilateral enforcement under general international law.21

This study elucidates the relationship between treaties in this area of interna-tional law and international responsibility. It argues that their precise relationship can be determined only by examining specific treaty provisions. Contrary to earl-ier studies, it notes the form of treaties, but sees beyond that form by examining the nature of the obligations created by the treaties. It argues that there are signs of genuine multilateralization in this area of international law: existing treaty practice is shifting from bilateral obligations regarding energy flows via pipelines towards the creation of interdependent or erga omnes partes obligations. It exam-ines whether, in the light of this development, countermeasures remain a central means for the implementation of responsibility for internationally wrongful acts pertaining to breaches of these treaty obligations and whether they are available as circumstances precluding the wrongfulness of suspending their performance.

Having established the question addressed in this study, the following sections are devoted first to the identification of the treaty law concerning transit of energy forming the framework of the study; then to the examination of the function of countermeasures in the law of international responsibility; and lastly, after a discussion of the method and outline of the study, to a definition of some basic concepts used in the treaties examined in this study.

2. Treaty Law Framework Concerning Transit of Energy

Owing to the proliferation of treaties in this area of international law, this study proposes that legal analysis should be shifted from the examination of natural law or customary rights of transit to the interpretation and enforcement of

20 J.J. Carver and G. Englefield, in G.H. Blake (ed.), The Peaceful Management of Transboundary Resources (1995) 104–105.

21 Ibid. 106.

Treaty Law Framework Concerning Transit of Energy 7

treaty obligations.22 The increasing ‘treatification’ of this area of international law may be due to three factors: first, the inconclusiveness as to the existence and scope of customary international law; second, the fact that rules concern-ing the construction and operation of pipelines require significant precision and detail due to the technical nature of the activity; and third, numerous trea-ties provide for dispute resolution or create institutions for further cooperation between parties, often endowing them with dispute settlement or compliance supervision competences, which would otherwise be unavailable.

For these reasons this study focuses on treaty rather than customary rules. In any case, since this study determines the scope and content of successive multilateral (and bilateral) treaties, it will contribute to future research con-cerning evidence for and the formation of rules of customary international law concerning the transit of energy via pipelines.23 Moreover, it has been noted that in some areas of international law ‘the contribution of treaty practice [ … ] was decisive for the emergence of customary rules protecting States’ common interests’.24 This study illuminates a treaty practice reflecting indivisible state interests, which could in the future stimulate the development of customary rules of this nature in this area of international law, assuming that the treat-ies include provisions of a fundamentally norm-creating character to generate custom.25

Notwithstanding the fact that rules contained in one treaty are distinct from those in other treaties and rules under customary international law,26 the ana-lysis in this study proceeds from the assumption that there is something to be gained by comparing and contrasting approaches reflected in bilateral and multi-lateral agreements, as well as by assessing the impact of the form of and provi-sions in those agreements on countermeasures under the law of international responsibility.

The following section sets out the treaties, which form the focus of this study and the rules for their interpretation.

22 For natural transit rights: H. Grotius, Hugonis Groti De Iure Belli Ac Pacis (1853), Vol. I, 263; B. Winiarski, Principes Generaux du Droit Fluvial International, 45 RCADI (1933) 118–119. For landlocked states: Vasciannie (n.3) 30–33. See also chapter 2.

23 For treaties contributing to the formation of new rules of custom: North Sea Continental Shelf, [61]–[62], [70]–[74]; ILA Statement on Principles Applicable to the Formation of Custom, 46–54. For treaties as evidence of state practice: Legality of the Threat or Use of Nuclear Weapons, [75], [82] (implicitly). For treaties as evidence of opinio juris: Military and Paramilitary Activities, [189]; Memorandum by the Secretariat, Formation and Evidence of Customary International Law, A/CN.4/659, 14 March 2013, 22[29], fn.85. For treaties codifying existing cus-tom: North Sea Continental Shelf, [63]–[64]; Libyan Arab Jarnahiriya/Malta, [27]. For case law and literature specifically on customary freedom of transit (n.3).

24 L. Picchio Forlati, in L.P. Forlati and L.-A. Sicilianos (eds.), Economic Sanctions in International Law (2004) 150.

25 North Sea Continental Shelf, [71–72]. M.E. Villiger, Customary International Law and Treaties (1997) 176–181.

26 ICJ: North Sea Continental Shelf, [72]; Military and Paramilitary Activities, Merits, [274]; Tunisia/Libyan Arab Jamahiriya, [24]; Costa Rica v. Nicaragua, [33]. Arbitral Tribunal: Indus Waters (Interim Measures), [130].

Introduction8

2.1 The choice of treaties

This study focuses on two multilateral agreements: the WTO Agreement and the ECT (as amended on 21 January 2010 by the ‘Trade Amendment’);27 and on six-teen bespoke pipeline agreements in different geographic areas. More specifically, these agreements are: the Baku–Tbilisi–Ceyhan (‘BTC’) Pipeline Agreement;28 the Nabucco Pipeline Agreement;29 the Burgas-Alexandroupolis Pipeline Agreement;30 the Interconnection Turkey-Greece-Italy (‘ITGI’) Agreement;31 the West African Gas Pipeline (‘WAGP’) Treaty;32 the Trans-Adriatic Pipeline (‘TAP’) Treaty;33 the China-Central Asia Pipeline Agreement;34 and the South Stream Pipeline Agreements.35

27 (n.9).28 Agreement among the Azerbaijan Republic, Georgia and the Republic of Turkey Relating to the

Transportation of Petroleum Via the Territories of the Azerbaijan Republic, Georgia and the Republic of Turkey Through the Baku–Tbilisi–Ceyhan Main Export Pipeline, 18 November 1999 (‘BTC Agreement’): <http://www.bp.com/sectiongenericarticle.do?categoryId=9029334&contentId=7053632>.

29 Agreement among the Republic of Austria, the Republic of Bulgaria, the Republic of Hungary, Romania and the Republic of Turkey Regarding the Nabucco Project, 13 July 2009 (‘Nabucco Agreement’): <http://www.mfa.gov.hu/kum/en/bal/actualities/spokesman_statements/090713_nabucco.htm>.

30 Agreement Between the Government of the Russian Federation, the Government of the Republic of Bulgaria and the Government of the Hellenic Republic Relating to the Cooperation in the Construction and the Operation of the ‘Burgas-Alexandroupolis’ Oil Pipeline, 15 March 2007 (‘Burgas-Alexandroupolis Agreement’).

31 Agreement Among the Hellenic Republic, the Republic of Turkey and the Italian Republic Concerning the Development of the Turkey-Greece-Italy Gas Transportation Corridor, 26 July 2007 (‘ITGI Agreement’): <http://www.ecolex.org/server2.php/libcat/docs/TRE/Full/Other/TRE-153531.pdf>.

32 Treaty on the West African Gas Pipeline Project between the Republic of Benin, the Republic of Ghana, the Federal Republic of Nigeria and the Togolese Republic, 2003 (‘WAGP Treaty’): <http://www.wagpa.org/Treaty_on_WAGP_Project.pdf>.

33 Agreement among the Republic of Albania, the Hellenic Republic and the Italian Republic relating to the Trans Adriatic Pipeline Project, 13 February 2013 (‘TAP Treaty’): <http://nomoi.info/ΦΕΚ-Α-267-2013-σελ-93.html>.

34 Agreement between the Government of the Republic of Kazakhstan and the Government of the People’s Republic of China on cooperation in the construction and operation of gas pipeline Kazakhstan-China, 2007; Protocol on making amendments and additions to the Agreement between the Government of the Republic of Kazakhstan and the Government of the People’s Republic of China on cooperation in the construction and operation of gas pipeline Kazakhstan—China, 2009 (‘China-Central Asia Pipeline Agreement’). As incorporated in the national legislation of Kazakhstan.

35 Intergovernmental Agreement between the Government of the Republic of Bulgaria and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Bulgaria, 18 January 2008 (‘Bulgaria-Russia South Stream Agreement’); Intergovernmental Agreement between the Government of the Republic of Serbia and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Serbia, 25 January 2008 (‘Serbia-Russia South Stream Agreement’); Intergovernmental Agreement between the Government of the Republic of Hungary and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Hungary, 28 February 2008 (‘Hungary-Russia South Stream Agreement’); Agreement between the Government of the Hellenic Republic and the Government of the Russian Federation on Cooperation in Construction and Operation of the Gas Pipeline on the Territory of the Hellenic Republic, 29 April 2008 (‘Greece-Russia South Stream Agreement’); Intergovernmental Agreement between the Government of the Republic of Slovenia and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Slovenia, 14 November 2009 (‘Slovenia-Russia South Stream


These treaties have been chosen because all treaty parties undertake obliga-tions regarding an aspect of established energy flows: import, export, and transit or transportation through the pipeline. The treaties reflect some symmetry of obligations incumbent on transit states and user states (exporters and importers of energy). Not only does the transit state undertake obligations regarding transit, but also exporters and importers undertake export/import obligations owed to the transit state and/or other treaty parties. The General Agreement on Tariffs and Trade (‘GATT’) annexed to (and an integral part of) the WTO Agreement contains obligations regarding the prohibition of export and import restrictions.36 The ECT contains obligations regarding exports and imports of energy: the WTO Agreement applies mutatis mutandis to trade between ECT Contracting Parties none of which is a WTO member, or between ECT Contracting Parties one of which is not a WTO member (ECT Article 29).37 Bespoke pipeline agreements contain diverse obligations tailor-made for each pipeline project. Generically they contain obligations concerning the construction and operation of the pipeline in question as well as transportation of energy through the pipeline which are incum-bent on all states in whose territory the pipeline is situated (‘pipeline states’).38

Agreement’); Intergovernmental Agreement between the Government of the Republic of Croatia and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Croatia, 2 March 2010 (‘Croatia-Russia South Stream Agreement’); Intergovernmental Agreement between the Government of the Republic of Austria and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Austria, 24 April 2010 (‘Austria-Russia South Stream Agreement’); Intergovernmental Agreement between the Government of the Republic of Macedonia and the Government of the Russian Federation on Cooperation in the Construction and Operation of the Gas Pipeline in the Territory of the Republic of Macedonia, 23 July 2013 (‘Republic of Macedonia-Russia South Stream Agreement’). The Protocol between the Government of Russian Federation and the Government of the Republic of Turkey on Cooperation in the Gas Sector, 6 August 2009 (‘Turkey-Russia South Stream Agreement’) only establishes obligations concerning the construction of a pipeline and is not examined in detail in the study, but is taken into account for purposes of completeness.

36 General Agreement on Tariffs and Trade, Annex IA to the Agreement establishing the World Trade Organization, 1867 UNTS 3. Illustratively GATT Articles I, II, XI, and XVII apply to exports and imports of energy. For analysis of such obligations under GATT: M. Matsushita, T.J. Schoenbaum, and P.C. Mavroidis, The World Trade Organization (2nd ed., 2006) 205–278; B. Karapinar, Defining the Legal Boundaries of Export Restrictions: a Case Law Analysis, 15 JIEL (2012) 443–479; M. Desta, The GATT/WTO System and International Trade in Petroleum: an Overview, 21 JENRL (2003) 385–398. WTO members undertake other obligations under the WTO covered agreements and bespoke obligations under their Accession Protocols. For recent case law concerning exports of natural resources see indicatively: China—Raw Materials; China—Rare Earths.

37 The ECT also contains other obligations, which are referred to later in this study, such as obligations for the protection of investments (Part III and Article 26). Literature on ECT trade obligations: I. Frasl, in T. Wälde (ed.), The Energy Charter Treaty (1996) 459–496.

38 The term ‘pipeline states’ used in this study is descriptive of a geographic position and encom-passes but is wider than the term ‘transit states’, e.g. Articles 2(31) and 7, Nabucco Agreement; WAGP Treaty Article VIII which includes obligations of export and transit; BTC Agreement Article II(4)(iii); ITGI Agreement Article 2.8; Burgas-Alexandroupolis Agreement Articles 1, 4, 5, and 8; China-Central Asia Pipeline Agreement Article 4 (transit obligation for Kazakhstan; import obliga-tion for China); Russia-Greece South Stream Agreement Articles 5, 6, and 9; TAP Treaty Article 7.

Introduction10

There are numerous reasons for choosing to examine these agreements. The questions posed in this study gain importance in the light of the following devel-opments. First, numerous oil and gas exporting and transit states have acceded to the WTO. Russia’s accession on 22 August 2012 signals the latest accession of such a state.39 As at 30 June 2014, eight of the twelve members to the Organization of the Petroleum Exporting Countries (‘OPEC’),40 and seven of the eleven state parties to the Gas Exporting Countries Forum (‘GECF’) are WTO members.41 Additionally, proposals concerning transit of energy via pipelines have been made in the Doha Round negotiations, as discussed in section 5.3.1 in this chapter. These developments signal the interest of WTO members in transit of energy via pipelines.

Second, given that the ECT is the first sector-specific treaty governing transit of energy, open to universal accession, future accessions may be expected by states in different areas of the world. Existing ECT Contracting Parties and states consid-ering accession in the future ought to know the relationship of transit obligations with countermeasures under general international law. Moreover, the transposi-tion of ECT provisions may take place either because ECT Contracting Parties implement the ECT by concluding subsequent bespoke pipeline agreements42 or because states, which are not ECT Contracting Parties, conclude treaties that transpose the ECT verbatim, such as the Energy Protocol to the Revised Treaty of the Treaty of the Economic Community of West African States (ECOWAS).43 Additionally, the Transit Protocol to the ECT is currently under negotiation.44 It is important to understand and critique the advantages and disadvantages of the existing ECT provisions because developments under the Transit Protocol and treaties beyond the ECT are expected in the future.

Third, the specific bespoke pipeline agreements have been chosen because although they deal with the same subject matter, they do so in different forms (some are bilateral, others plurilateral) and in different ways (for instance, some create

39 WTO Ministerial Council Decision of 16 December 2011 (with Annex on the Accession Protocol of the Russian Federation), WT/MIN(11)/24WT/L/839, 17 December 2011.

40 Angola, Ecuador, Kuwait, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. Agreement concerning the creation of the Organization of Petroleum Exporting Countries (OPEC), 14 November 1960, 443 UNTS 247.

41 Bolivia, Egypt, Nigeria, Qatar, Russia, Trinidad and Tobago, and Venezuela. The GECF members account for 70% of the world’s proven natural gas reserves: <http://www.gecf.org/ aboutus/about-gecf>. Agreement on the Functioning of the Gas Exporting Countries Forum, 23 December 2008 (Registration with the UN Secretariat: 8 July 2010; Registration no. I-47661).

42 e.g. Nabucco Agreement, BTC Agreement, TAP Treaty.43 Treaty of the Economic Community of West African States, 28 May 1975, 1010 UNTS 17;

ECOWAS Energy Protocol, 31 January 2003, 42 ECOWAS OJ 71. See also WAGP Treaty Article VIII(2).

44 Draft Final Act of the Energy Charter Conference with Respect to the Energy Charter Protocol on Transit, submitted to the Energy Charter Conference, 31 October 2003 (‘draft Transit Protocol’): <http://www.encharter.org/fileadmin/user_upload/document/CC251.pdf>; TTG 87—Last infor-mal version of the draft Transit Protocol as it emerged from consultations among the member states of the Energy Charter Treaty, 22 January 2010: <http://www.encharter.org/fileadmin/user_upload/document/TTG_87_ENG.pdf>. Whenever this study refers to the draft Transit Protocol, it refers to the latest formal version of 31 October 2003.


pipeline committees, others do not). Additionally, some of these treaties have been concluded for competing projects, such as the Nabucco Agreement and the TAP Treaty. Furthermore, others have attracted interest owing to the wider competing interests of importers and exporters: such as the South Stream Pipeline Agreements. This study highlights the different purposes served by the diversity in form and con-tent, and the implications of such diversity for the law of international responsibility.

Having explained which treaties are examined in this study and the reasons for which they have been chosen, it is important to set out the reasons for leav-ing other treaties and other agreements outside the scope of this study. Trade and transit of energy are operated on the basis of a network of agreements between various actors: states and entities, such as state-owned, state-controlled, or private enterprises.45 The construction and operation of transit pipelines are often gov-erned by (a) an intergovernmental agreement (‘IGA’); (b) an agreement between the state and the project investor, the entity which will construct, own and oper-ate the pipeline, often named host-governmental agreement (‘HGA’); (c) agree-ments between the entity operating the transit pipeline and an entity which makes use of the infrastructure for transportation purposes (also called ‘contracts’); and (d) possibly inter-state or inter-entity agreements concerning supply between the seller and the buyer or the importing and exporting states.46 However, agreements

45 The energy sector has been dominated by state control. Various governmental departments and agencies operate in the energy field due to first the particular interest of states in the energy sector, and second the need for governmental financial and other support for the realization of mega-development (transboundary) projects. Additionally, energy trade is predominantly operated via vertically integrated state-owned or state-controlled companies. Some examples: the Saudi Arabian Oil Company is entirely owned by Saudi Arabia operating in exploration, exports and refinement of oil and gas: <http://www.saudiaramco.com/en/home.html#top>; Petroleos de Venezuela SA was created and is owned by Venezuela the operations of which are supervised and controlled by the Ministry of Energy and Petroleum: <http://www.pdvsa.com/>. On the other hand, some countries have privatized energy companies and required the ‘unbundling’ of the ‘upstream’ (exploration and extraction) from the ‘downstream’ (transportation and supply) sectors. An example is the EU legislation on internal gas and electricity markets. The term ‘Third Energy Package’ is used in this study to mean the EU legislation in relation to internal gas and electricity markets in force by 30 June 2014: Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (OJ L 211, 14.8.2009, p. 36); Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ L 211, 14.8.2009, p. 94); Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ L 211, 14.8.2009, p. 55); Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (OJ L 211, 14.8.2009, p. 15); Regulation (EU) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC (OJ L 295/1, 12.11.2010). There is extensive literature on the liberalization of the EU energy sector. Illustratively: A. Johnston and G. Block, EU Energy Law (2012); E. Cabau and C. Jones (eds.), EU Energy Law, Vol. 1 (2010).

46 The Energy Charter Secretariat (‘ECS’) has through the Legal Advisory Task Force drafted Model IGAs and HGAs concerning cross-border pipelines and electricity projects. These do not exclusively apply to transit but to cross-border projects in general. This study refers to the latest versions publicly available of the Model IGAs and HGAs on cross-border pipelines and electric-ity projects (2008): <http://www.encharter.org/index.php?id=282>. The Model Agreements are

Introduction12

concluded between transit states and companies for the construction of transit pipelines, or agreements concluded between companies operating transit pipe-lines, are not examined in this study. What is covered instead is the set of inter-national obligations undertaken between subjects of international law (states and international organizations) and more specifically only treaties.47

The three major treaties dedicated to the transit rights of landlocked states (Convention on Transit Trade of Land-locked States (‘NY Convention’))48 or con-taining provisions on the freedom of transit of landlocked states (the Convention on the High Seas (‘HSC’), and the UN Convention on the Law of the Sea (‘LOSC’))49 are not examined in detail in this study, because they only permit further agree-ments for transit via pipelines, and do not create obligations for user states of pipelines relevant to exports or imports.50 Rather, they are discussed in chapter 2, where it is shown that the underlying rationale of transit rights of landlocked states is the freedom of the high seas, which makes transit rights of landlocked states a special category owing to particular geographic circumstances. By con-trast, the analysis in this study intends to overcome the particularities of claims pertaining to the geographical circumstances of landlocked states and to initiate a debate about existing energy transit flows in general.

Moreover, existing surveys are limited to the examination of challenges posed by transit in relation to EU energy security.51 However, transit is not a regional challenge. The definition of transit as a legal concept is predicated on the pas-sage through the territory of another state. As long as the ‘state’ exists as a ter-ritorial entity, wherever in the world that may be, the crossing of state territory (‘transit’) will exist.52 The Treaty of Lisbon and the Energy Community Treaty (‘EnComT’)53 are not included in this study for the following reasons. The Treaty of Lisbon is a regional treaty from the point of view of its accession terms, and its special features have already been adequately canvassed in the literature.54 The EnComT has not been examined in the literature and its terms of accession are not restricted geographically. However, it incorporates parts of the EU ‘acquis communautaire’ and, as a result, any analysis would require a discussion of ‘EU

non-binding instruments. In 2007, the Charter Conference ‘welcome[d] the Second Edition of the Model [pipeline] Agreements as a set of non-legally binding guidelines for the negotiation of cross-border pipeline projects, it being understood that these models can be used on a voluntary basis, in whole or in part, by States and investors seeking to conclude agreements for cross-border oil or gas pipeline projects’: <http://www.encharter.org/index.php?id=282&L=l>.

47 See section 2.2 later in this chapter. 48 8 July 1965, 597 UNTS 42.49 29 April 1958, 450 UNTS 11; 10 December 1982, 1833 UNTS 3.50 NY Convention Article 1(d)(iii); LOSC Article 124(2).51 For example: S.S. Haghighi, Energy Security (2007).52 J. Crawford, The Creation of States in International Law (2nd ed., 2006) 46.53 Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the

European Community, OJ C 306, 2007/C 306/01 (‘Treaty of Lisbon’). It comprises the Treaty on the European Union (‘TEU’) and the Treaty on the Functioning of the European Union (‘TFEU’). Treaty establishing the Energy Community. Registration with the UN Secretariat, 28 February 2011, Registration no. I-48331.

54 According to Article 49 of the TEU ‘any European state [ … ] may apply to become a member of the Union’. For the nature of the EU founding treaties, see analysis in chapter 4, section 2.2.


energy law’.55 However, the case law of the Court of Justice of the European Union (‘CJEU’) and the approach of EU law and the EnComT to the subject matter of this study are used, when relevant, first as markers of comparison and second, as elements for the interpretation of the treaties considered in this study.

2.2 The law of treaties: focus on interpretation

The 1969 Vienna Convention on the Law of Treaties (‘VCLT’ or ‘1969 VCLT’)56 applies to treaties concluded between states, which meet the definition of Article 2(1)(a).57 The 1986 Vienna Convention on the Law of Treaties between States and International Organizations or between International Organizations (‘1986 VCLT’)58 applies to treaties concluded between states and international organ-izations and between international organizations, which meet the definition of Article 2(1)(a), such as the WTO Agreement and the ECT.59

However, since the 1986 VCLT has not entered into force, and to the extent that there is no indication to the contrary, it is logical to argue that the rules of customary international law that are contained in provisions of the 1969 VCLT are transposable mutatis mutandis to treaties between states and international organizations, as well as between international organizations.60

The VCLT Articles 31–33 contain rules of customary international law for the interpretation of treaties.61 In any case, as regards the interpretation of the

55 EnComT Articles 100 and 102. 56 23 May 1969, 1155 UNTS 331.57 M.A. Fitzmaurice, The Identification and Character of Treaties and Treaty Obligations

between States, 73 BYIL (2002) 141–185; J. Klabbers, The Concept of Treaty in International Law (1996); K. Widdows, What is an Agreement in International Law?, 50 BYIL (1979) 117–149.

58 21 March 1986, 25 ILM 543.59 Upon entry into force of the Treaty of Lisbon the EU succeeded the EC (Article 1 TEU).

EURATOM, one of the three European Communities, has retained a distinct legal personality, and is bound by the ECT. The Economic Community for Coal and Steel, which was one of the three Communities (until the amendment of the founding treaties by the Treaty of the European Union in 1993), became extinct on 23 July 2002, when the Treaty establishing the European Coal and Steel Community was terminated according to its provisions.

60 The 1986 VCLT has been modelled on the 1969 VCLT. Gaja supports the view that to the extent that the provisions of the 1969 VCLT reflect custom, the same applies to the corresponding provisions of the 1986 VCLT. G. Gaja, A ‘New’ Vienna Convention on Treaties between States and International Organizations or between International Organizations: A Critical Commentary, 58 BYIL (1988) 267–269; P. Gautier, in O. Corten and P. Klein (eds.), The Vienna Conventions on the Law of Treaties (2011) 29. In any case, it may be argued that some provisions of the 1986 VCLT reflect custom. In relation to Articles 7, 46, and 31–32 of both the 1969 and 1986 VCLT: EMBL v. Germany, 30, 52. M.E. Footer, in A. Orakhelashvili and S. Williams (eds.), 40 Years of the Vienna Convention on the Law of Treaties (2010) 200–201. Villiger argues that the verbatim transposition of the provisions of the 1969 VCLT into the 1986 VCLT constitutes evidence that the latter’s provisions are of customary nature: M.E. Villiger, The 1969 Vienna Convention on the Law of Treaties: 40 Years After, 344 RCADI (2011) 54–55.

61 ICJ: LaGrand, [99]–[101] (VCLT Articles 31 and 33(4)); Application of the Genocide Convention (Merits), [160] (VCLT Articles 31–32); Costa Rica v. Nicaragua, [47] (VCLT Articles 31–32). ITLOS: International Seabed Mining, [58] (Articles 31–33). Arbitral Tribunal: Iron Rhine, [45] (Articles 31–32). EctHR: Golder v. UK, [29]; Witold Litwa v. Poland, [59]; Demir and Bayakara v. Turkey, [65] (Articles 31–33). Also: Conclusion 1, Text of the draft conclusions on subsequent agreements and subsequent practice in relation to the interpretation of treaties, as provisionally adopted by the Commission at its sixty-fifth session, Report of the International Law Commission, Sixty-fifth session (6 May–7 June and 8 July–9 August 2013) (with commentary), A/68/10, Chapter IV, 9–48 (‘Conclusions on SASP’), 13.

Introduction14

WTO covered agreements, the Understanding on Rules and Procedures Governing the Settlement of Disputes (‘DSU’) explicitly refers to ‘customary rules of interpretation of public international law’ (DSU Article 3(2)), which has been consistently interpreted by the Panels and the Appellate Body (‘AB’) to refer to VCLT Articles 31–33.62 As regards the interpretation of the ECT, the Chairman at the Plenary Session of the European Energy Charter Conference on 17 December 1994 (adoption session) made a statement, which contained the declaration by numerous negotiating states and the European Communities that the ECT ‘shall be applied and interpreted in accordance with generally recognized rules and principles of observance, applica-tion and interpretation of treaties as reflected in Part III of the Vienna Convention on the Law of Treaties of 25 May 1969’.63 The Conference agreed without objec-tion to this declaration, which constitutes part of the context of the ECT (VCLT Article 31(2)(b)).64 All bespoke transboundary project agreements considered in this study are interpreted by use of 1969 VCLT Articles 31–33, unless the treaties indicate otherwise.

This study extensively uses subsequent agreements and subsequent practice as a means of interpreting the treaties examined in this study. It is thus important to set out the criteria that agreements and practice have to meet in order to be taken into account together with the treaty’s context in the interpretation of treaties or as sup-plementary means of interpretation, in accordance with the customary rules set forth in VCLT Articles 31(3)(a) and (b), and 32 respectively.

As far as a subsequent agreement is concerned, the following criteria have to be fulfilled. First, it must be reached after the conclusion of the treaty being interpreted, i.e. after the text of the treaty has become definite.65 Second, it must be an agreement regarding the interpretation of the treaty or the application of its provisions.66 Third, the term ‘agreement’ relates to substance rather than form and as a result, such agree-ment need not be binding,67 but has to express ‘a common understanding, and an

62 15 April 1994, 1869 UNTS 401. Illustratively: AB Report, Japan—Alcoholic Beverages, 10; AB Report, US—Shrimps, [114] (VCLT Articles 31–32); AB Report, US—Subsidies on Upland Cotton, [424] (VCLT Article 33(3)); AB Report, Chile—Price Band, [271] (VCLT Article 33(4)). Literature on interpretation of WTO law: I. Van Damme, Treaty Interpretation by the WTO Appellate Body (2009). The European Community (‘EC’) signed the WTO Agreement, but upon entry into force of the Treaty of Lisbon the EU succeeded the EC (Article 1 TEU). See notification of succes-sion: Verbal Note from the Council of the European Union and the Commission of the European Communities, 30 November 2009, WT/L/779.

63 See (n.59). The final sentence of the statement transposes the text of VCLT Article 31(1). However, in light of the wording of the statement it cannot be concluded that this was meant to exclude the other elements of the general rule enshrined in Article 31 or the other rules of interpre-tation enshrined in Articles 32–33, given that the earlier sentence refers to Part III of the VCLT, which includes all these provisions.

64 The declaration is an instrument in connection with the treaty’s conclusion and accepted by the other parties as one related to the ECT. M.K. Yasseen, L’Interpretation des Traites d’Apres la Convention de Vienne sur le Droit des Traites, 151 RCADI (1976) 37–39, especially [20].

65 ILCYB 1966-II, 221[14]; Commentary to Conclusion 4 on SASP, 31[2] .66 Commentary to Conclusion 4(1), 34–35[13]–[14].67 AB Report, US—Clove Cigarettes, [267]; Commentary to Conclusion 4(1), 32[6] . Conclusion

9(1), Texts and titles of draft conclusions 6 to 10 provisionally adopted by the Drafting Committee on 27 and 28 May and on 2 and 3 June 2014, A/CN.4/L.833, 3 June 2014 (‘Provisionally Adopted Conclusions’); G. Nolte, in G. Nolte (ed.), Treaties and Subsequent Practice (2013) 375.


acceptance of that understanding among parties with regard to the meaning’ of the treaty.68 Thus, it may be adopted in the framework of a treaty Conference of Parties (‘COP’), even by consensus,69 unless there has been an objection by a treaty party.70

As far as subsequent practice is concerned, the following criteria have to be met. First, it must be subsequent to the treaty being interpreted, i.e. after the text of the treaty has become definite.71 Second, it must be practice attributed to treaty parties, not attributed to third states or non-state actors.72 Third, it must be in the application of the treaty being interpreted.73 Fourth, although not all parties to the treaty being interpreted ought to engage in the practice, the practice has to establish the agree-ment of all parties concerning the treaty’s interpretation.74 Mere lack of objection or silence is insufficient to constitute a relevant agreement on an interpretation.75 However, tacit acceptance by silence or omission may establish agreement in relation to the interpretation of a treaty, in circumstances where some reaction would have been the natural conduct.76 ‘Such situations may occur when a party that has not engaged in a practice has become or has been made aware of the practice of other parties (for example, by means of notification or by virtue of participation in a forum where it is discussed), but does not react to it.’77 However, having access to domestic legislation or case law cannot be equated with acceptance.78

In any case, even if subsequent practice of some parties does not establish the agree-ment of all, it may still fall within the realm of VCLT Article 32, as a supplementary means of interpretation, as long as it is practice in the application of the treaty.79

68 US—Clove Cigarettes, [267]; Provisionally Adopted Conclusion 9(1).69 Whaling in Antarctica, [46]; Provisionally Adopted Conclusion 10(2)–(3); Special Rapporteur

Nolte, Second Report on Subsequent Agreement and Subsequent Practice, [97]–[107]. On definition of COPs and relevance for this study see chapter 6, section 5. Provisionally Adopted Conclusion 10(1); Nolte (n.67) 364–366 and 370.

70 Implicitly: Whaling in Antarctica, [46], [83]; Provisionally Adopted Conclusion 10(3); Special Rapporteur Nolte, Second Report on Subsequent Agreement and Subsequent Practice, [103]–[107].

71 ILCYB 1966-II, 221[14]; Commentary to Conclusion 4 on SASP, 31[2] .72 Conclusion 5 on SASP and Commentary, 41–48.73 This includes the conclusion of international agreements for the implementation of the treaty:

Ibid. 35[17].74 I.M. Sinclair, The Vienna Convention on the Law of Treaties (2nd ed., 1984) 137; Yasseen (n.64)

48; G. Fitzmaurice, The Law and Procedure of the International Court of Justice 1951–4: Treaty Interpretation and Other Treaty Points, 33 BYIL (1957) 223 (‘of the great majority of the parties and not merely one’). The acceptance of the practice by other parties is sufficient: ILCYB 1966, vol. II, 221–222[15]. R. Gardiner, Treaty Interpretation (2008) 239 (‘it is sufficient if there is [ … ] good evidence that the other parties have endorsed the practice’). The AB in Japan—Alcoholic Beverages II set out that ‘subsequent practice in interpreting a treaty has been recognized as a “concordant, common and consistent” sequence of acts or pronouncements which is sufficient to establish a discernable pattern implying the agreement of the parties regarding its interpretation.’ AB Report, Japan—Alcoholic Beverages, section E.

75 AB Report, EC—Chicken Cuts, [272], [276]; Special Rapporteur Nolte, Second Report on Subsequent Agreement and Subsequent Practice, 29[58].

76 Provisionally Adopted Conclusion 9(2); I.C. MacGibbon, Some Observations on the Part of Protest in International Law, 30 BYIL (1953) 307; AB Report, EC—Chicken Cuts, [272].

77 AB Report, EC—Chicken Cuts, [272]; Special Rapporteur Nolte, Second Report on Subsequent Agreement and Subsequent Practice, [67]–[68].

78 AB Report, EC—Chicken Cuts, [334]; Special Rapporteur Nolte, Second Report, [67].79 Sinclair (n.74) 138; Yasseen (n.64) 52; ILCYB 1964, Vol. II, 204[13]; Commentary to

Conclusion Conclusion 4(3) on SASP, 37[22]–[23]; Provisionally Adopted Conclusion 6(3).

Introduction16

Having discussed the treaties examined in this study and the rules applied to interpret them, the following section provides an overview of the law of interna-tional responsibility and focuses on the function of countermeasures.

3. Countermeasures under the Law of International Responsibility

3.1 Overview of the law of international responsibility

The ILC prepared and adopted the Articles on Responsibility of States for Internationally Wrongful Acts (‘ASR’).80 In 2001, it submitted them to the UNGA,81 which commended them ‘to the attention of Governments without prejudice to the question of their future adoption or other appropriate action’.82 Unlike the works of the ILC in relation to the law of treaties, the ASR have not been incorporated in a treaty.83 Neither the ILC nor the UNGA has suggested that the ASR in their entirety reflect existing custom.84 Nonetheless, the ILC Commentary to the ASR suggests that some articles reflect custom and that others have been incorporated as progressive development of the law.85 Additionally, international case law prior and subsequent to the submission of the ASR to the UNGA has recognized that some articles reflect custom.86

Since this study examines obligations incumbent on international organiza-tions (for instance, the EU is party to the ECT and the WTO Agreement), the analysis of the engagement and implementation of responsibility of states is mutatis mutandis applicable to international organizations.87 The ILC adopted its Articles on the Responsibility of International Organizations

80 The International Law Commission (‘ILC’) is a subsidiary organ of the UN General Assembly (‘UNGA’) mandated to ‘promote the progressive development of international law and its codifi-cation’. UNGA Res. 174(II), 21 November 1947; Article 1, Statute of the ILC. Generally on the ILC: I.M. Sinclair, The International Law Commission (1987).

81 Text of the draft articles on the responsibility of states for internationally wrongful acts, Report of the Commission to the General Assembly on the work of its fifty-third session, ILCYB 2001-II, 26–30 (‘ASR’).

82 UNGA Res. 56/83, 12 December 2001, [3] . The ASR were annexed to this UNGA Res.83 However, the UNGA has continued periodically to examine the possibility of elaborating an

eventual convention on the law of state responsibility: UNGA Res. 62/61, 6 December 2007.84 On the temptation of using the ASR without verifying the legal value of the ‘rule’ therein,

because they have been conveniently drafted in a code-like manner: D. Caron, The ILC Articles on State Responsibility, the Paradoxical Relationship between Form and Authority, 96 AJIL (2002) 857–873; T. Treves, in M. Ragazzi (ed.), International Responsibility Today (2005) 225.

85 e.g. ASR Article 54, ILC Commentary, 139[6] ; ASR Article 48(2)(b), ILC Commentary, 127[12].

86 e.g. ASR Article 4: Application of the Genocide Convention (Merits), [385].87 For international responsibility of international organizations: Immunity from Legal Process

of a Special Rapporteur of the Commission on Human Rights, [66]; A. Tzanakopoulos, Disobeying the Security Council (2011). None of the bespoke pipeline agreements examined in this study is an agreement between states and international organizations or between international organizations. Such agreements can be envisaged given the capacity of international organizations to undertake international obligations within the limits of the powers conferred to them expressly or implicitly

Countermeasures under the Law of International Responsibility 17

(‘ARIO’),88 which were commended by the UNGA ‘to the attention of Governments and international organizations without prejudice to the question of their future adoption or other appropriate action’.89 The ILC Commentary to ARIO states that ‘[t] he fact that several [ … ] articles are based on limited practice moves the border between codification and progressive development in the direction of the latter. It may occur that a provision in the articles on State responsibility could be regarded as representing codification, while the corresponding provision on the responsibility of international organizations is more in the nature of progressive development.’90 Bearing this in mind, their approach to engagement (particularly the element of breach of an international obligation) (ARIO Article 4(b)), to implementation of responsibility of inter-national organizations (invocation of responsibility) (ARIO Part IV), and to countermeasures is based on that of the ASR.91

The analysis in this study is not only based on the ASR. It also examines lit-erature and international case law, which has preceded the adoption of ASR by the ILC and has been used by the ILC in their drafting, as well as international case law, which has considered the ASR after their adoption or in earlier drafts.92 Similarly the work of the ILC and the comments of governments to the prepar-ation of ARIO may provide evidence about the state of the law on international responsibility (of states and international organizations), by confirming or depart-ing from the ASR. ARIO are not examined in this study so much as to define the responsibility of international organizations, as to support whether the relevant ASR provisions reflect lex lata and to inform this study with contemporary prac-tice, as reflected in ARIO. For these reasons, ARIO are not referred to in all parts of this study.

The rules on international responsibility apply to breaches of international obli-gations irrespective of their source. There is no distinction between international

as necessary for the exercise of their functions. Reparation for Injuries, 179. On treaty-making powers of international organizations and implied powers: H.G. Schermers and N.M. Blokker, International Institutional Law (5th ed., 2011) 1123–1129; Sands and Klein (n.1) 476–479.

88 Text of the draft articles on the responsibility of international organizations, Report of the International Law Commission, Sixty-third session (26 April–3 June and 4 July–12 August 2011), General Assembly, Official Records, Sixty-sixth session, Supplement No. 10 (A/66/10), 52–66 (‘ARIO’). For the ILC Commentary: Text of the draft articles with commentaries thereto, Report of the International Law Commission, Sixty-third session (26 April–3 June and 4 July–12 August 2011), General Assembly, Official Records, Sixty-sixth session, Supplement No. 10 (A/66/10), 67–170 (‘ILC ARIO Commentary’).

89 UNGA Res. 66/100, 9 December 2011, [3]. 90 ILC ARIO Commentary, 67[5] –68.91 ILC Commentary to ARIO (Article 3); ILC ARIO Commentary, 78[1] ; ARIO Article 51;

ILC ARIO Commentary, 148[5]: ‘There is no apparent justification for a distinction in this regard between countermeasures taken against international organizations and countermeasures directed against States.’ In any case, it is shown in section 3.2 later in this chapter that countermeasures by international organizations against third states are an issue of state responsibility.

92 Concerning the dialogue between the ILC and the ICJ regarding rules on international responsibility: S. Villalpando, Le Codificateur et le Juge Face à la Responsabilite Internationale de l’État: Interaction Entre la CDI et la CIJ dans la Determination des Regles Secondaires, 55 AFDI (2009) 39–61.

Introduction18

responsibility for breach of treaty obligations and breach of obligations from other sources.93

The ASR and ARIO are premised on the distinction between primary rules and secondary rules.94 Primary rules prescribe conduct; secondary rules on interna-tional responsibility pertain to the consequences of breach of rules of conduct.95 Only the latter are the subject matter of the law of international responsibility. The following subsection touches on the elements of an internationally wrongful act, and particular focus is placed on attribution.

3.1.1 The elements of an internationally wrongful act: focus on attributionAccording to customary international law, international responsibility is engaged automatically upon the commission of an internationally wrongful act.96 An internationally wrongful act consists of conduct (actions and omissions),97 which first, is attributed to the state under international law, and second, constitutes a breach of an international obligation of the state.98 This study focuses on the second element of the internationally wrongful act ( chapter 3), but uses the rules on attribution.99 Given that trade in energy and transit pipelines are operated by a variety of entities it is necessary to clarify whether the conduct of corporations is attributed to the state.

The conduct of corporations operating transit pipelines or involved in imports and exports of energy can be attributed to the state.100 However, the fact that a corporation is owned partly or entirely by the state does not mean that the corpor-ate veil is lifted and that the conduct of the corporation is ipso facto attributed to the state.101 A number of requirements under international law must be fulfilled. First, the conduct of the corporation as organ of the state is attributed to the state (ASR Article 4),102 irrespective of whether the conduct may be classified as iure

93 ASR Article 12; ILC ASR Commentary, 35[7] , 55[5]; Phosphates in Morocco, 28; Interpretation of Peace Treaties (Second Phase), 228; Hostages in Iran, [56]; Rainbow Warrior, [75]; S. Rosenne, Breach of Treaty (1985) 106–117.

94 ILC ASR Commentary, 31[1] ; ILC ARIO Commentary, 67[3].95 Special Rapporteur Ago, First Report on State Responsibility, ILCYB 1970-II, 306[66.c]: ‘it is

one thing to define a rule and the content of the obligation it imposes, and another to determine whether that obligation has been violated and what should be the consequences of the violation. Only the second aspect of the matter comes within the sphere of responsibility proper’. This is a different definition of secondary rules to that provided by Hart: H.L.A. Hart, The Concept of Law (1961) 92–93.

96 ASR Article 1; ILC ASR Commentary, 88[3] , 91[4]. Literature: B. Graefrath, Responsibility and Damages Caused: Relationship between Responsibility and Damages, 185 RCADI (1984) 20; P.-M. Dupuy, Le Fait Generateur de la Responsabilite Internationale des États, 188 RCADI (1984) 53; P. Reuter, Le Developpement de l’Ordre Juridique International (1995) 561. Case law after the adoption of the ASR: Wall case, [147]; Jurisdictional Immunities, [136]; M/V Virginia, [430].

97 For omissions: Corfu Channel Case, 22–23; Hostages in Iran case, [63], [67].98 ASR Article 2. For international organizations: ARIO Article 4.99 ASR Articles 4–11. 100 ILC ASR Commentary, 39[5] .

101 On corporate veil: Barcelona Traction case, [58].102 Immunity from Legal Process of a Special Rapporteur of the Commission on Human Rights, [62];

Application of the Genocide Convention (Merits), [385]; DRC v. Uganda, [213].


gestionis or iure imperii.103 An example would be an entity incorporated within the structure of a ministry of the state.104

Second, a corporation may be empowered (but not merely permitted) by domestic law, even after its privatization,105 to exercise elements of governmental authority (ASR Article 5). When the corporation’s conduct is in that capacity, it is attributed to the state. This rule raises a number of difficulties in the context of entities operating transit pipelines. The Commentary to the ASR does not define ‘elements of governmental authority’, but indicates some criteria that could assist in making a relevant determination: the content of the powers, ‘the way they are conferred on an entity, the purposes for which they are to be exercised, and the extent to which the entity is accountable to the government for their exercise’.106 Transit via pipelines can be seen as a normal commercial operation, along with sales and purchases, and as such outside the scope of ‘governmental authority’; but it could also be seen as a governmental authority assigned to a corporation by the state.107 Ensuring the energy security of the state and the effective functioning of a pipeline system, which is also used for transit purposes, could be considered as part of governmental power, especially if accompanied by authority to represent a state in energy matters.108 However, empowerment by state law is a separate and formal requirement, which may encompass contracting with the state.109 A statute of a state-owned energy company being approved by the government does not necessarily fulfil this criterion. A more specific empowerment (even within the statute being approved) is needed.110 Hence even assuming that the operation of pipelines is a ‘governmental authority’, owing to the difficulty of obtaining evidence, it has not been possible in this study clearly to identify whether par-ticular entities, which have been involved in transit and trade disputes, have been

103 Where the internal law does not determine an entity as an ‘organ’, the powers of the entity and its relations to other bodies under internal law assist in its classification. ILC ASR Commentary, 41[6] . On de facto organs: ‘[it] is so closely attached [to the state] as to appear to be [ … ] its agent [ … ] whose supposed independence would be purely fictitious.’ Application of the Genocide Convention (Merits), [391]–[392], [394]–[395].

104 For entities specifically operating pipelines: Kardassopoulos v. Georgia (Award), [275].105 ILC ASR Commentary, 42[1] ; Hyatt International Corporation v. Government of the Islamic

Republic of Iran, 9 Iran-USCTR (1985) 72, 88–94. In Maffezini the Arbitral Tribunal did not rely on the draft ASR. In relation to attribution it applied the ‘structural test’ (whether the entity falls within ‘the overall scheme of public administration’), which implies the rule contained in ASR Article 4, and the ‘functional test’ (whether ‘the specific acts or omissions are essentially commercial rather than governmental in nature’), which seems mostly connected with ASR Article 5, rather than with ASR Article 8: Maffezini (Jurisdiction), [77] (structural test), [79]–[80] (functional test); Maffezzini (Award) [47]–[49] (structural test), [50]–[52] (functional test).

106 ILC ASR Commentary, 43[6] .107 In relation to competences relating to routes of communications: Salini v. Morocco, [33]–[34].108 Kardassopoulos v. Georgia (Award), [276]–[277].109 ILC ASR Commentary, 43[7] .110 e.g. according to Article 5 of the Statute of the ‘Naftogaz of Ukraine National Joint Stock

Company’, approved by the Cabinet of Ministers of Ukraine, Res. No. 474, 25 May 1998, the pur-pose of the company is restructuring of the oil and gas industries, improvement of energy security and ensuring the effective functioning of the oil and gas system. But, there is no specific provision in this statute that empowers Naftogaz to represent Ukraine or act on its behalf in particular matters.

Introduction20

empowered and have acted in the exercise of governmental authority within the meaning of the rule found in ASR Article 5.

Third, if the state instructs, directs, or controls a corporation, the latter’s con-duct is attributed to the state (ASR Article 8).111 For instance, in EDF (Services) Ltd v. Romania, the Tribunal found that the Romanian Ministry of Transportation instructed and directed two state-owned corporations to conduct themselves in a manner that violated a bilateral investment treaty to which Romania was party.112 But, in relation to control, the question becomes one of degree. The ILC did not determine the degree of control required for the purposes of attribution. If the state uses its ownership or control over a corporation specifically in order to achieve a particular result, the conduct of the corporation is attributed to the state (effective control).113 On the other hand, corporations are hierarchically organized structures and may often enjoy systemic and broad support from the state (especially when they are state-owned) in the context of trade and transit of energy due to the particular importance of energy for states. These features would meet the threshold of overall control.114 However, given the separation recognized in international law by virtue of the corporate veil,115 and the fact that the issue here is state responsibility, the ‘effective control’ standard is more suitable in this context.116

Fourth, if the entity is not an organ of the state or does not exercise governmen-tal authority, and no direction or control has been exercised over its conduct, its conduct can be attributed to the state, if it is acknowledged and adopted by the state as its own (ASR Article 11).117

Finally, the WTO/GATT does not include special rules of attribution to the exclusion of the rules of attribution under the law of international responsibility.118 GATT Article XVII(1)(a) does not strictly create secondary rules concerning attribution, but obliges WTO members to achieve a particular result vis-à-vis ‘state trading enterprises’, and in some respects widens the scope of attribution.119 However, there is no indication in the GATT as to the amount of capital that the state ought to own in order for the enterprise to fall within the term ‘state trading enterprise’, and there is not as yet WTO case law dealing with this issue.

111 ILC ASR Commentary, 48[5] . 112 EDF v. Romania, [201].113 ILC ASR Commentary, 48[6] ; Foremost Tehran, Inc. v. Islamic Republic of Iran, 10 Iran-

USCTR (1986) 228. On effective control: Military and Paramilitary Activities, Merits, [115]; Application of the Genocide Convention (Merits), [405]–[407]. For criticism of ‘effective control’: A. Cassese, The Nicaragua and Tadic Tests Revisited in Light of the ICJ Judgment on Genocide in Bosnia, 18 EJIL (2007) 649–668.

114 ICTY, Appeals Chamber, Prosecutor v. Tadic, Judgment, (IT-94-1-A, 15 July 1999), [120]. Cassese, ibid. 661.

115 Barcelona Traction case, [58].116 Application of the Genocide Convention (Merits), [406]–[407].117 Hostages in Iran case, [74]; Kardassopoulos v. Georgia (Award), [278]–[279].118 S. Villalpando, Attribution of Conduct to the State: How the Rules of State Responsibility

May be Applied within the WTO Dispute Settlement System, 5 JIEL (2002) 408; J. Gomula, in J. Crawford, A. Pellet, and S. Olleson (eds.), The Law of International Responsibility (2010) 791–801.

119 See analysis in chapter 3, section 2.2.1.


Similarly, ECT Article 22 requires Contracting Parties to conduct themselves in a particular manner with regard to some types of corporations (‘state and privileged enterprises’) without defining what constitutes a state enterprise.120 These issues are further discussed in chapter 3.

Whenever reference is made to breaches of transit or other obligations without specifically examining attribution, it is presumed in this study that the criteria for attribution have been met.

3.1.2 The consequences of an internationally wrongful actUpon engagement of international responsibility, the consequences of the inter-nationally wrongful act arise automatically. These are: first, the obligation to cease that wrongful act and offer assurances of non-repetition (ASR Article 30);121 and second, the obligation to make full reparation for the injury caused (ASR Article 31).122 Corresponding to these twin obligations are the twin remedial rights of states (or international organizations) injured by the internationally wrongful act. Nevertheless, the responsible state continues to bear the obligation to perform the breached obligation, because the pre-existing relationship established by the pri-mary obligation does not disappear by virtue of the breach.123

A number of chapters analyse seven disputes in the period 2002–2013 regard-ing interruptions or reductions of energy transit.124 With the exception of the 2002 Croatia-Slovenia transit dispute, no formal invocation of responsibility took place and informal protests only claimed cessation.125 To the author’s knowledge, no inter-state claims were brought for compensation. Without intending exhaus-tively to identify the reasons for such behaviour, it may be argued that the main concern surrounding trade, transit, and transportation of energy via pipelines is the cessation of the internationally wrongful act and (timely) implementation of the agreed rules, not the pursuit of compensation.126

The consequences of international responsibility do not form the focus of this study and are not further examined. Rather, the focus is on the implementation

120 See analysis in chapter 3, section 2.2.2.121 ICJ case law confirming the rule subsequent to the ASR: Avena, [144]–[153]; Costa Rica v.

Nicaragua, [150]; Pulp Mills, [278]; Jurisdiction Immunities, [138]. Concerning the conditions for the award of guarantees of non-repetition: Costa Rica v. Nicaragua, [150]; Jurisdiction Immunities, [138].

122 Forms of reparation include restitution, compensation and satisfaction: ASR and ARIO Articles 34–37. Case law before the ASR: Chorzów Factory case, 21, 47. Case law after the ASR: Wall case, [152]–[153]; Pulp Mills, [273]–[274]; Jurisdictional Immunities, [136]. These rules are also reflected in ARIO (Articles 30–31).

123 The obligation of cessation is predicated on the assumption of the continuation in force of the breached obligation and the duty of performance of that obligation. ASR Article 29; ILC ASR Commentary, 88[1] –[4].

124 The South Ossetia situation is not taken into account here since it did not involve ‘transit’ according to the definition of the ECT. See section 5.1 later in this chapter.

125 Although Slovenia formally invoked Croatia’s responsibility for a breach of the ECT, it did not claim compensation. See this chapter, section 5.3.2, and chapter 3, section 3.2.2.1.

126 Similar reasoning: C.D. Gray, Judicial Remedies in International Law (1987) 11.

Introduction22

of international responsibility. The following section examines the function of countermeasures in the law of international responsibility.

3.2 The function of countermeasures: invocation of responsibility and circumstances precluding wrongfulness

Countermeasures constitute a type of unilateralism effectuated in a bilateral manner.127 They are taken by one state against another state, because the latter has violated an obligation owed to the former. They represent an instance of bilat-eralism in international law.128

Countermeasures are distinct from ‘reprisals’ and ‘retorsion’. Retorsion does not involve the violation of international law,129 while countermeasures are themselves violations of international obligations owed to the targeted state.130 Reprisals are forcible and non-forcible measures against a perpetrator. However, since the prohibition of the use of force under the UN Charter and custom, for-cible reactions to breaches are no longer available to states under the law of inter-national responsibility.131

Additionally, countermeasures should be distinguished from sanctions by international organizations. ‘While countermeasures are acts that would per se be unlawful, sanctions are lawful measures that an international organization may take against its members according to the rules of the organization’.132 By contrast, responses (that pertain to the suspension of performance of interna-tional obligations) taken by an international organization against a responsible

127 For the bilateral evolution and framework of countermeasures: K. Sachariew, State Responsibility for Multilateral Treaty Violations: Identifying the ‘Injured State’ and its Legal Status, 35 NILR (1988) 286; J.A. Frowein, Reactions by Not Directly Affected States to Breaches of Public International Law, 248 RCADI (1994) 353.

128 Other instances of bilateralism in international law: (a) the reciprocal/bilateral nature of obli-gations. Dupuis (n.1) 350. (b) The bilateral-oriented interpretation of rules concerning standing, South West Africa Cases (Second Phase), 32[44]: ‘rights or interests, in order to exist, must be clearly vested in those who claim them, by some text or instrument, or rule of 1aw’. In a later passage the Court held that actio popularis is not known in international law as it stood in 1966. See [88]. Cf. C.J. Tams, Enforcing Obligations Erga Omnes in International Law (2005) 63–69. (c) The principle pacta tertiis. (d) The bilateral structure of international adjudication, which has traditionally been adversarial. L.F. Damrosch, in L.F. Damrosch (ed.), The International Court of Justice at a Crossroads (1987) 376–400.

129 Retorsion, MPEPIL online, [1–2]130 P. Reuter, Droit International Public (1976) 399–400; E. Zoller, Peacetime Unilateral

Remedies (1984) 5–9, 43–44.131 Air Services Agreement, [85]; Elagab (n.10) 37; Zoller (n.130) 40. For countermeasures being

distinct from forcible reprisals: ILC ASR Commentary 128[3] ; D.W. Bowett, Reprisals Involving Recourse to Armed Force, 66 AJIL (1972) 1–36. For prohibition of use of force: UN Charter Article 2(4). The exceptions to the rule of prohibition of use of force are: self-defence (UN Charter Article 51) and by authorization of the UN Security Council (UN Charter Articles 42 and 53(1)). Military and Paramilitary Activities, Merits, [191]–[193].

132 Special Rapporteur Gaja, Seventh Report on Responsibility of International Organizations, 27 March 2009, A/CN.4/610, [111]. For other differences: L.-A. Sicilianos, in L. Picchio Forlati and L.-A. Sicilianos (eds.), Economic Sanctions in International Law (2004) 17–25. On the relationship between sanctions and countermeasures: J. Crawford, in V. Gowlland-Debbas (ed.), United Nations Sanctions and International Law (2001) 57–68.


state that it is not its member are countermeasures against a responsible state, not a sanction.133 Moreover, sanctions may be distinguished from COPs deci-sions,134 because the latter do not have international legal personality,135 and their decisions are germane to collectively adopted treaty law responses.

In the framework of international responsibility, countermeasures have a dual function. They are self-help measures for the implementation of international responsibility.136 At the same time, they constitute breaches of international obli-gations. Because they are taken in response to a prior internationally wrongful act intending to induce the responsible state to comply with its obligations, their wrongfulness is precluded.137 This is recognized by the ASR: countermeasures are placed in the section concerning the conditions for the engagement of international responsibility, among the circumstances precluding wrongfulness (Article 22 in Part I on the Internationally Wrongful Act), and in the section concerning implementation of international responsibility (Part III, Articles 49–53).138

For the purposes of the ASR, invocation of international responsibility involves claims of ‘relative formality’, such as recourse to dispute settlement or counter-measures. Mere protests are not a means of invoking international responsibility.139 In international law standing is the cause of action upon which a claim is based. It arises from ‘(a) the existence of an international obligation owed to another subject of international law or a group of subjects of international law; and (b) the conduct which has allegedly breached that obligation.’140 This meaning coincides with the rationale of the ILC concerning the implementation of international responsibility. Under the ASR, which reflects the state of customary international law on this point, injured states may claim cessation, assurances and guarantees of non-repetition of the internationally wrongful act, and reparation (ASR Article 42). In contrast, states other than an injured state may claim cessation and assur-ances of non-repetition of the wrongful act, as well as reparation in the interest

133 Sicilianos, (n.132) 19.134 COPs are different from expert bodies and independent from treaty parties. See also analysis

in chapter 6, section 5.135 R.C. Churchill and G. Ulfstein, Autonomous Institutional Arrangements in Multilateral

Environmental Agreements: A Little-Noticed Phenomenon in International Law, 94 AJIL (2000) 623–659. For such decisions, see analysis in chapter 5, section 2.3.2, and chapter 6, section 5.

136 ILC ASR Commentary, 128[1] ; Separate Opinion of Judge Simma, Application of the Interim Accord of 13 September 1995 (the former Yugoslav Republic of Macedonia v. Greece), ICJ Reports 2011, p. 695 at 699 [10]; Elagab (n.10) 45–46; Sicilianos (n.132) 15–16.

137 ILC ASR Commentary 129[6] , 135[7].138 Similar approach: ARIO Articles 22 and 51–57.139 ILC ASR Commentary, 117[2] . See also Separate Opinion of Judge Fitzmaurice, Barcelona

Traction, Light and Power Company, Limited, Second Phase, Judgment of 5 February 1970, ICJ Reports 1970, p. 64 at 82[31]: ‘diplomatic representations [ … ] need not necessarily be based on or imply a claim of right, but are often admitted or received in the absence of any such claim or pretension to it.’

140 J. Crawford and A. Pellet, in I. Buffard, J. Crawford, A. Pellet, and S. Wittich (eds.), International Law between Universalism and Fragmentation (2008) 831–867. Cf. Pellet adds a third element: that the dispute is susceptible to judicial proceedings. Ibid. 848. However, this is not established in case law or literature. See also I. Brownlie, Causes of Action in the Law of Nations, 50 BYIL (1979) 13–41.

Introduction24

of the injured state or of the beneficiaries of the obligation breached (ASR Article 48).141

According to the ASR and ARIO, injured states and international organizations may resort to countermeasures.142 On the other hand, the ASR do not prejudice the right of states other than the injured state to resort to ‘lawful measures’ against the responsible state (ASR Article 54). They include ‘a saving clause which [ … ] leaves the resolution of the [question whether there is a customary right of states other than an injured state to resort to countermeasures] to the further develop-ment of international law’.143 ARIO take the same position vis-à-vis international organizations.144 Owing to the inconclusiveness as to whether states and interna-tional organizations other than an injured state or international organization may resort to countermeasures under lex lata, this issue is not further examined in this study.145 In any case, research for this study has not identified any measures that have been taken by states or international organizations other than an injured state or international organization in response to a breach of an erga omnes partes obligation regarding transit of energy. The determination of which is an injured state and which is a state other than an injured state, which is based on the nature of the obligation breached, is made in chapter 4. On the basis of that analysis, chapters 6 and 7 discuss which means of invoking responsibility are available to injured states and states other than an injured state (or international organiza-tion) by a breach of transit obligations regarding transit of energy via pipelines. However, the focus will be on injured states and international organizations. As explained, the following analysis will not refer to international organizations, but it applies to them mutatis mutandis.

As regards the function of countermeasures as circumstances precluding wrongfulness, it should be explained that circumstances precluding wrongful-ness provide ‘an excuse for non-performance while the circumstance in question subsists’ and do not affect the obligation not complied with; the latter remains an applicable legal standard between the parties.146 In the context of this study, countermeasures may be invoked by user states of the pipeline to preclude the wrongfulness of a breach of their obligations under the treaty breached by the transit state (for instance, suspending performance of obligations of exports to the transit state). They may also be invoked by the transit state in an effort to

141 According to the ILC Commentary, ASR Article 48(2)(b) (reparation in the interest of the injured state or of the beneficiaries of the obligation breached) is a progressive development: ILC Commentary, 127[12]. ARIO have adopted the same distinction. ARIO Articles 43, 49.

142 ASR Article 49; ARIO Article 51.143 ILC ASR Commentary, 129[8] , 137[3], 139[6]–[7].144 ARIO Article 57; ILC ARIO Commentary, 154[1] –155[2].145 For literature: M. Akehurst, Reprisals by Third States, 44 BYIL (1970) 1–18; Frowein (n.127);

M. Koskenniemi, Solidarity Measures: State Responsibility as a New International Order?, 72 BYIL (2001) 337–356. Sicilianos argues that countermeasures of states other than the injured state are permitted under lex lata, and shows that there is abundant practice of countermeasures taken by states other than the injured state. L.-A. Sicilianos, in J. Crawford, A. Pellet, and S. Olleson (eds.), The Law of International Responsibility (2010) 1146–1148.

146 ILC ASR Commentary, 71[2] ; Gabčνkovo-Nagymaros, [48].

Outline of the Study 25

preclude the wrongfulness of a breach of obligations regarding transit of energy. Chapters 7 and 8 analyse whether the treaties examined in this study exclude countermeasures as circumstances precluding wrongfulness, and if not whether particular types of countermeasures would meet the conditions of lawfulness under customary international law.

Because countermeasures are established under the default rules of general international law, they can be contracted-out of by states, which may choose to create lex specialis secondary rules attached to treaty obligations. The ASR acknowledge this option in Article 55, where the respective norms ‘cover the same subject matter and there has to be an actual inconsistency between them, or else a discernible intention that one provision excludes the other’.147 In the absence of such intention, the ‘fall back’ rules on countermeasures under general customary international law apply. The exercise of determining whether or not a treaty has created secondary rules, which supersede countermeasures, as pleas for the excuse of wrongfulness or as a means of implementation of international responsibility, is essentially one of treaty interpretation, which is undertaken in chapters 3, 6, 7 and 8.148

4. Outline of the Study

This study is composed of nine chapters. Chapter 2 provides an overview of the historical development of freedom of transit in international law and the norma-tive landscape in which treaties concerning transit of energy via pipelines oper-ate. Chapter 3 addresses the scope and content of obligations regarding transit of energy established in the treaties considered in this study. It illustrates the variety of primary rules and the primacy of treaty interpretation for the determin-ation of the scope and content of those rules. It lays emphasis on the relationship between treaty exceptions and circumstances precluding wrongfulness under gen-eral international law.

Chapter 4 examines the nature of obligations regarding transit of energy under the treaties included in this study. It considers the place of obligations regard-ing transit of energy in the pendulum between ‘bilateralism’ and ‘common inter-ests’ in international law.149 It determines who may resort to countermeasures against the responsible transit state under general international law, which has

147 ILC ASR Commentary, 140[4] ; ILC Fragmentation Report, 50; J.H.B. Pauwelyn, Conflict of Norms in Public International Law (2003) 164–188.

148 ILC ASR Commentary, 140[3] –[5].149 B. Simma, in Y. Dinstein (ed.), International Law at a Time of Perplexity (1989) 821–844;

S. Rosenne, in W. Friedmann, L. Henkin, and O. Lissitzyn (eds.), Transnational Law in a Changing Society (1972) 202–227; M. Lachs, Le Developpement et les Fonctions des Traites Multilateraux, 92 RCADI (1957) 229–341; B. Simma, From Bilateralism to Community Interest in International Law, 250 RCADI (1994) 217–384; J. Crawford, Multilateral Rights and Obligations in International Law, 319 RCADI (2006) 325–482.

Introduction26

implications concerning the recourse to countermeasures in the form of suspend-ing compliance with the obligations considered in this study.

Chapter 5 examines treaty law responses available for material breaches of the treaties examined in this study. It shows that treaty law responses (and the exceptio non adimpleti contractus) do not exclude countermeasures as a means of imple-menting responsibility under international law.

Chapter 6 determines whether treaty provisions concerning dispute settlement and compliance supervision exclude countermeasures as a means of implementing responsibility. It also shows that the treaty rules on standing to resort to dispute settlement with a view to claiming performance of treaty obligations often reflect the collective nature of treaty obligations.

Chapter 7 explores the form such countermeasures may take in the light of treaty provisions, which may exclude countermeasures, and in the light of the conditions of lawfulness of countermeasures under customary international law.

Chapter 8 considers whether countermeasures can preclude the wrongfulness of an interruption of established transit flows by the transit state.

Finally, chapter 9 summarizes the main characteristics of the relationship between countermeasures and the treaties examined here concerning transit of energy via pipelines.

5. Certain Basic Concepts

This section defines the key terms ‘transit of energy via pipelines’ and, by recourse to the rules on treaty interpretation, establishes whether the treaties examined in this study address such transit.

5.1 Transit

The definition of ‘transit’ adopted in this study is based on the definition of ‘traffic in transit’ (hereinafter, ‘transit’) under the 1921 Barcelona Convention. This is the first multilateral treaty of general character (in terms of subject matter and acces-sion), which defines ‘transit’ and is exclusively designed to address this activity.150 Numerous subsequent treaties, some of which are analysed in the following chap-ters, have adopted this definition, namely, that transit is the passage across the ter-ritory of the transit state which constitutes ‘only a portion of a complete journey, beginning and terminating beyond [the transit state’s] frontier [ … ]’ (Barcelona Statute Article 1).

GATT Article V, the GATT provision on freedom of transit adopts verbatim the definition found in Barcelona Statute Article 1: ‘[g] oods [ … ], and also vessels and other means of transport, shall be deemed to be in transit across the territory of a contracting party when the passage across such territory [ … ]’.

150 See overview in chapter 2, section 3.1.

Certain Basic Concepts 27

In contrast, under the ECT Article 7(10)(a) ‘transit’ means:

(i) the carriage through the Area of a Contracting Party, [ … ], of Energy Materials and Products originating in the Area of another state and destined for the Area of a third state, so long as either the other state or the third state is a Contracting Party; or

(ii) the carriage through the Area of a Contracting Party of Energy Materials and Products originating in the Area of another Contracting Party and destined for the Area of that other Contracting Party, [ … ]. [Emphasis added]

Article 2(10) defines the term ‘Area’ as follows:

[W] ith respect to a state that is a Contracting Party:(a) the territory under its sovereignty, it being understood that territory includes land,

internal waters and the territorial sea; and(b) subject to and in accordance with the international law of the sea: the sea, sea-bed and

its subsoil with regard to which that Contracting Party exercises sovereign rights and jurisdiction. With respect to a Regional Economic Integration Organization which is a Contracting Party, Area means the Areas of the member states of such Organization, under the provisions contained in the agreement establishing that Organization.

A number of points should be highlighted. First, transit under the GATT and the ECT differs in scope ratione loci: that of GATT Article V is ‘territory’,151 but that of ECT Article 7 is ‘Area’, a more widely defined term. The term ‘territory’ appears ten times in GATT Article V, but is not defined in that provision or in any other provi-sion of the GATT. It may be extrapolated from the term ‘vessels’ in GATT Article V that the term ‘territory’ includes waterways, but it is unclear which waterways the term ‘territory’ covers. Under customary international law sovereignty extends over land, internal waters, and the territorial sea.152 In contrast, states exercise sov-ereign rights over their continental shelf and their exclusive economic zone (‘EEZ’) (assuming that they have proclaimed one).153 As a result, the term ‘territory’ per se is inconclusive as to the maritime zones covered, and is more likely to cover only internal waters and the territorial sea to the exclusion of maritime zones where states exercise exclusive sovereign rights. However, WTO case law has interpreted the term ‘territory’ in other GATT provisions to include land, internal waters, the territorial sea, and maritime zones where WTO members exercise sovereign rights, and subsequent practice of some WTO members in the application of other GATT

151 GATT Article XXIV determines the territorial scope of the treaty’s application (‘metropoli-tan customs territories of the contracting parties and to any other customs territories in respect of which this Agreement has been accepted under Article XXVI or is being applied under Article XXXIII or pursuant to the Protocol of Provisional Application’), but does not explain the term ‘ter-ritory’. On the zones’ development and breadth, see chapter 2, section 2.3.

152 Churchill and Lowe (n.3) 61–65, 75–77. Article 1(1), Convention on the Territorial Sea and Contiguous Zone, 29 April 1958, 516 UNTS 205 (‘TSC’) and LOSC Article 2(1) reflect custom. Military and Paramilitary Activities, [212]; C. Rousseau, Droit International Public, Vol. III (1977) 8–9.

153 States need not proclaim a continental shelf: Article 2(1), Convention on the Continental Shelf, 29 April 1958, 499 UNTS 311. Sovereign rights in continental shelf and EEZ: LOSC Arts 56, 76. Distinction between sovereign rights and sovereignty: R. Higgins, Problems & Process (1994) 136–139.

Introduction28

provisions supports this interpretation.154 For instance, in US—Shrimps the com-plainants argued that US measures violated GATT Articles I:1, XI:1, and XIII:1, all of which use the term ‘territory’ in relation to the contracting party where the product originates, i.e. including their ‘territorial waters’ and their EEZ.155 The US denied the breach, but not on the basis that the term ‘territory’ did not include products located offshore, or in a maritime zone over which WTO members do not exercise sovereignty, but sovereign rights.156 The Panel upheld that the meas-ures violated GATT Article XI:1 without being concerned about whether the term restricted the scope of the obligation in that provision, which suggests that it may have considered that the term ‘territory’ covers the EEZ.157 On the other hand, the term ‘territory’ in Article V determines the scope of the activity itself regulated in the provision (‘traffic in transit’), while in Articles I:1, XI:1, and XIII:1 the term refers to the location from where the product originates. It could be the case that the product may be produced in areas outside the space covered by the term ‘ter-ritory’, but the moment it enters the ‘territory’ it becomes part of the market and the activity is regulated by these provisions. This issue does not form the focus of this study, but it should be noted that the term ‘territory’ under GATT Article V could be interpreted as inclusive of maritime areas where WTO Members exercise sovereign rights owing to the approach that the WTO case law has taken concern-ing the interpretation of the term in other GATT provisions. In contrast, under the ECT transit is carriage via land, inland waters, territorial sea, continental shelf, and EEZ, owing to the express definition of the term ‘Area’.158

154 There has been no claim by a GATT Contracting Party or a WTO member that GATT Article V applies to maritime zones beyond the territorial sea. Complaints relating to transit in relation to waterways concern measures affecting transit via ports. The following are some exam-ples. First, in 1996, the EU (then European Communities) asserted that Article 6005(b) of the US 1992 Cuban Democracy Act denied EU goods and vessels transit through US ports (WT/DS38/2, 8 October 1996). A panel was established, but suspended. Second, the EU (then European Communities) claimed that a Chilean prohibition on unloading swordfish in Chilean ports vio-lated Article V:1–3 (WT/DS193/2, 7 November 2000). Third, in 2007, Panama complained that Colombia violated GATT Article V by measures that required that goods from Panama could only enter/be imported into Colombia via specific ports. The Panel, whose Report was adopted by the DSB, upheld Panama’s claims that the measure violated Article V and was not justified under GATT Article XX(d). However, it did not define the term ‘territory’. Fourth, in 2013, Denmark on behalf of the Faroe Islands claimed that the EU violated GATT Articles I:1, V:2, and XI:1 by meas-ures prohibiting the introduction in EU members territory of Atlanto-Scandian herring/mackerel caught under the Faroe Islands’ control and the use of EU ports by vessels flying the Faroe Islands’ flag that fish for or transport such fish: WT/DS469/1G/L/1058, 7 November 2013. The DSB estab-lished a panel, but the complaint’s scope is limited to ‘territory, including ports’.

155 Panel Report, US—Shrimps, [161]–[168]. The term ‘territorial waters’ does not have a precise meaning in international law. It could refer to internal waters and the territorial sea.

156 Ibid. [169].157 Ibid. [7.16]–[7.17], [7.23]. The AB did not examine this issue, since the appeal concerned

the application by the Panel of GATT Article XX, which does not include a reference to ‘territory’.158 Concerning the overlap between the ECT and the law of the sea in relation to pipelines and

cables, ECT Article 7(8) stipulates that nothing in Article 7 derogates from rules under treaties and custom including concerning submarine pipelines and cables. Additionally, some Contracting Parties made a declaration at the time of the ECT’s conclusion first that the provisions of Article 7 are subject to treaty rules on jurisdiction over submarine pipelines and cables and to general inter-national law; and second that Article 7 is not intended to affect the interpretation of existing inter-national law on jurisdiction over submarine pipelines and cables.


Second, both GATT Article V and ECT Article 7 consider passage through a geographic area of the parties as long as the transit party and one other (generic-ally termed state of origin or of destination) are parties. Not all states involved in the transit situation are required to be contracting parties for that passage to qualify as transit under the definition.159

Third, both definitions encompass a situation where transit involves the same state of origin and destination, such as the case of the transit of gas via Lithuania coming from Russia and destined for Kaliningrad.

Fourth, in August 2008, South Ossetia, which is part of the territory under the sovereignty of Georgia (ECT Contracting Party), was actually placed under the control of Russian forces (provisionally bound by the ECT).160 Gas supply to South Ossetia via the pipeline carrying gas from Russia to Georgia was inter-rupted in Georgian territory.161 Russia claimed that Georgia interrupted gas flows to the occupied territory of South Ossetia.162 However, this situation did not constitute ‘transit’ under ECT Article 7(10)(a), and the obligations therein did not apply, because although gas originated in the Area of another state (Russia) and was transported through Georgia’s Area, it was not ‘destined for the Area of a third state’ or the Area of the same state of origin.163 According to Article 1(10)(a), Area means ‘territory under the sovereignty [of a Contracting Party]’.164 These terms when read together with relevant customary rules applicable in the relationship between all ECT Contracting Parties (VCLT Article 31(3)(c)), do not encompass territory that has been acquired forcibly at the expense of another state (annexation); such acquisition of territory is prohibited.165 Nor can they include occupied territories, because the Occupying Power only acquires control over ter-ritory, and bears specific rights and duties under customary international law.166 Whenever this study makes reference to this situation, it intends either to context-ualize the discussion or to indicate that international responsibility has not been engaged for a breach of a transit obligation.167

159 Panel Report, Colombia—Ports of Entry, [7.401]–[7.402]; WTO Secretariat, TN/TF/W2, 12 January 2005, 2. Contra (before the Panel Report): J.H. Jackson, World Trade and the Law of GATT (1969) 506–507; Energy Charter Secretariat, WTO Rules Applying under the Energy Charter Treaty (2001) 34; Churchill and Lowe (n.3) 441; R.K. Bhala, Modern GATT Law (2005) 472.

160 CERD case, [34]. Article 42, Hague Convention (IV) respecting the Laws and Customs of War on Land and its Annex: Regulations Concerning the Laws and Customs of War on Land, 18 October 1907, 205 CTS 277 (‘Hague Regulations’). This provision reflects custom, Wall case, [78]; Congo v. Uganda, [172]–[178]. A. Roberts, What is Military Occupation?, 55 BYIL (1984) 249–305. For Russia’s provisional application of the ECT: (n.13).

161 OSCE Chairperson welcomes resumption of natural gas supplies to South Ossetia, 25 January 2009: <http://www.osce.org/cio/50564>.

162 Georgia Ready to transit Russian gas to South Ossetia, RIA Novosti, 5 January 2009.163 For Russia’s provisional application of the ECT (n.13). 164 Emphasis added.165 R. Hofmann, Annexation, MPEIL online, [1] , [16]–[21].166 See Articles 42–56, Hague Regulations. E. Benvenisti, The International Law of Occupation

(2012) 6; E. Benvenisti, Belligerent Occupation, MPEPIL online, [1] ; Y. Dinstein, The International Law of Belligerent Occupation (2009) 31, 42–43.

167 Georgia’s conduct could be a quantitative import restriction prohibited under ECT Article 29(2)(a) (GATT Article XI:1 by incorporation). See analysis in chapter 3, section 3.2.2.3.

Introduction30

Some bespoke pipeline agreements follow the generic definition of transit con-tained in the Barcelona Convention, GATT Article V and ECT Article 7. Others do not refer to ‘transit’, but to ‘transportation’ or ‘flows’ through the pipeline. However, transportation through the pipeline also involves transit pursuant to the definition of transit under the Barcelona Convention, the GATT or the ECT. For instance, the Nabucco Agreement refers only to ‘transportation’, which also includes transit; the BTC Agreement refers to ‘transit’ without defining the term; and the TAP Treaty refers to ‘flows’.

Having established the definition of transit, the following section examines the meaning of energy.

5.2 Energy

In physics, energy (‘ενέργεια’) is a physical quantity that measures the capacity of a system for doing work. In classical physics, potential energy is the energy stored in a system, and it is this form of energy that is commonly understood as ‘energy’ in the context of the energy industry.168 These systems are sources of energy rather than energy in the physical sense. Hydrocarbons, which are compounds contain-ing carbon and hydrogen atoms only, are convenient and highly important stores of energy, because combustion of these compounds releases energy as heat that can then be used for a variety of different purposes.169

Treaties do not make a distinction between energy and sources of energy. Each treaty deals with its material scope (regarding energy and energy sources) separ-ately. For instance, the Electricity Transit Convention deals exclusively with transit of electricity;170 the EnComT initially applied only to gas and electricity, and subsequently the material scope of the treaty was expanded to oil;171 the material scope of the ECT exclusively covers ‘Energy Materials and Products’, as defined in ECT Article 1(4) and listed in Annex EM (after the Trade Amendment). These include nuclear energy, coal, natural gas, petroleum and petroleum prod-ucts, electricity, fuel wood, and charcoal. When used in relation to the ECT, the term ‘energy’ in this study means ‘Energy Materials and Products’ (‘EMPs’).172 Alternatively, a treaty may use the term ‘energy’ without explicitly defining it. For instance, TFEU does not define the term, yet it includes a new Title ‘Energy’ (with a sole article, TFEU Article 194). While the literal interpretation of the

168 M. J. Clugston, The Penguin Dictionary Of Science (3rd ed., 2009) 545.169 Ibid. 323.170 Convention Relating to the Transmission in Transit of Electric Power, 9 December 1923, 58

LNTS 315.171 In accordance with EnComT Article 100, the Ministerial Council modified the treaty by

Decision No. 2008/03/MC0EnC of 11 December 2008 concerning the implementation to the oil sec-tor of certain provisions of the Treaty and the creation of an Energy Community Oil Forum: <http://www.energy-community.org/portal/page/portal/ENC_HOME/ENERGY_COMMUNITY/Legal/Decisions>.

172 ECT Article 1(4) and Annex EM, Concluding Document of the Hague Conference on the European Energy Charter Conference, 17 December 1991, in The Energy Charter Treaty and Related Documents, 2004.


word ‘energy’ covers only electricity, when read in the context of EU law and practice under the TFEU, the provision includes oil and gas.173

In contrast, the WTO Agreement does not use the terms ‘energy’ or ‘energy sources’, nor does it refer to oil, gas, or electricity. There is no framework agree-ment on trade in energy in the WTO. However, the ordinary meaning of the terms ‘goods’ or ‘products’ in GATT includes oil and gas. GATT Article XX(g) uses the term ‘exhaustible natural resources’, which, according to the AB, includes ‘exhaustible mineral or other non-living natural resources’ other than living resources.174 GATT Article XXI(b)(i) uses the term ‘fissionable materials or mater ials from which they are derived’, whose ordinary meaning covers material for use in nuclear power generation.175 Read in this context, the ordinary meaning of the terms ‘goods’ in GATT Article V and ‘products’ in other GATT provisions encompasses, inter alia, oil and gas.

The following paragraphs examine whether the subsequent practice of WTO members in the application of GATT/WTO establishes the agreement of WTO members regarding the interpretation that oil and gas fall within the scope of GATT. If so, that practice will be taken into account for the interpretation of the term ‘good’ or ‘product’ in the GATT (VCLT Article 31(3)(b)); if not, it may serve as supplementary means of interpretation (VCLT Article 32).176

The International Convention on the Harmonized Commodity Description and Coding System (widely known as Harmonized System, ‘HS’)177 lists oil, gas,

173 As at 30 June 2014, there is no indication that any member state has objected to that inter-pretation. The Third Energy Package on the internal gas market and the Gas Security Regulation invoke the provisions under this title as its legal basis.

174 AB Report, US—Shrimp, [131].175 Fissionable materials are ‘capable of undergoing nuclear fission’ (Oxford English Dictionary).176 See analysis in section 2.2 earlier in this chapter. Although the Bali Ministerial Declaration,

adopted 7 December 2013, WT/MIN(13)/DEC, 11 December 2013, was adopted by consensus, it could be argued that it constitutes a subsequent agreement within the meaning of VCLT Article 31(3)(a). Even if it was not adopted under Article IX:2 of the WTO Agreement, subsequent agree-ments for treaty interpretation can be established otherwise: AB Report, US—Clove Cigarettes, [259]–[269]. However, nothing in the Declaration itself deals with GATT’s scope ratione materiae and hence it would not be helpful here. The Ministerial Decision on the Agreement on Trade Facilitation, appended to the Bali Declaration, deals with freedom of transit (Article 11) and indi-cates the members’ desire to ‘clarify and improve relevant aspects of Articles V [ … ] of the GATT 1994’ (Preamble). The Decision requires the General Council to adopt a Protocol of Amendment, which will enter into force in accordance with Article X:3 of the WTO Agreement: it ‘shall take effect for the Members that have accepted it upon acceptance by two thirds of the Members and thereafter for each other Member upon acceptance by it.’ The issue of interpretation remains rele-vant: Gardiner (n.74) 223–224. However, given the presumption that terms in the envisaged pro-tocol are not binding on those that have not formally accepted obligations under it, it needs to be shown that a sufficiently clear agreement has been established among all WTO members for the Ministerial Decision or parts of it to fall within the meaning of VCLT Article 31(3)(a), which is a difficult threshold to meet. See analysis of case law: Gardiner (n.74) 244–245. In any case, since the Ministerial Decision does not deal with GATT’s scope ratione materiae, it would not be useful here.

177 14 June 1983, 1503 UNTS 167. It is a treaty, but not a WTO covered agreement. The codes for goods in the HS are updated by the World Customs Organization (‘WCO’). The treaty provides the basis for, inter alia, customs tariffs and consists of about 5,000 commodity groups. The GATT Committee on Tariffs Concessions and the General Council have adopted procedures to implement periodic HS changes by the WCO.

Introduction32

coal, lignite, and electricity among commodities.178 The ‘vast majority’ of WTO members are parties to the HS, and use it in order to schedule specific commit-ments to GATT,179 including in relation to oil and gas.180 The AB has accepted (albeit unconvincingly) that the HS constitutes the context of the WTO cov-ered agreements, as an ‘agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty’ (VCLT Article 31(2)(a)),181 or without explaining the manner in which the HS has the character of context for the purpose of treaty interpretation.182 It could instead be argued that the practice of WTO members to schedule GATT commitments in relation to energy products (by reference to the HS) constitutes subsequent prac-tice in the application of GATT that establishes the agreement of WTO mem-bers that those products are covered ratione materiae by the scope of the GATT (VCLT Article 31(3)(b)).

Additionally, acceding WTO members show particular attention to energy. For instance, Ukraine has made a special commitment to the Accession Working Party that it will apply ‘all its [ … ] measures governing transit of goods (including energy) in conformity with GATT Article V and other provisions of the WTO Agreement’.183 Moreover, Russia’s General Commitments on Market Access include the following: ‘[t] he Russian Federation would apply all its [ … ] meas-ures governing transit of goods (including energy) in conformity with GATT and WTO provisions.’ According to the Report of the Working Party on Russia’s Accession, some WTO members expressed concern about the compatibility with GATT Article V of some measures by Russia regarding oil and gas,184 and the Russian representative replied that pipeline transit was in line with GATT Article V.185 Although Accession Protocols may create additional obligations to acceding WTO members, and thus they can constitute evidence of the contrary

178 For instance, entries 27.01, 27.02, 27.05, 27.07, 27.09, 27.10, 27.11, and 27.16 in Chapter 27, 27.01/04, Section V, Alphabetical Index to the Harmonized Commodity Description and Coding System, 1996.

179 In 1983, the GATT Contracting Parties decided to use the HS for GATT concessions: GATT Committee on Tariff Concessions, L/5470/Rev.1 (30 June 1983). AB Report, EC—Chicken Cuts, [196].

180 For instance, Ukraine’s GATT schedule of commitments, as a major gas transit and import-ing state, include oil, gas, and electricity: Schedule CLXII–Ukraine, WT/ACC/UKR/152/Add.1, Part I, Most-Favoured-Nation Tariff, Section II, 132–170. Schedules of commitments are binding on WTO members making them. AB Report, EC—Bananas, [154]; AB Report, EC—Subsidies on Sugar, [167]. Because this study focuses on GATT Article V, it does not discuss energy services under the General Agreement on Trade in Services (‘GATS’). For literature on energy services under GATS: M. Cossy, in Y. Selivanova (ed.), Regulation of Energy in International Trade Law (2011) 149–180.

181 AB Report, EC—Chicken Cuts, [195]–[199]. See solid criticism: Van Damme (n.62) 254–255.182 AB Report, China—Automobile Parts, [149].183 Report of the Working Party on the Accession of Ukraine to the WTO, WT/ACC/UKR/152,

25 January 2008, [367]. The Report notes the concerns of another WTO member that some prac-tices in Ukraine would be inconsistent with GATT Article I. Ukraine mentioned oil and gas and that its measures were consistent with GATT Article I. Ibid. [503].

184 Report of the Working Party on the Accession of the Russian Federation, WT/ACC/RUS/70, WT/MIN(11)/2, 17 November 2011, [1152].

185 Ibid. [1157].


interpretation of the existing provisions in GATT, the statements by some exist-ing WTO members in the context of the accession negotiations denote their understanding that oil and gas fall within the scope of GATT.

Disputes have been brought under the DSU concerning oil, raw and rare earth materials: the US—Gasoline, the China—Raw Materials, and the China—Rare Earths. The Panels and the AB did not give any indication that they do not fall within the scope ratione materiae of GATT. Importantly neither the parties to the dispute nor any other WTO member, including those that intervened as third parties, objected to or protested at the initiation of the DSU proceedings in rela-tion to such products.

Additionally, no WTO member argued against oil falling within the scope of the WTO Agreement and the GATT, when in 2002 Slovenia protested in the Council for Trade in Goods against an alleged violation of GATT Article V by Croatia’s measures in relation to transit of oil.186 Other WTO members replied in that forum, but did not raise the issue of non-application of the GATT to this dispute.187 In 2013, the minutes of the meetings of the Council for Trade in Goods indicate that some WTO members have expressed concerns about the compatibility with the GATT and other WTO covered agreements of measures concerning energy sources.188

All these instances of subsequent practice taken together provide a strong indi-cation of the ‘concordant, common, and consistent practice of WTO members, which establishes the agreement of all WTO members regarding the interpreta-tion of the material scope of GATT’ (VCLT 31(3)(b)).189 The interpretation by use of the general rule of interpretation reflected in VCLT Article 31 leads to the conclusion that oil and gas fall within the scope of the words ‘products’ and ‘goods’ found in GATT. As a result, there is no reason to resort to supplementary means of interpretation.

However, since it has been unpersuasively suggested that the GATT prepara-tory works show that owing to its strategic importance energy was excluded from the GATT 1947,190 supplementary means of interpretation are examined here with a view to confirming the interpretation reached by use of VCLT Article 31. During the negotiations of 1947 GATT, some perceived electricity as a service

186 See analysis in section 5.3.2 later in this chapter.187 Council for Trade in Goods, Minutes of Meeting on 22 and 27 March 2002, G/C/M/59,

22 April 2002.188 In July 2013, the EU, the US, Australia, and Russia raised concerns about the compatibil-

ity with GATT of the import quota imposed by Ukraine on coal. Minutes of the meeting of the Council for Trade in Goods, 11 July 2013, G/C/M/114, [11.1]–[11.9]. Ukraine replied in the meet-ing but did not reject the allegations on the basis that GATT’s scope did not cover coal, as a source of energy. Ibid. [11.10]. Other concerns have been expressed about the compatibility with GATT provisions of measures by WTO members, but it is not clear whether the measures in question relate to trade in energy sources as such or whether they only relate to material used in the oil and gas sec-tor (e.g. equipment), and hence they are not discussed here. Ibid. [10.2]–[10.13].

189 On practice of some but not all and the weight of silence, see analysis in section 2.2 earlier in this chapter. Also Yasseen (n.64) 48; Sinclair (n.74) 137; AB Report, Japan—Alcoholic Beverages, [107]; AB Report, Chile—Price Band System, [214]; AB Report, EC—Computer Equipment, [93].

190 UNCTAD, Trade Agreements, Petroleum and Energy Policies, 2000, 14–15.

Introduction34

rather than a good.191 However, that does not prove that energy sources, such as oil and gas, were excluded from GATT. Additionally, a Panel, which interpreted GATT Article V, considered that the Barcelona Convention formed part of the preparatory works of the provision, because Article V was derived from parallel provisions in that convention.192 Given this connection, arguably the preparatory works of the Barcelona Convention may be taken into account as supplementary means for the interpretation of the term ‘goods’, which appears in the definition of ‘freedom of transit’ in GATT Article V and the Barcelona Convention. They indicate that the term ‘goods’ included ‘raw materials essential for the develop-ment of the industry of states of destination’.193

The AB has implicitly used 1947 GATT Panel Reports as supplementary means of interpretation of 1994 GATT.194 US—Superfund dealt with taxes on oil prod-ucts. The Panel, whose Report was adopted, did not find that oil does not fall within the scope of GATT. Neither the parties to the dispute nor the intervening contracting parties objected to the material scope of GATT including oil. By contrast, their pleadings and statements, as summarized in the Report, support the position taken here that they understood that oil fell within the scope of GATT.195

In any case, assuming that the practice of some WTO members, as summar-ized above, does not establish the agreement of all WTO members, as required under VCLT Article 31(3)(b), it may constitute supplementary means of interpre-tation that confirms the interpretation reached above that oil and gas fall within the scope ratione materiae of GATT.196

Before embarking on the analysis concerning transit routes, note should be taken of the debate as to whether GATT or GATS applies to transit of oil and gas via pipelines.197 Because the two agreements cover different aspects of the

191 UN Doc. EPCT/C.6/89 (1947), 47. Jackson (n.159) 745; L. Ehring and Y. Selivanova, in Y. Selivanova (ed.), Regulation of Energy in International Trade Law (2011) 59.

192 Panel Report, Colombia—Ports of Entry, [7.394], [7.469].193 Emphasis added. Report on the Draft Convention on Freedom of Transit, presented to the

General Communications and Transit Conference by the Commission of Enquiry, in Barcelona Conference: Verbatim Reports and Texts (1921) 289; Persia and Sweden, Eighth Meeting of the Conference, 14 March 1921, ibid. 15, 18. The ICJ has resorted to the preparatory works of the PCIJ Statute as part of the preparatory works of the ICJ Statute, because the relevant provision was substantially the same in both and the ICJ Statute was modelled on that of the PCIJ: Serbia and Montenegro v. Belgium, [103].

194 Implicitly: AB Report, US—Shrimps, [157]. Also Van Damme (n.62) 319.195 GATT Panel Report, US—Superfund, [3.1.1]–[3.1.2], [4.1]–[4.6], [5.1.1]–[5.1.2].196 See analysis in section 2.2 earlier in this chapter.197 Another question is whether electricity constitutes a good under GATT or a service under

GATS. The WTO Secretariat has suggested the criterion of ‘storability’ or ‘tangibility’ for categor-izing energy as a good or service: Guide to the GATS (2001), 261; Contra: F. Smith and L. Woods, A Distinction without a Difference: Exploring the Boundary between Goods and Services in the World Trade Organization and the European Union, 24 YEL (2005) 471–474. The classification of electricity is an optional heading under HS. However, the ECJ (today CJEU) has found that electricity is a good under EU law: Case 6/64 Costa/ENEL, ECR-1964, 1251. M. Roggenkamp, Implications of GATT and EEC on Networkbound Energy Trade in Europe, 12 JENRL (1994) 64; P. Pierros, Exploring Certain Trade-related Aspects of Energy under GATT/WTO: Demarcation Questions regarding Electricity, 5 Int.TLR (1999) 26–27.


energy sector, a type of transportation may be governed by GATT Article V, if it constitutes transit, and by GATS.198 This is also implicit in the language ‘conforms with the WTO provisions’ and ‘in conformity with GATT and WTO provisions’ as used in Ukraine’s and Russia’s commitments (recounted above) in relation to transit of energy. However, this issue is not further analysed, because it is tangential to the central focus of this study, meaning the relationship between obligations regarding transit via pipelines and countermeasures.

Having established in this section that, in accordance with the customary rules of treaty interpretation, oil and gas fall within the material scope of 1994 GATT and the ECT, the following section discusses whether the treaties considered in this study cover transit via pipelines.

5.3 Transit routes

Because trade depends on transportation, the economic development of states and populations and the stability of international markets depend on the availability of routes, both natural and artificial. Natural routes are rivers and waterways. Artificial routes include man-made infrastructure, such as canals, roads, railways, pipelines, and grids. Although this study examines treaties concerning transit via pipelines, some findings of this study are valuable for treaty obligations regarding transit via other artificial and natural routes.

Bespoke pipeline agreements apply to a particular pipeline. However, other treaties do not limit or do not specify the application of obligations regarding transit to particular means. This has been interpreted to include any means, such as under the TFEU199 or in GATT Article V. Given the debate in the WTO Doha Round negotiations about whether the wording ‘pipelines and cables’ should be inserted in GATT Article V, and the misconception by some that the ECT transit provision applies solely to pipelines or grids over land, the following section estab-lishes the scope of application of the transit provisions in the two treaties.

198 Traditionally, energy (as a commodity) and energy-services, such as transportation of energy—transit being an aspect of transportation—have not been perceived separately. This is because vertically integrated companies conducted the ‘production to supply’ chain. Numerous states have separated production from transmission, and they distinguish between energy goods and services. WTO Trade Report, Trade in Natural Resources (2010) 46. Further analysis: Cossy (n.180).

199 In 1982, the ECJ (today, CJEU) recognized for the first time the ‘general principle of free-dom of transit’ as the necessary consequence of the customs union and the internal market. It did so in relation to transit of oil via a pipeline. Case 266/81 SIOT v. Ministero delle Finanze [1983] ECR-731, [16]. Subsequent case law confirmed this finding in relation to other means of transport (waterways, railways, and roads): Case C-367/89 Richardt and Les Accessoires Scientifiques SNC. [1991] ECR I-4621, [16]; Case C-115/02 Administration des douanes et droits indirects v. Rioglass SA and Transremar SL [2003] ECR I-12719, [19]; Case C-320/03 Commission v. Austria [2005] ECR I-9871, [69]. The ‘Third Energy Package’ does not use the term ‘transit’, but the term ‘transmission’ (of gas) means ‘transport through a high pressure pipeline network other than an upstream pipe-line network with a view to its delivery to customers’. Article 1(1), Regulation 715/2009. The term ‘transmission’ cannot repeal the ‘general principle of freedom of transit’ (applicable to intra-Union transit), because the latter flows from the TFEU.

Introduction36

5.3.1 The WTOAccording to GATT Article V ‘[t] here shall be freedom of transit [‘of goods, and also vessels and other means of transport’] through the territory of each contract-ing party, via the routes most convenient for international transit’ (GATT Article V:1 and V:2). It has been suggested that the ordinary meaning of the term ‘means of transport’ refers to moving vehicles, and that since the term is included in the definition of ‘traffic in transit’ in paragraph 1, the provision applies only to mobile means, to the exclusion of fixed infrastructure, such as pipelines.200 However, when the ordinary meaning of the term ‘means of transport’ is read in the light of the object and purpose of GATT, which is trade and transit of goods (transit of trucks, vessels or railway wagons is instrumental for the fulfilment of the transit of goods),201 the better view is that the reference to ‘means of transport’ is not intended to restrict the scope of the provision to mobile means of transport, but rather ensures that states shall not prevent freedom of transit of goods by inter-rupting movement of means of transport.202 In any case, paragraph 2 of GATT Article V uses the term ‘routes,’ whose ordinary meaning according to the Oxford English Dictionary is ‘[a] way or course taken in moving from a starting point to a destination; [ … ] the course of a river, stream, etc.’ The term thus may include fixed infrastructure, such as pipelines.

Supplementary means confirm this interpretation. For instance, subsequent practice of some WTO members that does not establish the agreement of all WTO members as to the interpretation of the provision confirms this line of reasoning.203 First, in the Doha Round negotiations, proposals were made with a view to clarifying the existing provision by inserting a reference to pipelines.204 At least two WTO members (Egypt and Turkey) objected claiming that refer-ence to pipelines in the future agreement would go beyond mere clarification.205 However, their explanation denotes their concern about the appropriateness of GATT Article V to deal with the specificities of transit via pipelines, rather than

200 Communication from Egypt and Turkey, Discussion paper on the inclusion of the goods moved via fixed infrastructure into the definition of traffic in transit, TN/TF/W/179, 4 June 2012, 3.

201 This can be confirmed by the initial intention to exclude transportation from the GATT and the International Trade Organization Charter. See, UN Doc. EPCT/A/PV.9 25 (1947); WTO Secretariat, Article V of GATT 1994–Scope and Application, TN/TF/W2, 12 January 2005, 4.

202 In relation to transit under the Barcelona Convention: Hostie (n.1) 418–419.203 See section 2.2 earlier in this chapter.204 Communication from the EC, WTO Trade Facilitation–Strengthening WTO Rules

on GATT Article V on Freedom of Transit, WTO Council for Trade in Goods, G/C/W/422, 30 September 2002, 5 (‘the EC invites WTO members to consider the following issues that would be relevant in any possible clarification or improvement of the provisions of Article V’ [emphasis added]); Communication from Armenia, the European Communities, the Former Yugoslav Republic of Macedonia, the Kyrgyz Republic, Mongolia, Paraguay, the Republic of Moldova, Rwanda, and Switzerland, Negotiating Group on Trade Facilitation, TN/TF/W/133, 10 July 2006, 1[1] . For over-view of the Doha Round negotiations on this issue: D. Azaria, Energy Transit under the Energy Charter Treaty and the General Agreement on Tariffs and Trade, 27 JENRL (2009) 527–698.

205 Communication from Egypt and Turkey, Discussion paper on the inclusion of the goods moved via fixed infrastructure into the definition of traffic in transit, TN/TF/W/179, 4 June 2012, 5.


the fact that the provision per se does not apply (as a matter of its scope) to pipe-lines, irrespective of whether or not it governs transit satisfactorily.206 There is no indication from the publicly available documents of the Doha Round negotiations that the position of Egypt and Turkey that pipelines are not included in GATT Article V was shared by all or some other WTO members.

Second, the wording of Ukraine’s and Russia’s commitments, recounted in the previous section, 5.2, and of the statements made by other WTO members in the context of the negotiations for Russia’s accession illustrate the understanding that GATT Article V applies to transit via pipelines. Third, in the SIOT case the European Court of Justice (today, CJEU) found that GATT Article V was binding upon the Community (since 1 December 2009, the Union) concerning transit via a pipeline of oil coming from a third state through an EC (today, EU) member state to another third state.207 Fourth, the Preamble of the bilateral agreement between Chad and Cameroon (both of which are WTO members) concerning a transit pipe-line that carries oil from Chad through Cameroon to the sea refers to the GATT.208

Fifth, ECT Article 4 (prior to its amendment in 2010) stated that ‘[n] othing in this Treaty shall derogate, as between particular Contracting Parties, which are parties to the GATT [1947 and 1994], from the provisions of the GATT and Related Instruments as they are applied between those Contracting Parties’. ECT Article 4 was inserted, because 1947 GATT Contracting Parties that were negoti-ating the ECT (in parallel with the WTO Agreement) intended to avoid a conflict between their obligations under GATT Article V and their obligations under ECT Article 7 that applies to transit via pipelines.209 This practice implies that at least some 1947 GATT Contracting Parties and WTO members understood that ECT Article 7 and GATT Article V overlapped in terms of scope of application concerning pipelines.

Additionally, the preparatory works of 1994 GATT do not contradict this finding. At the time of the negotiations of the 1947 GATT, the drafters were aware of types of transit via fixed infrastructure. For instance, the 1923 Electricity Transit Convention and other regional agreements concerning oil pipelines had been concluded.210 The preparatory works indicate that there was an intention to exclude transportation and shipping from the scope of GATT Article V, but this was not finally adopted; hence the reference to ‘vessels’ and ‘means of transportation’ in the provision.211 But, there is no evidence that the negotiators intended to exclude pipelines.

To sum up, the ordinary meaning of the terms ‘routes’ and ‘traffic in transit’ in GATT Article V read in their context and in the light of the object and purpose

206 Ibid. 207 Case 266/81 SIOT v. Ministero delle Finanze [1983] ECR-731, [28].208 Accord signe le 8 fevrier 1996 entre la Republique du Cameroun et la Republique du Tchad

relatif à la construction et à l’exploitation d’un systeme de transport des hydrocarbures par pipe-line. Not available in the UNTS; reference to it and quotations from its preamble and Article 3: K. Uprety, The Transit Regime for Landlocked States (2005) 122, fn.502.

209 See analysis in section 5.2 earlier in this chapter.210 Convention on the Construction of Oil Pipelines, 6 February 1941, in M. Hudson, 8

International Legislation (1938–1941) 622–623.211 UN Doc. EPCT/A/PV.9 25 (1947). See also WTO Secretariat (n.201) 4.

Introduction38

of the GATT encompasses ‘pipelines’. Supplementary means of interpretation do not contradict this interpretation.

5.3.2 The ECTContrary to the position of some authors,212 ECT Article 7 applies to carriage of energy by fixed infrastructure and mobile means.213 This study is concerned with transit via pipelines rather than other means of transport. However, research for this study has uncovered practice of ECT Contracting Parties after the conclusion of the ECT and in the application of ECT Article 7 relating to transit via roads. Because such practice is used in the following chapters for the interpretation of the ECT, this section will show that the scope of ECT Article 7 encompasses not only pipelines and cables, but also other means of transport.

ECT Article 7(10)(b) defines the term ‘Energy Transport Facilities’ (‘ETFs’) as exclusively fixed infrastructure, including pipelines. The question arises as to whether the term delineates the scope of application of the provision as a whole. It will be shown that this is not the case.

First, the immediate context of the provision, ECT Article 7(10)(a), which defines transit, does not use the term ‘ETFs’. By contrast, it refers to the term ‘car-riage’, whose ordinary meaning includes ‘the action of carrying’ or ‘[a] vehicle or means of conveyance of any kind’.214

Second, ECT Article 7(3) uses the term ‘transport of Energy Materials and Products and the use of Energy Transport Facilities’.215 The use of ETFs is seen as separate from transport of Energy Materials and Products (‘EMPs’), which suggests that ETFs are one of many options for transportation of EMPs covered in ECT Article 7. Read in the context of ECT Article 7(3), the term ‘carriage’ in ECT Article 7(10)(a), which determines the scope of ‘transit’ under ECT Article 7, means that it includes ETFs as well as other transport means.

Third, the definition of ‘Energy Materials and Products’ in ECT Article 1(4) and Annex EM I includes energy products which cannot be transported via ETFs, such as nuclear materials, coal, and charcoal. If the definition of transit encom-passes only carriage via ETFs, certain EMPs would be excluded from the scope in ECT Article 7, and their inclusion in Annex EM I, would be meaningless vis-à-vis transit.216 If this were the intention of the parties, they would have done so

212 Authors arguing that ECT applies only to transit via fixed infrastructure: M. Roggenkamp, Transit of Network-bound Energy: A New Phenomenon? Transit Examined from the Barcelona Transit Convention to the Energy Charter Treaty, 19 WComp (1995–1996) 142; Haghighi (n.51) 326.

213 A. Fatouros, An International Legal Framework for Energy, 332 RCADI (2007) 432.214 Oxford English Dictionary online. 215 Emphasis added.216 For effective interpretation: PCIJ: Free Zones case (Order), 13; Acquisition of Polish Nationality,

16–17. ICJ: Qatar/Bahrain, [35]; FYROM v. Greece, [109]; CERD case, [134]; Libyan Arab Jamahiriya/Chad, [47]. Arbitral award: Eureko BV v. Poland, [248]. WTO: AB Report, Korea—Dairy Products, [81]; H. Lauterpacht, The Development of International Law by the International Court (1958) 221–266; G. Fitzmaurice, Vae Viciis or Woe to the Negotiators! Your Treaty or our ‘Interpretation’ of It?, 65 AJIL (1971) 373.


expressly, as they have done in the context of the definition of ‘Economic Activity in the Energy Sector’ (Annex NI).

On the other hand, it may be argued that read in the context of ECT Article 7(6) and (7), the term ‘ETFs’ delineates the scope of ECT Article 7 as a whole. According to paragraph 7, the conciliator can decide ‘interim tariffs and other terms and conditions to be observed for Transit’ (ECT Article 7(7)(c)). But, the term ‘tariff’ is used in other transport contexts, such as railways, roads, rivers, and navigation through international canals. Similarly, the wording ‘other terms and conditions’ may apply to other routes. Furthermore, even assuming arguendo that ECT Article 7(6) and (7) apply exclusively to transit via ETFs, it does not neces-sarily follow that all provisions of ECT Article 7 apply only to ETFs, when there is evidence that they apply to other means of transport.

Subsequent practice of ECT Contracting Parties in the application of the ECT does not establish the agreement of all parties regarding the interpretation that Article 7 applies to transit via roads, but does not prejudice this interpretation. More specifically, on 16 January 2002, Croatia imposed a complete ban on road transit of oil products, and claimed its measure was lawful owing to environ-mental and crime prevention reasons.217 Slovenia, which was a competitor oil exporter to the Balkan region but depended on transit through Croatia, consid-ered that the Croatian measures being unilateral and discriminatory violated the WTO Agreement, the ECT, and a bilateral agreement between itself and Croatia. Slovenia informed the Energy Charter Secretariat (‘ECS’) that the Croatian measures were incompatible with ECT Article 7, and requested the Secretariat assess whether Croatia’s ban violated ECT Article 7 in view of the environmental grounds invoked by Croatia.218 Croatia argued that ECT Article 7(10)(b) restricts the application of ECT Article 7 to ETFs and that it did not apply to transit via roads,219 and on 27 January 2002, it unilaterally amended the ban without con-sulting the affected states, imposing some restrictions on transit. According to Slovenian press, the ECS replied that the measures could be in violation of the ECT.220 Although the Secretariat’s position would not be binding and would not constitute a subsequent practice within the meaning of VCLT Article 31(3)(b), it could trigger subsequent practice by ECT Contracting Parties.

On 8 May 2002, Slovenia informed Croatia that the meeting of their delega-tions in Zagreb (Croatia) would fall within the scope of ECT Article 27(1),221 and the following day it informed the ECS.222 On 13 and 14 May 2002, the issue was

217 Croatia lifts ban on oil transit, World News, Thursday 24 January 2002.218 Slovenia to retaliate against Croatia’s oil road transport ban next week, BBC Monitoring

Europe, 18 January 2002; Bruseljski ukor Hrvaski, Slovenija ocenjuje skodo, Naftna vonja, Delo, 19 February 2002 [in Slovenian] (accessed in the archives of newspaper DELO by email request).

219 Ibid. 220 Ibid.221 Slovensko-hrvaski spor o nafti v Bruslju, Resitve se niso izvrtali, Delo, 14 May 2002 [in

Slovenian] (accessed in the archives of newspaper DELO by email request). Decision of the Energy Charter Conference, Reports submitted to the 10th Meeting of the Energy Charter Conference, CCDEC2002, 1 NOT Restricted, 20 June 2002, 4.

222 Ibid.

Introduction40

discussed in the Working Group on Trade,223 a subsidiary body of the Charter Conference.224 In parallel with the Working Group on Trade, Slovenia requested cessation of the measures, but Croatia rejected that the scope of ECT Article 7 covered transit via road.225

On 20 June 2002, Slovenia addressed the Charter Conference in its annual meeting and claimed that Croatia violated ECT Article 7.226 Croatia responded that it was giving consideration to the claim, and no other ECT Contracting Party reacted in the context of the Conference.227 The Charter Conference con-sists of representatives of all parties, whose function is, inter alia, to keep under review and facilitate the implementation of the ECT (Article 34(3)(b)). Slovenia’s claim along with Croatia’s silence and that of other ECT Contracting Parties in the Conference do not offer evidence of a tacit agreement. Croatia had been con-sistently opposed to Slovenia’s interpretation and in the Conference it did not alter its position, and silence of other Contracting Parties in these circumstances may instead mean that they avoided getting involved in a bilateral dispute.228

However, supplementary means confirm that transit via roads falls in ECT Article 7. First, ECT preparatory works confirm that the definition of transit is not restricted to ETFs. Early versions or proposed versions of Article 7(3) included transport by rail, road, inland waterway or sea.229 References to specific means of transport were later deleted, but the term ‘transport’ was maintained. Later drafts of ECT Article 7(3) included the language ‘transport of EMPs and the use of harbor facilities, pipelines and grids’. A negotiating state reserved on the use of harbour facilities,230 waiting for a ministerial declaration to the effect that this provision would not cover means of transportation other than pipelines and grids.231 A compromise was finally reached: the term ‘harbour facilities’ was deleted, and no ministerial declaration was made to this effect. However, there is no evidence in the preparatory works that this was made with the intention of excluding from the provision other means of transport rather than harbour facili-ties. The same negotiating state also insisted that shipping and ‘maritime transit’ be expressly excluded from the definition of ‘transit’ in Article 7(10), by including

223 Hrvaska v zvezi z naftnim sporom s Slovenijo zadovoljna z dogodki v Zenevi in Bruslju, Slovenska tiskovna agencija, 15 May 2002 [in Slovenian].

224 The Charter Conference can establish subsidiary bodies: ECT Article 34(5).225 Slovensko-hrvaski spor o nafti v Bruslju, Resitve se niso izvrtali, Delo, 14 May 2002 [in

Slovenian].226 Decision of the Energy Charter Conference, Reports submitted to the 10th Meeting of the

Energy Charter Conference, CCDEC2002, 1 NOT Restricted, 20 June 2002, 4: <http://www.encharter.org/ntc_admin/dev_extranet/files/CCDEC200201_1378462774.pdf>.

227 Ibid.228 Nor is it a supplementary means in support Slovenia’s interpretation, as it does not bring to

light positions that were not directly opposed. Air Transport, 62.229 Document 4/92, Annex 1, BA6, Restricted, 20 January 1992, 24; Note on the ad hoc Group

(Energy Charter) Council meeting, 30–31 January 1992, 5 February 1992; Conference Secretariat, Room Document 1, 6 April 1992, Annex 1, 2.

230 Conference Secretariat, Room Document 8, Plenary session, 24–26 March 1993, 26 March 1993.

231 Conference Secretariat, Room Document 26, Plenary Session, 28 April 93, Outcome of Plenary discussions on 28 April 1993, 6.


the terms ‘land transport’ and ‘territory’, rather than ‘Area’, in that provision.232 However, this was not taken forward. This account shows that a negotiating state was concerned about excluding maritime transportation,233 but there was no objection to transportation by other means, such as roads or railway.

Second, preparatory works indicate that the reasons for proposing ECT Article 7(8) included the intention ‘not to disturb the detailed provisions of treaties, such as those governing road transportation across [A] and [B], which may contain a dif-ferent but satisfactory balance of rights and obligations from that in Article 7’.234 If ECT Article 7 were intended to cover only ETFs, the provision would not over-lap with treaties governing road transport and there would be no concern about the ECT prevailing over such treaties.

To sum up, ‘transit of energy’ in this study has a precise legal definition. It is a type of transportation involving passage of oil and gas through territory (and mari-time areas where states exercise sovereign rights, where applicable under the treaty). It is distinct from imports or exports or domestic transportation through pipelines. This study examines in particular existing transit of energy and not the permission of new transit or the construction of new transit routes. The term ‘transportation’ or ‘established flows’ is sometimes mentioned in this study, and is intended to refer to exports, imports, or transit flows, which are already in existence. When neces-sary, this study refers more precisely to the type of flows (transit, export, or import).

232 Room Document 13, Plenary Session, 28 June–2 July 93, Outcome of Plenary discussion on 29 June 1993, 7; Version of the Treaty, 11 October 1993, 19–20.

233 Doc.22.4.94/2649, ECT, LKE/VV/LW (folder 7/4).234 Informal Note (After CONF 106), 14 November 1994/775, 2–3.

Treaties on Transit of Energy via Pipelines and Countermeasures

Documents

Transcript of Treaties on Transit of Energy via Pipelines and Countermeasures