Dr. Michael de Boeck:

The Deputy asked how much room there is for manoeuvring. Under the current set-up, there is not a lot of room to manoeuvre. We are a contracting party to an international agreement. That agreement sets out certain rules with which we are no longer very happy and we would like to modify them. One option is to withdraw. We can do that jointly with all of the EU member states but then, of course, we would be, from the perspective of international law, unilaterally withdrawing states, and the consequence of that would be to lock in the investment protections that are guaranteed in that treaty for another 20 years. That is not our intent. The intent is to replace the current framework, but that has to happen through the energy charter itself, with a treaty modification. That requires unanimity of all the parties. That is why the European Commission is currently negotiating for a change in almost all the notions and definitions, as is clear if one looks at the draft text, several of the protection standards and more qualified protection standards, and the exceptions. What are the standards? One of the difficulties with and criticisms of international law is that the provisions that contain the investment protection standards are rather vague and they are interpreted by many different international investment tribunals that are composed on an ad hoc basis. That is why one of the envisaged changes is to have a sort of appellate body that could be responsible for a kind of co-ordination of the different strands in the jurisprudence.

All of these different protections are interpreted, sometimes with quite a bit of divergence. The most well known is the protection of fair and equitable treatment. Even its name is rather vague. One of the contents of that particular standard of protection is whether the investor had a legitimate expectation. The difficulty - and this has particularly been the case in the Spanish, Czech and Italian solar cases - is in determining when an investor has a legitimate expectation. Tribunals have reached diverging reasonings on that issue. I refer to whether there has to be a specific commitment on the part of the host state. If the host state makes a specific commitment in a contract, or any type of commercial agreement, to induce investors to make an investment in its territory, that would be seen as giving rise to a legitimate expectation on the part of the investor that the regulatory regime will not change or, at least, not change to such an extent that it would alter the economic rationale of the investment. Some tribunals, however, have determined that an implicit commitment of the host state vis-à-vis the investor could lead to legitimate expectations and, therefore, the mere fact that a regulatory regime exists - such as, in the Spanish case, an incentive subsidy for solar energy - automatically creates a legitimate expectation on the part of the investor that the regime will not radically alter. Of course, there are always definitional problems such as what is radical and what constitutes changing the economic rationale of the investment. One of the major criticisms of investment arbitration is that it is all one-off decisions that try to meander to a consistent strand of jurisprudence but there is no one co-ordinating it.

In the context of the investment standards, the provisions from the international treaty are very vague, so it leaves a lot of leeway for the investment tribunals to make those determinations. That was particularly the case in respect of treaties dating from the 1990s, such as the Energy Charter Treaty and all of what we now call the older generation of bilateral investment treaties. The idea of the European Commission and the member states is that all of the new generation free trade and investment agreements that are concluded by the European Union or by the member states, subject to an authorisation by the Union, should contain qualified investment protection standards, which simply means more lengthy clauses that clearly delineate the scope and what is covered. Of course, those only exist once they have been concluded. Unless they have been concluded, the old regime still applies.

As regards exceptions, there are very few exceptions in the treaties that were concluded in the 1990s. Very little attention was paid to that. One of the things that has changed in the practice of the conclusion of investment agreements is that far more attention is being offered to qualifications of scope, exceptions, justifications for breaches, etc. They would not then actually be breaches.

As regards the question on the emissions trading system, I apologise, but I am not competent to answer it.