. . NSTANT ENERGY PIARTER SECRE-TARIAT - BRU�SELS 3) lnvestment Protection and Promotion The Energy Charter Treaty aims mainly to reduce political risk and increase predictability and therefore confidence of investors. it seeks to provide the safeguards needed to attract investments. The more unstable the perceived environment for making investment, the more benefit a Government will obtain from being party to an agreement which enhances the conditions for investment. "lnvestment" means every kinci of asset, owned or controlled directly or indirectly by an lnvestor. The sectoral limitation is that the investment must be "associated with an Economic Activity in the Energy Sector." The words "associated with" are important because they are broadening the coverage of the Treaty. "Economic Activity in the Energy Sector" means an economic activity concerning the exploration, extraction, refining, production, storage, land transport, transmission, distribution, trade, marketing, or sale of Energy Materials and Products. Energy Materials and Products listed in Annex EM contains all the relevant energy materials from uranium, through coal, peat, coke, oil, petroleum, asphalt, to electrical energy and heat. lnvestments related The Treaty reinforces the principle of "pacta sunt servanda" ("sanctity of contracts"). Even prior agreements between ·governments and private foreign investors are protected by the Treaty. it is a violation of a Contracting Party's obligations under the Treaty if these prior agreements with foreign investors are not respected. Such violation could be addressed under the dispute settlement provisions of the Treaty. As to the making of investments, the Treaty embodies the soft law principle of "best efforts" with regard to national treatment. it leaves the hard law obligation and modalities of its application to a possibly later "Supplementary" treaty. 4) Energy Efficiency Generic issues The concept of energy efficiency has become one of great importance. it is equally important for countries in transition towards a market economy, for countries in the process of development or for industrialised countries concerned with changes in the world's climate systems. lnstruments developed to improve energy efficiency are associated with and support actions oriented towards a cleaner environment, restructuring the economies and a higher standard of living. to cogeneration and district heating evidently The concept of energy effiThese driving forces have created an appropriate climate to develop and enforce specific mechanisms directed at improving energy efficiency. Such mechanisms ciency has become one of great supplement efficiency improvements resulting from reforms, notably developments such as market oriented prices and behaviour. Specific energy efficiency mechanisms will alsa support and become par! of the restructuring process. Any mechanisms should take into account particular national appear to be fully covered by the provisions of the Treaty. The investmentimportance. it is equally important tor countries in transition towards a market economy, tor countries in the process of development or tor industrialised countries concerned with changes related provisions in the Treaty concentrate in the world's climate systems or regional needs and stages and trends of development. This is the on investments, which have already been made. They go well beyond the provisions contained in traditional bilateral investment agreements and international rules, including those of OECD. The Treaty ensures that governments will give to foreign investments the better of either Most Favoured Nation or National Treatment. This principle is accompanied by strong protection standards for such investments covering: Transfer of capital and profil repatriation; Employment of key personnel; Compensation for expropriation; Compensation for losses caused by war or civil disturbance. 5 81 ECOGENERATION WORLD context in which agreement was reached on the energy efficiency provisions of the Energy Charter Treaty (ECT, Art 19) and on the Protocol on Energy Efficiency and Related Environmental Aspects. The Energy Charter Protocol on Energy Efficiency and Related Environmenta/ Aspects (PEEREA) The Protocol, negotiated, opened for signature and entered into force at the same time with the Treaty, is the channel through which countries with more than twenty years of experience in the field of energy efficiency and those with economies in transition recognise the necessity and the value ofa binding document to deal with these matters and to offer an effective tool for international co-operation. The Protocol is promoting Full-Cost and Cost-Effectiveness principles, which should be incorporated into energy efficiency policies, which in turn have to be consistent with sustainable
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