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Analysis of the Impact on Sustainable Developments by Investment Regulations in the Energy Charter Treaty

Qinglin Zhang: ‘Analysis of the Impact on Sustainable Developments by Investment Regulations in the Energy Charter Treaty’ - Journal of World Energy Law and Business, 2015, Vol. 8, No. 6

Online: http://jwelb.oxfordjournals.org/content/8/6/542.full.pdf?keytype=ref&ijkey=CQd14CZkstoPt3q

 

In an energy-related legal dispute between a foreign investor and a host state, in which the parties involved are bound by the Energy Charter Treaty 2004, due consideration must be given to both the need to promote the interests of the investor, and the goal of facilitating sustainable development. Qinglin Zhang, Professor in International Economic Law at Wuhan University, argues that these two interests have not been satisfactorily balanced in practice.

It is noted that energy-related disputes are most commonly resolved via international arbitration. This is often because foreign investors fear that the contracting party in their host state will benefit from protectionism by local courts. However, Zhang suggests that a similar degree of protectionism, this time in favour of the investor and at the expense of host states which are developing countries, is experienced when disputes are resolved via arbitration proceedings.

This is argued to be the case because arbitrators tend to be trained in developed Western jurisdictions, and are thus arguably predisposed to favour the arguments of investors from developed countries. Case-law supporting this finding is provided. Additionally, Zhang states that arbitrators tend to be accustomed to handling disputes between two private parties, but are generally less experienced and less equipped to adjudicate upon matters concerning public state entities. As a result, Zhang suggests that arbitration panels lack the requisite expertise to provide a fair decision. To the extent that developing countries are the victims of such prejudice, it is suggested that their ability to pursue sustainable development is undermined.

To resolve this problem, Zhang proposes several solutions. Zhang argues in favour of providing financial assistance to the state via money raised from other member states, so that the state can adequately represent its interests and better position itself to avoid being advised by incompetent lawyers. Furthermore, it is suggested that a special team of arbitrators, who are experts in the fields of both sustainable development and investments disputes, should be made readily available to prospective disputants. Additionally, Zhang concludes that it is necessary for the state of an investor to better supervise their conduct, and take measures to prevent them from avoiding legal obligations or bribing officials in the host state. Finally, it is suggested that the confidentiality which is characteristic of arbitration proceedings should not necessarily apply to energy-related arbitration proceedings involving a state entity. It is implied that the public should be able to access such information so that they can hold the state accountable for its dealings with the foreign investor.