Transit Protocol

The Energy Charter Conference is currently conducting broad consultations among government and industry representatives from member states as well as observers on a possible reset of negotiations on the Transit Protocol - a legal framework to facilitate energy trade across borders and cooperation among energy producing, consuming and transit countries.

Background

The Energy Charter Treaty's existing transit provisions oblige contracting parties to facilitate transit on a non-discriminatory basis, consistent with the principle of freedom of transit enshrined in the WTO/GATT. These provisions go beyond WTO in so far as they contain explicit obligations relative to energy transit, including via fixed infrastructure like pipelines and electricity grids.

Shortly after the entry into force of the Energy Charter Treaty in 1998, the Charter Conference decided to go even further and to agree on more specific rules on energy transit within a separate Transit Protocol. The objectives of the negotiations on this Protocol, which started in 2000, were:

  • to ensure secure, efficient, uninterrupted and unimpeded transit;
  • to promote more efficient use of transit infrastructure;
  • to facilitate the construction or modification of transit infrastructure.

Basic issues to be addressed were, among other: sanctity of transit, transparent and non-discriminatory access to transit infrastructure - excluding mandatory third-party access - and prompt and effective dispute settlement.

Agreement was reached for most of the Protocol's text by the end of 2002, notably on:

  • the definition of available capacity for transit;
  • the rules on the utilisation of available capacity (access rules) providing for non-discriminatory and good-faith negotiations on access to energy transport facilities;
  • the obligation to have in place objective, transparent and non-discriminatory authorisation procedures or legislation concerning the expansion, extension, reconstruction, and operation of energy transport facilities used for transit;
  • the requirement for transit tariffs and other conditions to be objective, reasonable, transparent, non-discriminatory and based on operational and investment costs, including a reasonable rate of return;
  • good-faith negotiations on the supply of energy materials and products to the transit country based on transparent and non-discriminatory procedures;
  • provisions on government charges, technical and accounting standards, metering and measuring, measures in case of accidental interruption, reduction or stoppage of transit as well as international energy swap agreements.

Following the suspension of negotiations in 2003, three main outstanding issues became the subject of consultations between the European Union and the Russian Federation and, later on, among all Energy Charter Treaty member states. They concerned:

  • long-term capacity booking and creation of transit infrastructure;
  • the cost-reflectiveness of tariffs arising from auctions;
  • the clause introduced by the European Union having the effect that the Protocol would not apply to energy flows within the EU ("REIO-clause").

In view of the progress made by the Trade and Transit Group (TTG) on these outstanding issues during multilateral consultations, on 9 December 2009 the Charter Conference mandated a restart of formal negotiations based on the texts that had been worked out by the Group.

However, in October 2011, the European Union presented a new common position with regard to the negotiations on the draft Transit Protocol. It argued that in view of the developments in the international energy situation, the developments in the Energy Charter constituency and, most notably, the lack of progress in the negotiations and consultations on the Transit protocol in recent years, it appeared no longer opportune to continue the negotiations on a Transit Protocol on the current basis. The EU expressed its willingness to consider a reset of the negotiations on the basis of a new document reflecting the common views of the constituency, if an important number of stakeholders/contracting parties were to express a genuine interest in such negotiations and a commitment to be bound by the resulting agreement.

Current Situation

Taking into account the position of the EU, the Charter Conference decided on 29 November 2011 to repeal the negotiation mandate of 2009. In view of the possibility of a reset of negotiations on a new Protocol, the Trade and Transit Group was tasked to conduct consultations among ECT members, observers and industry representatives, in order to obtain more information with regard to the prospects for such an initiative, including the issues to be addressed and the convergence of positions within the constituency in this regard. In doing so, the TTG shall take into account the original mandate for the negotiations on the Transit Protocol (Charter Conference Document 156 adopted on 7 December 1999).

In 2012, the Energy Charter Secretariat plans several stakeholder events on energy transit and cross-border trade to obtain expert advice. Later, the Trade and Transit Group will suggest possible steps to be taken by the Charter Conference.

Texts

Interested readers may acquaint themselves with the texts of the original mandate and the draft Transit Protocol as it emerged from past negotiations and consultations. These texts are currently not the subject of negotiations among the member states of the Energy Charter Treaty.

CC 156 - Mandate for negotiating a Transit Protocol under the auspices of the Energy Charter Conference

CC 251 - Last formal version of the draft Transit Protocol as discussed by the Charter Conference in 2003

TTG 87 - Last informal version of the draft Transit Protocol as it emerged from consultations among the member states of the Energy Charter Treaty