The question of whether Russia is or is not bound by the Energy Charter Treaty (ECT) sounds theoretical. However, Tim Osborne, CEO of GML, the main shareholder of the expropriated Yukos company, is awaiting a decision on a case brought under the ECT that governs international energy relations. GML is claiming some US$50 billion in damages from Russia for “illegal” expropriation. The international tribunal, sitting under the auspices of the Permanent Court of Arbitration in The Hague, is expected to give its decision very soon – it was expected before the summer.

“Our view is that Russia is bound by the treaty. There are specific provisions that state that a country is bound if it signs and provisionally applies the treaty without opting out. The Russian constitution also allows the executive to bind the country to international treaties on a provisional basis,” said Osborne. He is also confident of eventually recuperating monies lost from Yukos. “If the tribunal decides in our favour, then it will also decide on our loss. Our argument is that the loss should be based on our 60% share in what Yukos would have been worth if the Russian government had not interfered. If there is a binding award then we expect Russia to meet it. If the Russian government does not, then there are other treaties that allow us to collect against Russian assets around the world,” said Osborne.

“Russia has signed the ECT and applies it provisionally. The final level includes signature, provisional application and ratification. The tribunal [currently sitting in The Hague - Ed] will determine the exact extent of provisional application,” said André Mernier, secretary-general of the Energy Charter Treaty Secretariat. “Even if Russia were to withdraw from the treaty as some officials have hinted at, the level of investment protection that Russia has accepted will still continue for a further 20 years. The tribunal decides on both the question of provisional application and the substance of the case [brought by GML - Ed],” notes Mernier.

More generally, Mernier is “open” to Russia’s proposal for a new international treaty to guarantee energy trading and replace the ECT, to which 51 countries are signatories ⁽¹⁾. “It is time to modernise the Energy Charter Treaty. The way forward is not to restart negotiations with most of the countries on this planet for a new treaty covering almost the same ground. The way forward is to start from what we have now – and what Russia has signed – and see how we can build upon this. It is one thing for one member state, the Russian Federation, to make a proposal. But it is another to find support among other states,” said Mernier. He notes that response to the Russian proposal has been very cautious, if not silent. “Much depends on meetings between the EU and Russia.”