As an expression of their sovereignty, states may exclude one or more territories for which they are internationally responsible from the applicability of a treaty. This sets further hurdles for Investors,217 as the case may be that, for example, the territory in which an Investor is incorporated is not covered by the ECT. Investors must be aware of this additional limitation imposed on the concept of Contracting Party or signatory of the ECT.
216 This is valid except for the signatories listed in Annex PA to the ECT: the Czech Republic, Germany, Hungary, Lithuania, Poland and Slovakia. However, these signatories are now Contracting Parties to the ECT and, therefore, Annex PA is no longer effective.
The application of certain provisions of the ECT for a period of twenty years was the proposal of the Canadian delegation. See, Canadian suggestion on draft Article 40 – Provisional Application; supra at FN 199.
217 This is rather a situation of concern for Investors legal persons who are organized in a territory of a Contracting Party that might be excluded from the ECT’s application.
Article 29 of the Vienna Convention provides for the possibility to restrict the territorial application of a treaty:
“Unless a different intention appears from the treaty or is otherwise established, a treaty is binding upon each party in respect of its entire territory.”218
Article 29 of the Vienna Convention establishes the rule of territorial unity, but also acknowledges the right of the contracting parties to provide exceptions to this rule.
Article 40(1) of the ECT contains the same principle referred to in Article 29 of the Vienna Convention. As a rule, the ECT applies to all territories for which Contracting Parties or signatories are internationally responsible, but allows the exclusion of one or more territories from the application of the ECT. According to Article 40(1) of the ECT:
“Any state or Regional Economic Integration Organisation may at the time of signature, ratification, acceptance, approval or accession, by a declaration deposited with the Depository, declare that the Treaty shall be binding upon it with respect to all territories for the international relations of which it is responsible, or to one or more of them. Such declaration shall take effect at the time the Treaty enters into force for that Contracting Party.”219
The Contracting Parties may submit a declaration at a later stage extending the applicability of the ECT to other territories or may withdraw the initial declaration in respect to the territories to which the ECT was applicable.220 The application to
218 According to the International Law Commission, the “Commission preferred this term [“the entire territory of each party”] to the term “all the territory or territories for which the parties are internationally responsible””, in order “to avoid the association of the latter term with the so–called “colonial clause””.
See, International Law Commission; Draft Articles on the Law of Treaties with commentaries, 1966, p.
213, Yearbook of the International Law Commission, 1966, vol. II. On the drafting history of Art. 29 of the Vienna Convention, see, Sinclair, Ian; The Vienna Convention on the Law of Treaties, 2nd edition, Manchester: Manchester University Press, 1984, pp. 87–92; for further comments on overseas territories, see, Aust, A.; supra at FN 94, p. 71.
219 The chapeau of the first draft of Art. 40 referred to the “Application to Overseas Territories”. See, Art.
35 of the Basic Agreement of 20 January 1992, 4/92 BA 6.
220 Art. 40(2) and (3) of the ECT. See, supra FN 206.
territories under Article 40 of the ECT must be read in conjunction with Article 1(10), which defines the notion of ‘Area’.221 Article 40(4) of the ECT expressly provides that
“[t]he definition of “Area” in Article 1(10) shall be construed having regard to any declaration deposited under this Article.”
It follows that only territories that are not excluded by a Contracting Party from the application of the ECT are included in the Area of that Contracting Party. The definition of ‘Area’ is relevant in the context of the definition of ‘Investment’ under Articles 1(6) and 26 of the ECT. Pursuant to Article 26 of the ECT, only disputes concerning Investments in the Area of another Contracting Party may be covered by the dispute resolution mechanism of the ECT. Consequently, an Investor may resort to the resolution mechanism under Article 26, and, thus, benefit from the procedural protection of the ECT, only if the Investment is in the Area of the respondent Contracting Party.222
When pursuing arbitration against another Contracting Party or signatory to the ECT, the fact the territory on which an Investor relies for the application of the ECT is not covered by the ECT may affect the jurisdiction of arbitral tribunals.223 This situation has practical consequences, as shown by the case of Petrobart v. Kyrgyzstan.224
221 According to Art. 1(10) of the ECT,
“”Area” means with 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 Organisation which is a Contracting Party, Area means the Areas of the member states of such Organisation, under the provisions contained in the agreement establishing that Organisation.”
222 This limitation is further discussed in Chapter III.3 below.
223 See, Art. 26 of the ECT. The Energy Charter Secretariat does not keep a public list of the territories that are excluded for the application of the ECT. This is an additional obstacle for Investors relying on the fact that the ECT applies to certain territories.
224 See, Chapter I.1.3.4 above.
1.5 Regional Economic Integration Organizations as Contracting Parties to the