ENERGY SECURITY AND INTERNATIONAL LAW

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1 ENERGY SECURITY AND INTERNATIONAL LAW BIICL Annual Conference 11 June 2010 Catherine Redgwell Professor of International Law Faculty of Laws University College London

2 Recent energy market events have provided a sharp reminder of the central role of energy for our near-term security. Insecurity arises from a range of issues, including geopolitical instability, natural disasters, terrorism and even poor regulatory design. Increasingly tight capacity in energy infrastructure and production facilities and diminished potential for fuel substitution demand renewed attention to existing energy security policies and procedures. Growing oil demand in IEA Member and non- Member countries, particularly in transport, requires greater effort by importing countries to build and hold appropriate energy stocks. (2003 IEA Ministerial Statement)

3 Causes of Energy Insecurity Price volatility (esp. continued high crude oil prices and their volatility) Geopolitical instability, including armed conflict, sabotage and terrorist attacks Demand growth Energy import dependence Disruptions in supply (caused by eg labour unrest; sabotage; political/economic leverage) Infrastructure constraints (incl. refinery capacity) Corporate and policy failures Growing environmental threats (including climate change)

4 Defining energy security diversified supplies of energy being available at affordable prices to help economies to continue to grow (1993 statement by then exec dir of IEA, Helga Steeg) Energy security has three faces. The first involves limiting vulnerability to disruption given rising dependence on imported oil from an unstable Middle East. The second, broader face is, over time, the provision of adequate supply for rising demand at reasonable prices in effect, the reasonably smooth functioning over time of the international energy system. The third face of energy security is the energy-related environmental challenge. The international energy system needs to operate within the constraints of sustainable development constraints which, however uncertain and long-term, have gained considerable salience in the energy policy debates in our countries. (Martin/Imai/Steeg, 1996 Report to the Trilateral Commission Maintaining Energy Security in a Global Context)

5 Energy Security and International Law 1. Transport and Infrastructure 2. Personnel 3. Guarding Supply Against Disruptions 4. Security of Demand 5. Protection of Energy Security Interests of Investors and Traders 6. Environment, Human Rights and Energy Security 7. Access to Energy/Energy Poverty

6 1. Transport and Infrastructure 1. Pipelines Onshore and offshore (UNCLOS) Construction and access Transit rights (No transit protocol yet under ECT) Pipeline regulation 2. Tankers pollution (UNCLOS; 1973/78 MARPOL; CLC and Fund Conventions) Piracy (UNCLOS) Hijacking (1988 SUA Convention and Protocol) Armed Attack (eg Gulf War and reflagging operation)

7 3. Offshore Installations Armed attack (Oil Platforms case); IHL Terrorist attack (SUA Protocol) Other uses of the seas eg shipping (UNCLOS; IMO) 4. Onshore Installations and Materials Siting, construction and decommissioning of onshore installations, especially containing ultrahazardous material (nuclear eg 1979 Convention on Physical Protection of Nuclear Material) Also subject to threat of attack (armed attack and permissible targetting under the Geneva convention/protocol (IHL); terrorist threat (e.g Nuclear Terrorism Convention) and sabotage

8 2. Personnel State responsibility and general human rights standards 1979 Hostages Convention (linked with compulsion of third party State, intergovernmental organisation, natural or juridical person, or groups)

9 3. Guarding Supply Against Disruptions The role of the International Energy Agency founded by treaty under OECD auspices in response to 1973/74 oil crisis Cooperation with non-oecd members such as China, India and Russia Three Goals (the three Es ): (i) Energy Security (ii) Environmental Protection (iii) Economic Growth

10 IEA members are required to hold oil stocks equivalent to at least 90 days of net oil imports and stand ready to take effective cooperative measures to meet any oil supply emergency which might include stock draw, demand restraint, fuel switching and increased indigenous production; also to transmit emergency oil data Flexible Coordinated Emergency Response Measures (principally oil stockpiling and demand restraint) have developed and formal Emergency Sharing System ( ESS ) rarely invoked

11 4. Security of Demand: Energy Security from the exporter s perspective OPEC the joint initiative of Venezuela and Iraq in 1960, with Iran, Kuwait and Saudi Arabia also founding members: Agreement to establish OPEC, 443 UNTS 248 (Angola most recent member) Initial objective collective action vs Seven Sisters and price stability; maximising revenue from a wasting asset to pursue development and other goals Price and production First energy crisis of 1973/74 precipitated by use of oil weapon, selected delivery and/or cuts in supply against Denmark, Netherlands, Portugal, Rhodesia, South Africa and the United States Presently accounts for less than 50% of petroleum in global markets Cooperation between OPEC and ECT (observer status of a number of OPEC members); some OPEC members are also members of the WTO though no specific exception for petroleum trade is found in the GATT or GATS; OPEC itself an observer in some WTO Committees (CTE for example) To date no challenge to OPEC export restrictions under WTO rules

12 5. Protection of Energy Security Interests of Investors and Traders 1. WTO Energy goods and services subject to WTO disciplines; no general petroleum exception. No case law. But: GATT Art XXI: essential security interests, including relating to fissionable materials GATT Art XX(g): conservation of exhaustible natural resources (Reformulated Gasoline case 1996: challenge by Venezuela and others to US Clean Air Act as contrary to GATT Art 1)

13 2. Energy Charter Treaty (1994) (as amended by the 1998 Trade Agreement and supplemented by the 1994 Protocol on Energy Efficiency and Related Environmental Matters) covers not only energy trade, but also investment and competition, access to capital, transit (art 7 ECT), and energy efficiency Its mission is to strive towards open, efficient, sustainable and secure energy markets and to promote a constructive climate conducive to energy interdependence on the basis of trust between nations Transit Protocol negotiations ; provisional application of ECT by Russia until 2009

14 6. Environment, Human Rights and Energy Security Indirect impact on energy security of host of environmental and human rights measures Not common to find energy security exceptions/derogations

15 7. Access to Energy Eradicating energy poverty (up to 1/3 world s population lack access to modern energy services: estimates put 1.6 billion people without electricity; 2.6 billion use fuel wood, charcoal and animal dung to meet daily energy needs for cooking and heating) [T]he link between energy and development is well established. Modern energy services are indispensable to improving productivity, creating enterprises, increasing employment and incomes, and providing effective public services - such as education and healthcare. Given the fundamental importance of energy for achieving sustainable development, it will not be possible to reach the United Nations Millennium Development Goals by 2015, as agreed by the world's leaders, without increased attention to the provision of energy to the world's poorest societies." (Secretary-General, Energy Charter Treaty, September 2009) G8 Energy Summit May 2009: joint declaration includes reference to energy poverty particularly in Africa and the need to encourage the mobilisation of increased financing for addressing the problem of energy access throughout Africa