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Treaties on Transit of Energy via Pipelines and Countermeasures by Azaria, Danae (26th March 2015)

3 The Scope and Content of Obligations Regarding Transit of Energy

From: Treaties on Transit of Energy via Pipelines and Countermeasures

Danae Azaria

Subject(s):
ECT (Energy Charter Treaty) — Vienna Convention on the Law of Treaties — World Trade Organization (WTO) Dispute Settlement Body

(p. 59) The Scope and Content of Obligations Regarding Transit of Energy

1.  Introduction

This chapter analyses the scope and content of treaty obligations regarding transit of energy,1 and shows that there is a variety of primary rules. The exercise in this chapter is one of treaty interpretation. It assists in the determination of when and how a breach of transit obligations takes place.2 Hence, this chapter provides the framework for the discussion in all following chapters concerning the implementation of responsibility of the transit state, as well as the preclusion of wrongfulness of transit interruptions by the transit state.

Section 2 classifies treaty obligations regarding transit of energy as obligations of conduct or obligations of result. Section 3 demonstrates that an implied customary rule concerning security exceptions cannot be read into treaties that do not contain such exceptions. Section 4 examines whether the exceptions in GATT, the ECT and bespoke pipeline agreements are placed on the same footing as circumstances precluding wrongfulness, thus displacing countermeasures as lex specialis, or rather whether they delineate the scope of the primary obligations incumbent on treaty parties.

2.  Taxonomy of Obligations regarding Transit of Energy

2.1  Obligations of conduct and obligations of result

Treaties establishing obligations regarding transit either use terms such as ‘freedom of transit’, ‘free transit’, ‘principle of freedom of transit’, or make no mention of a ‘right’ or a ‘freedom’ when requiring states to permit transit. It has been argued unconvincingly that a right implies a corresponding duty on the (p. 60) part of another, while a liberty or freedom implies no such duty.3 However, in legal discourse, ‘freedoms’ (liberties) mainly refer to ‘abstention’ (respect of and non-interference with the freedom), and in international law, the term ‘freedom’ has been employed to indicate the existence of legal rights and duties. An example is the freedom of the high seas.4 Contrary to ‘freedoms’, ‘rights’ may not only be negative (abstention), but also positive (obligation to take positive measures effectively to ensure the enjoyment of the right).5 In either case, an obligation is incumbent upon transit states to behave in a certain manner. What changes is the behaviour mandated by the obligation: it may be positive or negative or both.6 A breach of the obligation to abstain from interference with transit or a breach of the obligation to take positive measures to ensure or facilitate transit automatically engages the international responsibility of the transit state, and creates a correlative right of reparation for the injured subject.

As a separate matter the question arises as to the normative intensity of a binding obligation.7 A rule may be couched in ‘soft’ language, such as ‘the Parties will endeavour’ or ‘will use their best efforts’.8 However, this does not affect the normative character of the rule.9 In such a case, the challenge is to identify how and when a breach occurs. But, a breach of such an obligation will engage the state’s responsibility.

In international law, a distinction is drawn (known in the civil law tradition) between obligations of conduct and obligations of result.10 This classification may assist in determining first the conduct by which an internationally wrongful act of a state has occurred, and second the exact time of a breach. Special Rapporteur Ago had proposed three articles on state responsibility, which classified international (p. 61) obligations as obligations of conduct, of result, and of prevention. However, these articles were later dropped, as they were criticized by governments and literature, and they related to the content of primary rules, rather than the rules of international responsibility.11 The ILC Commentary to the ASR recognizes that the distinction (between obligations of conduct and of result) has been adopted in practice,12 and the ICJ has classified obligations of prevention as obligations of conduct, rather than as a separate species of obligations.13

Obligations of result require states to achieve, in each and every case, a particular result prescribed by the obligation,14 but states have discretion in the choice of means by which they will achieve that result. The means chosen must be adequate to satisfy the state’s international obligation.15 An obligation of result is breached, when the result required by the obligation does not occur,16 even in relation to the conduct of entities, whose acts/omissions are not attributed to the state.

In contrast, an obligation of conduct is an obligation to behave in a certain manner: states are not obliged to achieve a particular result.17 This does not mean that obligations of conduct are bereft of legal content.18 An obligation of conduct is an obligation ‘de s’efforcer’, an obligation to endeavour to realize a certain result.19 States are obliged to ‘employ all means reasonably available to them’,20 to ‘deploy adequate means, to exercise best possible efforts, to do the utmost, to obtain [a]‌ result.’21 Obligations of conduct are breached if the state has not taken the necessary steps to prevent or protect the situation prohibited by the primary rule and that situation occurs. It is at the time of occurrence of the situation prohibited by the primary rule that the breach occurs.22 Some obligations of conduct may be obligations of ‘due (p. 62) diligence’:23 they oblige states to adopt ‘a certain level of vigilance in their enforcement and the exercise of administrative control applicable to public and private operators’, for instance, by monitoring their activities.24 Should the state adopt this diligent conduct, but the unwanted result occurs, it will not have breached its obligation.25 The breach of a due diligence obligation takes place at the time of the state’s failure to act diligently, irrespective of whether the unwanted situation occurs.26 In any event, if the state actively participates in conduct that leads to the situation renounced by the primary rule it will violate its obligation of conduct. For instance, the prohibition to prevent genocide logically prohibits the commission of genocide.27

Determining whether an obligation is one of conduct or of result and whether it involves a duty of diligence depends on the interpretation of the primary rule (here regarding transit).28 Since obligations differ from treaty to treaty, each obligation must be interpreted individually.

The following section gives an overview of the obligations regarding transit in GATT, the ECT, and in bespoke pipeline agreements.

2.2  Overview of obligations regarding transit

The differences between the obligations contained in GATT Article V and ECT Article 7 have been discussed in detail elsewhere.29 It should be clarified at the outset that a central difference between GATT Article V and ECT Article 7 is that the latter explicitly encompasses obligations regarding the construction of new transit routes, while GATT Article V does not.30 However, obligations concerning the construction (p. 63) of pipelines are beyond the scope of this study, which analyses international obligations concerning established energy flows in transit.31

2.2.1  GATT Article V

GATT Article V illustratively uses the following language:

  1. (2)  there shall be freedom of transit […], via the routes most convenient for international transit; [n]‌o distinction shall be made which is based on the flag of vessels, the place of origin, departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of vessels or of other means of transport;

  2. (3)  shall not be subject to any unnecessary delays or restrictions and shall be exempt from customs duties and from all transit duties or other charges imposed in respect of transit;

  3. (4)  [a]‌ll charges and regulations imposed by contracting parties […] shall be reasonable;

  4. (5)  shall accord to […] transit […] no less favourable than the treatment accorded to traffic in transit to or from any third country.

The following analysis begins by briefly examining the content of these obligations, and then focuses on their nature as obligations of conduct or of result, putting the discussion in the context of transit pipelines.

The first sentence of paragraph 2 sets out the core content of the obligation concerning transit. In Colombia—Ports of Entry, a Panel, which dealt with GATT Article V, considered that the second sentence of paragraph 2 ‘complements and expands upon the obligation to extend freedom of transit’ established in the first sentence of that paragraph.32 By necessary implication, this understanding extends to the subsequent paragraphs of the provision. While the ordinary meaning of the term ‘freedom’ means ‘the unrestricted use of something’,33 the Panel found that the words ‘via the routes most convenient for international transit’ impose a limiting condition on the obligation: WTO members are not required to guarantee transport on any or all routes in their (p. 64) territory, but only on those most convenient for transport through their territory.34 However, the Panel did not explain further how such convenience is to be measured. The term is flexible and requires a case-by-case application taking into account criteria, such as the geographical position of the consumer and the producer.35

Dues and tolls for the mere fact of transit are prohibited, but necessary delays or restrictions, as well as non-discriminatory and reasonable charges are permitted for services rendered or those commensurate with administrative expenses relating to transit.36 An important challenge for transit via pipelines is that pipelines have specific capacity. This gives rise to two questions. First, is there an obligation to permit third-party access through pipelines? Given that GATT Article V:2 prescribes that ‘there shall be freedom of transit’, mandatory third-party access arguably falls within the scope of these wide terms. However, the terms ‘unnecessary restrictions’ and ‘unreasonable regulations’ allow the transit state to refuse transit access: capacity constraints may qualify as a necessary restriction and refusal on such ground as a reasonable regulation.

Second, what is the content of the non-distinction obligation; what is the standard to which it is contingent? This question is important because if the transit state and transit right-holder states have a competitive relationship commercially and industrially, and the transit state does not afford national treatment to transit, it will enjoy competitive advantages for its exports or subsidies for its domestic industry. Paragraph 5 obliges transit WTO members to accord most-favoured-nation (‘MFN’) treatment among different instances of transit in relation to charges, regulations, and formalities. This standard applies in relation to capacity allocation.

On the other hand, paragraph 2 prohibits any distinction. However, it is unclear whether the treatment under paragraph 2 is contingent only upon MFN treatment (i.e. no distinction among different instances of transit) or whether it is contingent on MFN treatment and the treatment of exports/imports and domestic transport, or only on instances of cross-border transportation (i.e. MFN between instances of transit and non-distinction between transit and exports/imports, but not domestic transportation). This vagueness has been inherited from the 1921 Barcelona Convention, whose text (Barcelona Statute Articles 2, 3, and 4) permits exclusive (MFN treatment of different instances of transit) and inclusive (imports, exports, and domestic transportation, ‘national treatment’) interpretations. The Convention’s preparatory works reflect opposing views. But, there seems to have been no intention to give priority to transit over internal (p. 65) traffic concerning conditions of access and use of transit routes (i.e. physical access and congestion management).37

Proposals in the Doha Round negotiations for the clarification of GATT Article V were contradictory: some proposed equality vis-à-vis imports and exports,38 others equality vis-à-vis domestic transportation only,39 and others equality vis-à-vis imports, exports and domestic transportation.40 However, none of these proposals were incorporated in the Decision on the Agreement on Trade Facilitation.41

In Colombia—Ports of Entry, the Panel considered that paragraphs 2 and 5 of the provision extend MFN treatment to WTO members’ goods in transit, without making any reference to whether paragraph 2 includes other non-discrimination standards (national treatment).42 That may have been because there had been no claim before it concerning national treatment, rather than because paragraph 2 only refers to MFN treatment. Assuming that there are capacity constraints, the Panel’s finding in Colombia—Ports of Entry that the second sentence of paragraph 2 requires that goods from all WTO members be ensured ‘an identical level of access […] to transit’,43 could be understood as requiring states to set up a mechanism by which they regulate capacity allocation between exports, imports, transit, and domestic transport in a non-discriminatory manner, which would allow an identical level of access, but not necessarily identical access. Ultimately, that national treatment in its full content (imports, exports, and domestic transportation) is included in the existing non-distinction obligation is a defensible position, but one that remains to be established beyond doubt.

The terms of the aforementioned provisions (e.g. ‘there shall be freedom of transit’; ‘no distinction shall be made’; ‘shall accord’) denote that the provisions establish obligations of result. WTO members incur responsibility when the result is not achieved:44 when transit is prohibited, when distinction is made, when transit is subject to unnecessary delays or restrictions and to duties and charges, when (p. 66) unreasonable charges and regulations are imposed, and when transit treatment is less favourable to transit to or from other states. WTO members are allowed to adopt measures of their own choice to achieve the results prescribed by the provision. But, they would breach their obligations through a measure that may interrupt transit, discriminate against it, or impose unreasonable delays.45

The question arises as to whether a WTO member may violate GATT Article V as a result of the conduct of transit pipelines operators. These may be state enterprises or private entities. Under the law of international responsibility, the fact that a company is state-owned (wholly or partially) or that it is subject to executive control are not decisive criteria for the purpose of attributing the entity’s conduct to the state, as an entity that exercises elements of governmental authority.46 For instance, if Naftogaz, a state-owned company operating the transit pipeline system in Ukraine, imposed unreasonable or discriminatory tariffs for transit, its conduct would not be attributed to Ukraine, owing to the mere fact that it is owned by Ukraine. What is necessary is that the entity has been empowered by domestic law to exercise some governmental authority and that the conduct of the entity relates to the exercise of that authority (ASR Article 5). Assuming that the operation of transit pipelines does not fall within the scope of ‘governmental authority’, because it is an ordinary commercial activity along with sales and purchases,47 if Naftogaz interrupts gas transit, its conduct would not be attributed to Ukraine under this rule of general international law (ASR Article 5). On the other hand, GATT Article XVII(1)(a) on state trading enterprises widens the scope of conduct that will be attributed to WTO members in two ways.48 First, the conduct of state enterprises (presumably those owned by the state) will be attributed to WTO members without specific empowerment with governmental authority being necessary, besides the conduct of enterprises afforded special rights and privileges.49 Second, the provision deals with ordinary commercial relationships: ‘purchases or sales involving either imports or exports’.50 In that way, it could capture the operation of pipelines. However, the provision does not refer to transit activities, and a contrario it does not cover transit.51

(p. 67) The conduct of entities, such as Naftogaz (owned by Ukraine) or Gazprom (Russian company, 50 per cent of whose shares are owned by Russia),52 that are not state organs or are not authorized to exercise elements of governmental authority may be attributed to a WTO member pursuant to other rules of attribution under the law of international responsibility:53 ‘instructions, direction or control’ (ASR Article 8), as well as of ‘acknowledgment and adoption’ (ASR Article 11). These requirements depend on the behaviour of the WTO member on a case-by-case basis.54

Even if such criteria for attribution are not met, given that GATT Article V establishes obligations of result, WTO members are obliged to achieve non-discriminatory freedom of transit without unreasonable charges and unnecessary restrictions, even when private companies, whose conduct is not attributed to the state, operate pipeline systems. This can be achieved by a number of arrangements or regulatory measures over private pipeline operators. WTO members will violate their obligations by failing to achieve the required result, irrespective of whether the conduct of the pipeline operator is attributed to them.

Having set out the main features of the transit obligations incumbent on WTO members under GATT Article V, the following section examines the content of ECT Article 7.

2.2.2  ECT Article 7

The language employed in ECT Article 7 is prescriptive:

  1. (1)  [e]‌ach Contracting Party shall take the necessary measures to facilitate the Transit […] consistent with the principle of freedom of transit and without distinction, […] and without imposing any unreasonable delays, restrictions or charges;

  2. (2)  shall encourage relevant entities to co-operate in: (a) modernising Energy Transport Facilities necessary to the Transit […]; (c) measures to mitigate the effects of interruptions in the supply of Energy Materials and Products;

  3. (3)  [e]‌ach Contracting Party undertakes that its provisions shall treat […] in Transit in no less favourable a manner than its provisions treat such […] products originating in or destined for its own Area;

  4. (4)  shall not place obstacles in the way of new capacity being established, except as may be otherwise provided in applicable legislation which is consistent with paragraph (1);

  5. (5)  shall, subject to paragraphs (6) and (7), secure established flows of Energy Materials and Products to, from or between the Areas of other Contracting Parties. [Emphasis added]

Each paragraph creates a different type of obligation. Paragraphs 1, 2, and 5 create obligations of conduct, while paragraphs 3 and 4 set out obligations of result.

First, ECT Article 7(1) requires ECT Contracting Parties to take the necessary measures to facilitate transit consistent with the ‘principle of freedom of (p. 68) transit’.55 The wording ‘shall take the necessary measures to facilitate’ denotes that the obligation is one of conduct. ECT Contracting Parties are required to use their best efforts to facilitate transit by taking the necessary measures consistent with the principle of freedom of transit and without discrimination. This obligation requires ECT Contracting Parties to undertake positive action not only to ensure that there is no interruption of transit or discrimination, unreasonable restrictions, delays, or charges for transit, but also to facilitate transit.56 ‘Facilitation’ is not an event that can clearly be determined and established. All other authentic texts of the ECT (ECT Article 50), which are presumed to have the same meaning under the rules of treaty interpretation,57 in French (‘prend les mesures nécessaires pour faciliter le transit’), German (‘trifft die erforderlichen Maßnahmen, um den Transit’), Italian (‘adotta le misure necessarie per agevolare il transito’), Russian (‘Каждая Договаривающаяся Сторона принимает необходимые меры для облегчения Транзита’), and Spanish (‘tomarán las medidas necesarias para facilitar el tránsito’) do not provide any more guidance as to the meaning of the term ‘facilitate’. Rather they reinforce the understanding that the concept’s content is variable. Given that it is not possible precisely to determine which situation is disavowed by the primary rule, the obligation cannot be breached at the time of occurrence of ‘non-facilitation’, and it is logical to argue that the obligation (as read in all authentic treaty texts) is one of due diligence.58 ECT Contracting Parties are obliged to show a degree of vigilance in adopting a regulatory framework within their domestic legal system, which facilitates transit without discrimination, unreasonable restrictions, delays, or charges, and in enforcing their relevant regulations on public and private operators of pipeline/cable systems within their jurisdiction.59

The obligation to take measures to facilitate does not mean that a transit ECT Contracting Party may actively interrupt or require the interruption of transit. As the ICJ held in Application of the Genocide Convention (Merits), ‘[…] logic dictates that a State cannot have satisfied an obligation to prevent genocide [an obligation (p. 69) of conduct] in which it actively participated’.60 Additionally, the language of ECT Article 7(1), when read in the context of the exceptional circumstances foreseen in ECT Article 7(6), which obliges ECT Contracting Parties not to interrupt or restrict transit during a dispute over any matter over transit, a fortiori implies an obligation not to interrupt transit, when no such dispute exists.

The question arises as to whether an ECT Contracting Party would violate ECT Article 7(1), if a corporation within its Area unreasonably interrupts transit. ECT Article 22 (entitled ‘State and Privileged Enterprises’) provides for three obligations relating to this issue.61 First, it requires ECT Contracting Parties not to encourage or require any ‘state enterprise’62 to conduct activities inconsistent with their ECT obligations (paragraph 2).63 If an ECT Contracting Party encourages or requires such enterprise unreasonably to interrupt transit, it will breach ECT Article 22(2) and ECT Article 7(1). Whether a Contracting Party has encouraged or required an entity so to act is a matter of evidence, but it is submitted that ‘encouragement’ is a lesser threshold than direction or effective control under the rule of attribution set forth in ASR Article 8, and leads to a more stringent outcome for ECT Contracting Parties.64 Second, ECT Contracting Parties are obliged to ensure that any ‘entity’ to which they entrust regulatory, administrative, or other governmental authority exercise that authority consistent with their ECT obligations (paragraph 3). If such entity unreasonably interrupts transit, the ECT Contracting Party will breach ECT Article 22(3) and ECT Article 7(1).65 Third, ECT Contracting Parties are obliged not to encourage or require any entity to which they grant exclusive or special privileges to conduct its activities in their Area inconsistently with their ECT obligations (paragraph 4).66

(p. 70) In any case, assuming that the entity would not constitute an organ of the state (ASR Article 4), or an entity empowered to exercise governmental authority in relation to transit (ASR Article 5),67 the entity could still be directed or controlled by the ECT Contracting Party unreasonably to interrupt energy transit (ASR Article 8) or the Contracting Party could ‘acknowledge and adopt’ the entity’s conduct as its own (ASR Article 11).68 In such cases, the conduct of the entity would be attributed to the ECT Contracting Party.

The question arises as to the conduct of private enterprises, in relation to which the ECT Contracting Party has not undertaken obligations under ECT Article 22, and whose conduct cannot be attributed to it by the rules of attribution under customary international law. If such a company unreasonably interrupts transit through the Area of the ECT Contracting Party, despite the fact that the ECT Contracting Party has shown due diligence in adopting a domestic regulatory framework to ensure that unreasonable restrictions do not take place, and to observe and enforce such regulations on private pipeline operators within its jurisdiction, there would be no breach by the ECT Contracting Part of its due diligence obligation, and it would not incur international responsibility. However, should the ECT Contracting Party fail to act in due diligence, it would violate its ECT obligation. In other words, ECT Contracting Parties cannot avoid performance of this duty only because an interference with transit does not occur.

Under ECT Article 7(5) ECT ‘Contracting Parties shall […] secure established flows of [energy] to, from or between the Areas of other Contracting Parties’. The French text uses the terms ‘garantissent le transit de flux établis’ (meaning, ‘shall guarantee’ or ‘shall protect’ the transit of established flows), the German text ‘sichern die Vertragsparteien den seit langem bestehenden Fluß’ (meaning ‘shall secure’ or ‘shall ensure’ established flows), the Italian text ‘garantiscono flussi regolari’ (meaning, ‘shall guarantee’ or ‘shall ensure’ ‘regular flows’), the Russian text ‘Договаривающиеся Стороны обеспечивают сложившиеся потоки’ (meaning, ‘shall secure’ or ‘shall ensure’ established flows), and the Spanish text ‘permitirán el tránsito de flujos ya establecidos’ (meaning, ‘shall permit the transit of established flows’).69 The six authentic texts disclose a difference of meaning, especially in Spanish, which means ‘shall permit’, but also because the obligation to guarantee (French and Italian texts) would be best classified as an obligation of resultto guarantee that interruption/reduction of established flows will not occur. By contrast, if understood as an ‘obligation to ensure’, as the German and Russian texts suggest, it is best understood as an obligation of conduct and due diligence.

According to VCLT Article 33(4) in such cases, recourse to the rules of interpretation under VCLT Articles 31–32 should be had and if this difference in meaning is not removed, the meaning that best reconciles the texts, having regard (p. 71) to the treaty’s object and purpose shall be adopted.70 The immediate context of the terms ‘shall secure’ (or of the corresponding terms in all other authentic texts) is the language ‘subject to paragraphs (6) and (7)’. Paragraph 6 obliges Contracting Parties ‘in the event of a dispute over any matter arising from that Transit’ ‘not to interrupt or reduce’, ‘not to permit any entity subject to their control to interrupt or reduce’, or ‘not to require any entity subject to its jurisdiction to interrupt or reduce’ the existing flow [of energy], except in three specific and exhaustive cases. Paragraph 7 provides for dispute settlement, which may allow for the interruption/reduction of transit.71 Comparing the language of paragraph 6 to that of paragraph 5, it is clear that paragraph 6 deals with a specific situation and obliges states in a narrower manner than paragraph 5 does. First, paragraph 5 does not apply in relation to disputes concerning transit, but under all circumstances. Second, paragraph 6 leaves outside its scope (and hence does not oblige Contracting Parties in this case) the situation where a Contracting Party permits an entity under its jurisdiction (but not under its control) to interrupt or reduce transit. By contrast, this situation is covered by paragraph 5.

It is submitted that the interpretation of ECT Article 7(5) that reconciles the difference in all authentic texts of the ECT in the light of the object and purpose of the ECT, which is the long-term cooperation in the energy field,72 is that it establishes an obligation of conduct and more specifically an obligation of due diligence.73 ECT Contracting Parties are required to deploy adequate means and to do their utmost to secure such flows.74 They are obliged to adopt a domestic legal framework that would ensure established flows and to employ diligence when enforcing this legal framework on entities within their jurisdiction, by establishing adequate monitoring mechanisms. They would violate this obligation by omitting to take any of these steps, and they are not able to neglect their duty to secure established transit flows on the basis that an interruption or reduction of established energy flows has not yet occurred or may never occur.75 In any case, Contracting Parties would violate their obligation under paragraph 5 if they interrupted or reduced established transit flows, through their organs (ASR Article 4) or entities exercising governmental authority (ASR Article 5) or by directing or controlling the conduct of entities, whose conduct would not otherwise be attributed to them (ASR Article 8), or by acknowledging and adopting conduct of such entities as their own (ASR Article 11).

Moreover, ECT Contracting Parties are obliged to encourage relevant entities within their jurisdiction to cooperate in, inter alia, modernizing pipelines (p. 72) necessary to energy transit (ECT Article 7(2)). This is an obligation of conduct, but of lower normative quality than the obligation to facilitate in paragraph 1 and to secure in paragraph 5. Under paragraph 2, ECT Contracting Parties are only obliged to encourage entities to cooperate; they are not obliged to ensure that the entities do so. A manner in which this obligation could be breached is by omitting to adopt any domestic legal provision for such cooperation, as it would imply the lack of encouragement.

By contrast, paragraphs 3 and 4 of ECT Article 7 contain obligations of result. Under paragraph 3, the transit ECT Contracting Party is obliged to permit the establishment of new capacity, including the modernization and expansion of existing Energy Transport Facilities (‘ETFs’) (ECT Article 7(10)(b)), the use of other routes (non-ETFs) or the construction of new ETFs, if transit via ETFs cannot take place on commercial terms or a fortiori when it cannot take place at all. Additionally, ECT Contracting Parties are obliged, when they take measures concerning transport of energy and use of ETFs, to treat transit ‘in no less favourable manner than its provisions treat [energy] originating in or destined for its own Area’.76 This provision arguably covers access to transit infrastructure and tariffs for transportation services.77 Although the ordinary meaning of the provision could allow mandatory third-party access, as can the text of ECT Article 7(5)(b), which obliges transit states to permit new or additional transit through existing ETFs (but only in exceptional circumstances), the understanding adopted with respect to the treaty as a whole explicitly excludes such interpretation.78

The word ‘or’ in paragraph 3 could be disjunctive or conjunctive. If it is disjunctive, the treatment required is no less favourable vis-à-vis either exports or imports. If it is conjunctive, the treatment of transit should be equal to the transit state’s imports, exports, and domestic transportation of energy.79 The use of the term ‘or’, rather than the conjunctive ‘and’ or both ‘or/and’, which is employed in another ECT provision (Article 25(2)), suggests a contrario that the term was meant to be disjunctive.80 There is no indication in this provision that the term (p. 73) ‘or’ was given a different meaning than in other ECT provisions. ECT Article 7 requires that measures concerning transport of energy and use of ETFs are no less favourable than those taken for exports and imports.

At a minimum, ECT Article 7 obliges transit ECT Contracting Parties to take the necessary measures to facilitate and secure transit (of established energy flows) by showing a degree of diligence in adopting a domestic regulatory framework that ensures and facilitates transit without discrimination, unreasonable restrictions, delays, and charges, and by enforcing it on pipeline operators within their jurisdiction. Should they interrupt or reduce transit, ECT Contracting Parties would violate their obligations.

2.2.3  ECT Article 29

ECT Article 29 applies to trade in Energy Materials and Products (‘EMPs’) between (a) ECT Contracting Parties none of which are WTO members (ECT Article 29(1)); and (b) ECT Contracting Parties some of which are WTO members and some are not (ECT Article 29(2)). ECT Article 29(2)(a) prescribes that ‘trade’ of EMPs ‘shall be governed, subject to […] the exceptions and rules provided for in Annex G, by the provisions of the [WTO Agreement]’. The list in Annex G, and in Annex W, which replaced Annex G on the basis of the Trade Amendment, does not include GATT Article V, and as a result, this provision is not excluded from the ambit of ECT Article 29.

The preparatory works show that a negotiating state wanted a provision inserted (either in ECT Article 29 or ECT Article 7(8)) with a view to ensuring the effect of ECT Article 4 concerning transit involving non-GATT Contracting Parties or GATT Contracting Parties and non-GATT Contracting Parties.81 In 1994, the Legal Sub-Group noted that it ‘saw no way that Article 7 could “derogate” from Article 29.’82 This statement is subject to two different interpretations. First, the two Articles (ECT Article 7 and 29) do not overlap because ECT Article 29 does not incorporate GATT Article V, and hence there is no possibility of derogation. Second, although they overlap, ECT Article 7 does not derogate, but furthers Article 29. The preparatory works do not clarify this point further. Since a relevant provision was not inserted in the ECT, at the adoption session of the ECT on 17 December 1994 the Russian Federation made a declaration, which was included in the Chairman’s Statement, and intended to compensate for this omission:83 ‘no provision of this Treaty shall derogate from the provisions of GATT 1947 as made applicable by Article 29(2), Annex G and relevant Declarations. This again is clearly the intention of the negotiating parties and a basis for the approach to (p. 74) trade contained in Article 29 of the Treaty’.84 This statement constitutes the context of the ECT in which the term ‘trade’ in ECT Article 29 is to be read.85

The provisions of ECT Article 29 read in their context mean that GATT Article V applies by incorporation. The analysis in section 2.2.1 earlier in this chapter is thus relevant here.

2.2.4  Bespoke pipeline agreements

The bespoke pipeline agreements examined in this study have been concluded for projects, which were not existent at the time of the conclusion of the treaties. Hence they all create obligations relevant to two phases: first, the construction of the project; and second, the operation of the project. This section does not exhaustively discuss the obligations established in these treaties, but gives an overview of the main obligations which are necessary for the analysis in the following chapters: those relating to established energy flows (operation phase). Usually, treaties contain obligations regarding the granting of land rights necessary for the realization of the project,86 and obligations that ensure that the parties either do not interfere with or facilitate the construction and operation of the project.87 They also require treaty parties to refrain from imposing (additional) taxes.88

The treaties create obligations on all treaty parties concerning flows through the pipeline. Some obligations of result include the following: ‘not to permit or require the interruption of or restriction on the freedom of transportation of Natural Gas’ (Nabucco Agreement Article 7.2); ‘to allow the export and transit of Natural Gas’ (WAGP Treaty Article VIII); ‘not to interrupt or impede the freedom of transit of Petroleum in, across and/or exiting from their Territory through the Facilities’ (BTC Agreement Article II(4)(iii)); to allow free unimpeded transit, while the importing state undertakes to buy gas from the transit state (Article 4, China-Kazakhstan Agreement); to guarantee full and unrestricted transit of gas through the gas pipeline (Article 9, Russia-Greece South-Stream Agreement;89(p. 75) Article 10, Russia-Bulgaria South-Stream Agreement; Article 8, Russia-Hungary South-Stream Agreement).

Obligations of conduct include: the obligation to undertake all necessary measures for the operation of the part of the project located in their territory and to ‘ensure the uninterrupted flow of natural gas’ (Article 2, ITGI Agreement); to undertake every effort to ensure the uninterrupted transportation of oil through the Oil Pipeline (Article 1, Burgas-Alexandroupolis Agreement); to use its best endeavours to ensure the unimpeded gas transmission across its territory, while the exporting state is to use its best endeavours to secure reliable deliveries of gas to the transit state (Article 4(a)–(b), Russia-Austria South-Stream Agreement).

Each treaty establishes different obligations in relation to transit flows. Some create obligations of result, others obligations of conduct. At a minimum, all these transit obligations would be breached, if the transit state interrupts or reduces transit.90

3.  Delineating the Scope of Obligations: the Example of Security Exceptions

In the absence of obligations regarding transit, the transit state may exercise its regulatory powers over the activity of transit through its territory or areas within its jurisdiction,91 including for the protection of its security interests.92 On the other hand, the existence of treaty provisions binding on states may restrict measures taken for the protection of the transit state’s security interests. The treaty practice examined in this study reveals a variety of approaches: some treaties contain provisions on exceptions; others do not.

Section 3.1 shows that there is no implied rule permitting security exceptions in the absence of such provisions in transit treaties, and that international case law has not inferred an implied exception, but in some cases it has struck a balance between the interests of the transit state and the transit right-holder. Section 3.2 explores the relationship between security exceptions (p. 76) and circumstances precluding wrongfulness under customary international law. It shows that the mere existence of security exceptions in treaties regarding transit of energy does not ipso facto displace circumstances precluding wrongfulness, including countermeasures.

3.1  Treaties without exceptions

3.1.1  There is no implied customary rule on security exceptions

The 1969 and 1986 VCLT deal with the invalidity, termination, and suspension of the operation of treaties in general (Part V of 1969 and 1986 VCLT). No right to suspend the treaty’s operation (wholly or partially) is found therein on grounds of environmental, public policy or security grounds. During the ILC’s work on the law of treaties, Special Rapporteur Fitzmaurice had proposed an article according to which ‘commercial treaties’ were ‘to be read as subject to an implied condition enabling local authorities to prohibit entirely or to institute special regulations for the importation or exportation’ of some goods ‘on grounds of public policy, health, […] or do so on particular occasions if rendered necessary by local circumstances’. This would be a condition of non-performance of the treaty obligations separate from grounds of suspension of the treaty’s operation and its termination.93 According to the proposed commentary: ‘the general right to trade conferred by many commercial treaties has never been regarded as prejudicing the right of the local authorities to prohibit altogether traffic in certain categories of goods or articles, or in certain particular circumstances as indicated in the article.’94

Special Rapporteur Waldock did not take up this suggestion and such a provision is not contained in the VCLT. However, he examined whether ‘commercial treaties’ could unilaterally be denounced in the absence of an express provision on withdrawal or denunciation by their parties.95 A generically worded legacy of these suggestions is found in VCLT Article 56(1)(b): a ‘right of denunciation or withdrawal may be implied by the nature of the treaty’.96 Under the VCLT, states are entitled to invoke grounds of invalidity, termination, and suspension of the operation of treaties, but no right of non-performance on grounds relating to (p. 77) security interests.97 There is no evidence that under customary international law such a right exists vis-à-vis treaties.

It could be argued that a rule of customary international law permitting non-performance on such grounds may have been created particularly in relation to treaties establishing transit obligations. Numerous treaties containing transit obligations include provisions that allow transit states to take measures for their vital interests or their essential security interests.98 Elihu Lauterpacht takes into account this treaty practice to support his argument that a customary right of transit would include security exceptions in favour of the transit state.99 But, even assuming that the argument by Lauterpacht is well founded, the issue examined here is different. The question is whether there is a customary rule specifically permitting security exceptions in relation to a treaty, which does not contain such exceptions;100 not whether a customary rule concerning transit would include security exceptions in favour of the transit state, as part of the content of that customary rule.

The argument that in the absence of security exceptions in treaties regarding transit a customary rule permits such exceptions is unsustainable for the following reasons. First, the insertion of security exceptions in numerous transit treaties may denote that in the absence of security exceptions no such implied ground of non-performance of treaty obligations is available under customary international law.101 Second, successive treaties regarding transit, which include security exceptions, may have created custom. But, state practice for the formation of custom by virtue of successive treaties has to be extensive and uniform,102 while the wording of such provisions differs in each treaty. Third, even assuming arguendo that such provisions constitute sufficiently uniform practice for the emergence of custom, it has not been possible to find evidence of opinio juris that such exceptions are implied in treaties in the absence of express treaty clauses to that effect.103

(p. 78) In the absence of provisions in treaties establishing transit obligations, transit states cannot invoke security grounds as exceptions allowing them not to perform their treaty obligations by reference to a rule of customary international law.

3.1.2  International case law

In 2005, the Arbitral Tribunal in Iron Rhine was faced with the contention by the Netherlands that the right of transit enjoyed by Belgium on the basis of the bilateral treaty of separation between the two states should be subject to the Netherlands’ legitimate exercise of sovereignty for the protection of the environment.104 It found that according to the provision which referred to the Netherlands’ sovereignty and the transit right of Belgium, the Netherlands would exercise its sovereignty, unless this would conflict with the right of transit under the treaty.105

More specifically, there were two limitations over the regulatory power of the Netherlands over Belgium’s transit right. First, the Netherlands’ regulation could not amount to a denial of the transit right;106 and second, it could not render unreasonably difficult the exercise of the transit right.107 The Tribunal found that the Netherlands’ environmental concerns were legitimate, and that the foregoing provision echoed a balance between the legitimate interests of the Netherlands (environmental considerations) and Belgium’s transit right (economic development); hence the two should be reconciled.108 The Tribunal did not infer an exception in the absence of an express provision.

In 2009, in Costa Rica v. Nicaragua the ICJ examined the balance between Nicaragua’s ‘full and exclusive sovereignty’ over the San Juan River and Costa Rica’s ‘perpetual right of navigation’ under the 1858 bilateral boundary treaty between Nicaragua and Costa Rica. It found that Nicaragua has the power to regulate the exercise by Costa Rica of its right of navigation in Nicaragua’s territory. That power is not unlimited, but tempered by the rights and obligations of the parties to the dispute.109 The Court did not infer an exception to the treaty in the absence of an express provision. Rather, it found that ‘in the present case’ a regulation ought to have the following characteristics in order to be lawful under the treaty:

  1. (1)  it must only subject the activity to certain rules without rendering impossible or substantially impeding the exercise of the right;

  2. (p. 79) (2)  it must be consistent with the terms of the Treaty […];

  3. (3)  it must have a legitimate purpose, such as safety of navigation, crime prevention and public safety and border control;110

  4. (4)  it must not be discriminatory […];

  5. (5)  it must not be unreasonable, i.e. its negative impact on the exercise of the right in question must not be manifestly excessive when measured against the protection afforded to the purpose invoked.111

Neither the Tribunal nor the ICJ inferred an exception in the absence of a provision permitting exceptions.

Supportive of the argument that exceptions cannot be inferred when they are absent from treaties regarding trade and transit is the China—Raw Materials case. China argued before a WTO Panel that the general exceptions of GATT Article XX should be available as a defence for its conduct, which was inconsistent with paragraph 11.3 of its WTO Accession Protocol. The Panel examined the ordinary meaning of paragraph 11.3 in the context of other provisions of the WTO Agreement. It concluded that were GATT Article XX intended to apply to paragraph 11.3 of China’s Protocol, language would have been inserted to this effect; but it had not been.112 The AB confirmed the findings of the Panel.113 China had also argued that it could still invoke GATT Article XX because of its ‘inherent right to regulate’. However, both the Panel and the AB rejected this argument owing to the non-existence of an express reference to Article XX (or language which would allow its incorporation)114 in the Protocol for China’s Accession.115

In summary, international case law suggests that in the absence of exceptions in treaties, non-performance of transit obligations for the protection of the transit state’s legitimate interests cannot be inferred. Nor has international case law found a rule of customary international law that permits exceptions in the absence of express provisions in treaties. The following section examines the relationship between security exceptions in treaties and circumstances precluding wrongfulness under the law of international responsibility. It focuses on countermeasures, but the findings therein may have implications in relation to other circumstances precluding wrongfulness under customary international law.

(p. 80) 3.2  Security exceptions and treaty language intended to displace countermeasures

Chapter 1, section 3.1 explained that primary rules prescribe conduct, while the rules on international responsibility are secondary rules pertaining to the consequences of breach of rules of conduct. In the context of the latter, circumstances precluding wrongfulness provide excuses to what would otherwise constitute an internationally wrongful act, for as long as the circumstances exist, and are distinct from the requirements of the primary obligation.116 However, the distinction between primary and secondary rules may be challenging when it comes to circumstances precluding wrongfulness under the law of international responsibility and their relationship with treaty exceptions.117 In the Wall case, the Court asked whether ‘a state of necessity as recognized in customary international law could be invoked with regard to those treaties as a ground for precluding the wrongfulness of the measures or decisions being challenged’,118 while the treaties in question contained security exceptions.119 However, the Court did not answer this question.

An example of the language used in security exceptions which has been examined in case law and scholarship is ‘[n]‌othing in this Agreement shall […] prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests’. However, the language in security exceptions in different treaties is varied, and a case-by-case interpretation of these provisions in order to determine their relationship with circumstances precluding wrongfulness is required. Based on the assumption that states may contract out of customary secondary rules by creating lex specialis secondary rules in treaties (ASR Article 55),120 international case law and scholarship have approached the relationship between treaty security exceptions and circumstances precluding wrongfulness in three different ways. First (and most persuasively), treaty exceptions are part of the primary rule and circumstances precluding wrongfulness are applicable secondary rules.121 A measure taken on the basis of a security exception of this sort is not in breach of the treaty, since conduct falling within the exception is outside the scope of the obligations under the treaty. Therefore, the secondary rules of international responsibility do not apply. Only if conduct is not justified under treaty exceptions, is there an internationally wrongful act, and the question (p. 81) about whether its wrongfulness can be precluded under customary international law will arise. Second, if the exceptions are interpreted as specifically crafted by the treaty parties to preclude wrongfulness of breaches of treaty provisions, the treaty exceptions are positioned on the same footing as secondary rules under the ASR. As lex specialis, they supersede the customary circumstances precluding wrongfulness.122 Third, arbitral tribunals have interpreted treaty exceptions through VCLT Article 31(3)(c) to incorporate conditions from secondary rules under customary international law.123

Literature has overlooked the findings of the PCIJ in its Advisory Opinion on Railway Traffic, which involved a treaty concerning transit that included security exceptions, and its relationship with ‘peaceful reprisals’. Poland occupied a part of Lithuania (including Vilnius, Lithuania’s capital today) that was adjacent to the non-occupied territory of Lithuania through which Poland requested transit to Memel (under international regime, but within the territory of Lithuania). Lithuania and Poland interfered with their mutual economic relations, including transit (on railway and internal waterways). In 1927, the LoN Council recommended that Lithuania and Poland enter into direct negotiations.124 When the latter proved fruitless, the Council requested the Advisory Committee’s recommendation, including with regard to Poland’s transit through Lithuania on the Landwarow-Kaisiadorys railway sector. Since the parties did not adopt the Committee’s recommendation, the Council requested the Court’s opinion about whether the ‘international engagements in force oblige Lithuania in the present circumstances, and if so in what manner, to take the necessary measures to open for traffic or for certain categories of traffic the Landwarow-Kaisiadorys railway sector?’125

The PCIJ found that Lithuania was not bound to reopen the railway under the (a) Council’s Resolution directing the two parties to the dispute to negotiate; (b) Article 23(e) of the LoN Covenant; and (c) the 1924 Convention Concerning the Territory of Memel (‘Memel Convention’),126 which expressly referred to the 1921 Barcelona Convention. It is the latter instrument that is of importance here. Barcelona Statute Article 7 reads:

The measures […] which a Contracting State is obliged to take in case of an emergency affecting the safety of the State or the vital interests of the country may in exceptional cases, and for as short a period as possible, involve a deviation from the provisions of the above Articles; it being understood that the principle of freedom of transit must be observed to the utmost possible extent. [Emphasis added]

Lithuania in its written statements had argued that under Article 7 of the Barcelona Statute annexed to the Barcelona Convention, its national pride, a vital interest of Lithuania, had been affected by Poland’s occupation of Vilnius in violation of the (p. 82) Lithuania-Poland Agreement (Soulvaki Agreement).127 It had argued that it was entitled under general international law to interrupt any commercial relation with Poland (including transit) on grounds of, inter alia, ‘peaceful reprisals’;128 and in a separate section it had argued that it was under no obligation to permit Poland’s transit via the railway section in question, including, inter alia, by virtue of the deviations permitted under Barcelona Statute Article 7.129 But, it had not addressed the relationship between peaceful reprisals and Article 7 of the Statute. Poland had repudiated that Lithuania was permitted to undertake ‘peaceful reprisals’, but not on the grounds that Barcelona Statute Article 7 superseded them as lex specialis.130

The Court initially explained that it would examine whether Lithuania was entitled to exercise ‘reprisals’, inter alia, by keeping the railway sector out of use, ‘only […] if it is shown that the international engagements in force oblige Lithuania to open this sector […]. Should the Court arrive at the conclusion that no international engagements of this nature exist for Lithuania, the argument based on the alleged right […] to engage in pacific reprisals ceases to be of any importance’.131 The Court found no such obligation because the railway section in question was not in use and was not convenient for international transit (Barcelona Statute Article 2). However, it continued that

even if the railway were in use and could serve Memel traffic, Lithuania would be entitled to invoke Article 7, as a ground for refusing to open this sector for traffic or for certain categories of traffic, in case of an emergency affecting her safety or vital interests. From this point of view also, Lithuania is therefore not at present under the Memel Convention under any obligation to restore to use and open for traffic the railway sector in question.132

As a result, the Court did not examine whether Lithuania’s response constituted peaceful reprisals. It can be inferred from the Court’s reasoning that although it did not adopt expressly a distinction between primary and secondary rules, it did consider that ‘reprisals’ applied only if one of Lithuania’s international obligations had been breached, and implicitly that the exception of Article 7 was instead part of the primary rule, which determined the content of the obligation: Lithuania had no obligation to restore the railway, since its conduct fell within Article 7 of the Barcelona Statute.

In light of this analysis, the more persuasive approach is to draw a distinction between security exceptions that delineate the scope of primary obligations under (p. 83) the treaty, and circumstances precluding wrongfulness, which constitute secondary rules. Treaty parties can create special circumstances precluding wrongfulness. Evidence of this intention is necessary and treaty interpretation will address this issue.133 However, security exceptions, which suggest that some conduct is not prohibited by the treaty, do not have such effect, because they delineate the scope of obligations undertaken by parties under the treaty. Rather, language by which rules that excuse wrongfulness of a breach of treaty obligations is necessary in order to displace circumstances that preclude wrongfulness under customary international law. The following sections show that the security exceptions in GATT and the ECT do not exclude circumstances precluding wrongfulness, and identify provisions in bespoke pipeline agreements that could have such a result.

3.2.1  GATT Article XXI

GATT Article XX contains general exceptions, while GATT Article XXI contains security exceptions. This section focuses on security exceptions since they are more likely to overlap with the function of countermeasures under the law of international responsibility. However, the WTO Panels and the AB have examined only Article XX, as at 30 June 2014.134 The following analysis will take into account the findings of the Panels and the AB in relation to Article XX, since it is logical to assume that the interpretation concerning the relationship between circumstances precluding wrongfulness under custom and general exceptions applies also vis-à-vis security exceptions under GATT Article XXI.135

The Panels and the AB have generally adopted two steps for the assessment of the lawful use of GATT Article XX by WTO members: first the specific exceptions in the sub-sections of the article have to be met; second, if the first step is satisfied, the requirements of the chapeau have to be met.136 Freedom of transit under GATT Article V can even be restricted altogether, if such restriction is justified under the general exceptions (and by analogy under security exceptions).137 GATT Article XXI reads:

Nothing in this Agreement shall be construed […]

  1. (b to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

    1. (i)  relating to fissionable materials or the materials from which they are derived; […]

    2. (iii)  taken in time […] other emergency in international relations; […]

(p. 84) The question about whether GATT Article XXI is subject to the examination of the Panels and the AB has been discussed in detail elsewhere and is not analysed here.138 But, it should be pointed out first that the DSU does not expressly exclude security exceptions in any WTO covered agreement from the jurisdiction of the Panels and the AB; and second that while the wording ‘it considers necessary’ ensures that this is a self-judging clause,139 the Panels and the AB can review the good faith of the invoking state, the necessity of the measures, as well as the terms in sections (i), (ii), and (iii) of Article XXI(b).140

Coming to the focus of the analysis in this section, the wording ‘[n]‌othing in this Agreement shall be construed to prevent any contracting party from taking any action […] for the protection of its essential security interests taken in time of […] other emergency in international relations’ overlaps with a situation addressed by countermeasures under general international law.141 In US —Shrimps the AB found that ‘paragraphs (a) to (j) [of GATT Article XX] comprise measures that are recognized exceptions to substantive obligations established in the GATT 1994 […].’142 This language indicates that the exception delineates the scope of the primary obligations in GATT: WTO members are not obliged under GATT when the conditions of the exceptions are met. However, subsequent case law complicates things. In China—Publications and Audiovisual Entertainment the AB found that ‘WTO Members’ regulatory requirements may be WTO-consistent in two ways. First, they may simply not contravene any WTO obligation. Second, even if they contravene a WTO obligation, they may be justified under an applicable exception.’143 The language employed by the AB could be interpreted either (p. 85) as referring to the justification of a prima facie breach, which would indicate that the exception is part of the primary obligation; or it could be interpreted as an excuse of the breach of a WTO obligation, in which case the AB could be perceiving the exceptions as special secondary rules.

In Mexico—Soft Drinks a Panel and the AB dealt with an argument by Mexico that GATT Article XX(d) justified the countermeasures which were taken against the US for the latter’s prior breach of NAFTA. Mexico’s claim concerned the interpretation of GATT Article XX(d) by reference to secondary rules on countermeasures under customary international law. The AB rejected Mexico’s defence on the ground that the language ‘secure compliance with laws and regulations’ in GATT Article XX(d) does not incorporate countermeasures to secure compliance with non-WTO international obligations.144 It found that if Mexico’s argument was accepted it would allow unilateral determinations by WTO members that other WTO members have breached their obligations, which would evade the specific and detailed rules that apply when a WTO Member seeks to take ‘WTO countermeasures’ in response to another Member’s failure to comply with DSB recommendations pursuant to Article XXIII:2 of the GATT 1994 and Articles 22 and 23 of the DSU.145

This statement by the AB, which followed an argument put forward by the US, does not necessarily touch on the relationship between treaty exceptions in the WTO and circumstances precluding wrongfulness under the law of international responsibility. Mexico did not claim as a separate argument that countermeasures as secondary rules were available to it in order to excuse the wrongfulness of its conduct under GATT. As a result, the AB did not examine (and did not pronounce on) whether GATT Article XX (and by implication XXI) is a lex specialis secondary rule displacing countermeasures. But, even so, the reasoning of the AB that the DSU displaces countermeasures is insufficient to exclude countermeasures as circumstances precluding wrongfulness for prior breaches of non-WTO obligations because it does not touch on this function of countermeasures. Chapter 6 explains that the DSU displaces countermeasures as a means of implementing responsibility, meaning countermeasures taken in response to breaches of WTO obligations, not countermeasures taken in the form of suspending compliance with WTO obligations in response to prior breaches of obligations outside the WTO.

From the point of view of the WTO, it may be useful to retain the completeness of the WTO system by excluding countermeasures under customary international law, as circumstances precluding wrongfulness. To some extent, the AB’s reasoning in paragraph 77 of its Report in Mexico—Soft Drinks may imply its inclination to consider that countermeasures are excluded as circumstances precluding wrongfulness (for breaches of non-WTO obligations), since they are excluded as a means of implementation of international responsibility for breaches of WTO covered agreements.146

(p. 86) An example of such implicit inclination is found in paragraph 334 of the AB Report on China—Raw Materials:

Members can resort to Article XX of the GATT 1994 as an exception to justify measures that would otherwise be inconsistent with their GATT obligations. By contrast, Article XI:2 […] seems to indicate that the scope of the obligation not to impose quantitative restrictions itself is limited by Article XI:2(a). Accordingly, where the requirements of Article XI:2(a) are met, there would be no scope for the application of Article XX, because no obligation exists.147

This paragraph suggests that GATT Article XX excuses wrongfulness, because of the direct juxtaposition between the delimitation of the scope of obligations in Article XI and the exceptions. Further to this line of reasoning GATT Article XX (and GATT Article XXI) would displace circumstances precluding wrongfulness under international law. However, the AB did not deal with that relationship, and the reasoning may still be confined to the relationship between provisions that determine the conduct of states and their primary obligations.

The AB might (in the future) interpret GATT exceptions in the context of the DSU and in the light of the object and purpose of the DSU, which is the discouragement of unilateralism between WTO members,148 thereby excluding circumstances precluding wrongfulness as secondary rules under customary international law. However, there is no sufficient evidence that the WTO Agreement and its annexes derogate from circumstances precluding wrongfulness in general, and from countermeasures in particular. While detailed rules concerning unilateral ‘countermeasures’ were introduced in the DSU as a means of implementing responsibility for breaches of WTO obligations (besides for non-violation claims), there is no provision concerning circumstances precluding wrongfulness, despite the fact that the issue of the relationship between countermeasures under custom and the GATT had arisen in the pre-WTO era.149

More specifically, preparatory works of the 1994 GATT, as supplementary means of interpretation, are inconclusive as to the nature of GATT exceptions as primary rules or lex specialis secondary rules. The preparatory works of 1947 GATT Article V indicate the drafters’ consideration of the relationship between GATT Article V and the general and security exceptions. It was proposed that wording be inserted in GATT Article V, which would permit transit to be diverted from the most convenient route, if a situation such as famine called for the reservation of that route for other operations. The Rapporteur of the Preparatory Committee of the relevant provision under the Havana Charter suggested that (p. 87) ‘[i]‌t would seem that Article 32(b) and (e) [identical with GATT Articles XX(b) and XXI(b)(iii)] afford ample protection for cases in which transit must be suspended or diverted for humanitarian or security reasons.’150 While this may be helpful regarding the relationship between GATT Article V and GATT Article XXI, it is inconclusive as to the relationship between GATT Articles XX and XXI and circumstances precluding wrongfulness under customary international law.

Subsequent practice of 1947 GATT Contracting Parties (as supplementary means of interpretation of 1994 GATT) is also inconclusive as to the relationship between countermeasures taken in the form of suspending compliance with the GATT for prior breaches outside the GATT. For instance, in 1982 the EEC, Australia and Canada adopted import restrictions against Argentina as a reaction to Argentina’s use of force on the Malvinas/Falkland Islands. As such, they could qualify as countermeasures taken by international subjects other than the injured state (UK).151 When Argentina complained, EEC, Australia, and Canada justified the measures (a) in the light of the situation addressed in UNSC Resolution 502/1982 and (b) on the basis of their ‘inherent rights’ of which GATT Article XXI was a reflection.152 The language ‘reflection of the inherent right’ may imply the understanding of these three GATT Contracting Parties that Article XXI was a special secondary rule corresponding to rules under customary international law. On the other hand, Canada and Norway claimed that the import restrictions were not inconsistent with GATT, which implies that there was no obligation under GATT (by virtue of GATT Article XXI) that GATT Contracting Parties do not restrict imports from Argentina.153

In 1974, Germany imposed restrictions against Iceland, as a reaction to the latter’s violation of the ICJ Fisheries Jurisdiction judgment, invoking countermeasures under customary international law and without referring to GATT Article XXI.154 Iceland did not object to the availability of countermeasures. Rather, it objected to Germany’s contention that GATT was not applicable in that situation and that Germany’s measures had not breached the GATT.155 This practice in the application of the treaty indicates that 1947 GATT Contracting Parties did not agree that security exceptions formed lex specialis superseding circumstances precluding wrongfulness under customary international law, including countermeasures.

There is no sufficient evidence that the WTO Agreement and the covered agreements exclude circumstances precluding wrongfulness under customary international (p. 88) law, including countermeasures in the form of suspending compliance with WTO obligations for prior breaches of non-WTO obligations, although the WTO Panels and the AB may be inclined to interpret GATT exceptions as secondary rules that displace countermeasures. This issue is further discussed in chapters 6 and 7.

3.2.2  ECT Article 24

Unlike GATT, the ECT contains a single provision on exceptions, which includes environmental and security exceptions (ECT Article 24). There is no case law concerning the relationship between Article 24 and other provisions of the ECT, especially those concerning transit (ECT Article 7). As at 30 June 2014, none of the arbitral awards on investor-state disputes that are publicly available, has touched on the nature of ECT Article 24 and its relationship with other provisions of the ECT or with general international law.156 The following paragraphs examine whether ECT Article 24 displaces circumstances precluding wrongfulness under the law of international responsibility. The analysis focuses on security-related exceptions (ECT Article 24(3)), because they are more likely to overlap with the function of countermeasures under the law of international responsibility.

ECT Article 24 is modelled on (but is different from) GATT Article XXI. It reads:

The provisions of this Treaty other than those referred to in paragraph (1) shall not be construed to prevent any Contracting party from taking any measure which it considers necessary:

  1. (a)  for the protection of its essential security interests […]; or […]

  2. (c)  for the maintenance of public order.

    Such measure shall not constitute a disguised restriction on Transit. [Emphasis added]

The only way effectively to ensure that measures taken under the exceptions are not a disguised restriction to transit is by submitting them to judicial determination.157 The language in the provision suggests that the exceptions in ECT Article 24(3) are justiciable.158 The ordinary meaning of the terms of the provision (‘[t]‌he provisions of this Treaty […] shall not be construed to prevent any Contracting Party from taking any measure’) indicates that the exceptions delineate the scope of the primary obligation: ECT Contracting Parties are not obliged to comply with ECT obligations when the conditions of ECT Article 24(3) are met.

(p. 89) Moreover, ECT Article 24(1), which constitutes the context of ECT Article 24(3), expressly exempts ECT Article 29 from ECT Article 24. ECT Article 29 is subject to the exceptions of GATT Articles XX and XXI, not those of ECT Article 24.159 The ordinary meaning of the provision’s terms suggests that the provision is intended to delineate the scope of primary obligations under the ECT.

Measures taken under the exceptions are lawful, because there is no ECT obligation on Contracting Parties when these are applicable. Subsequent practice of ECT Contracting Parties in the application of the ECT shows that ECT Article 24(3) has not been used to preclude the wrongfulness of breaches of transit obligations. The following sub-sections examine subsequent practice by some ECT Contracting Parties (including those provisionally bound by the ECT) in the ECT’s application.

3.2.2.1  The 2002 Croatia-Slovenia oil transit dispute

In 2002, when Croatia (ECT Contracting Party) banned and later restricted oil transit by road through its territory it invoked the exceptions of ECT Article 24(2) (environmental grounds). When the issue was presented by Slovenia (ECT Contracting Party) at the Charter Conference meeting, Croatia did not elaborate on whether the measure fell within the exceptions, and there was no reaction by other ECT Contracting Parties in the Conference.160 On the basis of the information available, neither Croatia or Slovenia, nor any other ECT Contracting Party, took a position, which would be of value in determining how they perceived the relationship between ECT Article 24 and circumstances precluding wrongfulness under the law of international responsibility. Slovenia did not suspend the performance of any ECT obligations, nor did it notify Croatia that it would take countermeasures in this form (or as a separate matter that it would suspend partially the operation of the ECT between itself and Croatia, as a response to a material breach under the law of treaties).

3.2.2.2  Interruption of gas transit to Armenia during the 2008 Georgia-Russia armed conflict

In 2008, during the armed conflict with Russia, Georgia (ECT Contracting Party) reduced the transit of gas coming from Russia (provisionally bound by the ECT) and destined for Armenia (ECT Contracting Party).161 Georgia did not formally invoke ECT Article 24(3), or a circumstance precluding wrongfulness. Armenia did not complain formally to Georgia.162 This may be because it considered that Georgia’s conduct fell within the exceptions of ECT Article 24(3).

(p. 90) 3.2.2.3  The 2008 interruption of gas transportation to South Ossetia

In 2008, after the establishment of actual control by Russian forces over the Georgian territory of South Ossetia, gas supply to South Ossetia via the pipeline carrying gas from Russia (provisionally bound by the ECT) to Georgia (ECT Contracting Party and WTO member) was interrupted in Georgian territory. Chapter 1, section 5.1 showed that transportation to South Ossetia did not constitute transit under ECT Article 7 nor arguably under GATT Article V (by incorporation in ECT Article 29). Hence, assuming that Georgia interrupted gas flows to the occupied territory of South Ossetia, it did not violate its transit obligations under the ECT. However, Georgia’s conduct could arguably qualify as a quantitative import restriction on gas coming from Russia which was prohibited under GATT Article XI:1 (incorporated in ECT Article 29). Although Georgia’s measure fell within the exception of GATT Article XXI(b)(iii) (by incorporation in ECT Article 29), Georgia did not invoke this provision, nor did it take a position regarding the relationship between ECT exceptions and circumstances that preclude wrongfulness under customary international law.

3.2.2.4  The 2009 Ukraine-Russia gas transit dispute

On 1 January 2009, Gazprom restricted gas exports to Ukraine (ECT Contracting Party), but continued to export gas to Europe through Ukraine.163 Russia was provisionally bound by the ECT at the time. Even assuming arguendo that Gazprom constitutes a Russian ‘state enterprise’ within the meaning of GATT Article XVII(1)(a),164 or that Gazprom’s conduct could have been attributed to Russia,165 the conduct did not violate ECT Article 29(1) and 29(2)(a), which incorporates GATT Articles XI:1 and XVI by reference, because exports were suspended owing to commercial/economic reasons: the non-performance of a commercial contract by Naftogaz. On 3 January 2009, Gazprom alleged that Naftogaz stole gas that was exported to European states in transit through its territory.166 Naftogaz indicated a discrepancy of some gas volumes per day, which were necessary for the operation of its pipeline, in accordance with a bilateral intergovernmental agreement.167 It follows that assuming arguendo Ukraine was controlling Naftogaz’s conduct or that, even if it did not (p. 91) control its conduct, it had not employed the requisite due diligence in facilitating and securing established energy flows (ECT Article 7(1) and (5)), rather than attempting to show that its conduct fell within the exceptions of ECT Article 24(3), or to excuse the wrongfulness of its conduct by reference to international responsibility, Ukraine would have been claiming that its conduct was a reasonable restriction consistent with ECT Article 7(1), or a reasonable regulation, or a necessary restriction consistent with GATT Article V(3)–(4) (under the WTO Agreement, and as a separate matter by incorporation in ECT Article 29).

In response, Gazprom, in agreement with the Russian President, reduced gas exports to other ECT Contracting Parties (and other states) through Ukraine in breach of its obligation not to quantitatively restrict exports (ECT Article 29 in combination with GATT Article XI:1) owed to other ECT Contracting Parties.168 Russia did not claim that these measures fell within the exceptions of GATT Articles XX and XXI (incorporated by reference in ECT Article 24(1)), probably because they would not. Nor did it attempt to invoke a circumstance precluding wrongfulness under custom.169 No ECT Contracting Party formally invoked Russia’s responsibility, but there is no indication that they did not do so because the wrongfulness of Russia’s conduct would be precluded under custom, for instance under force majeure (ASR Article 23).

On 7 January 2009, Gazprom completely restricted exports to importing states in Europe, some of which were ECT Contracting Parties, claiming that Ukraine had closed down the pipeline system, in breach of its obligations under ECT Article 7.170 No reference was made by Russia to force majeure. Naftogaz argued that it closed down the transit system for technical reasons, because (p. 92) Gazprom had stopped deliveries.171 This appears to suggest a reasonable restriction to transit (ECT Article 7(1)). On 10 January 2009, Russia, Ukraine, and the European Commission signed the Agreement on Monitoring of the Natural Gas through Ukraine to address the difficulty of determining the facts.172 Pursuant to the agreement, international monitoring staff, whose competence was strictly fact-finding, were dispatched to metering stations at the Russia-Ukraine border in Ukraine and Russia.173 On 12 January 2009, Gazprom announced that it would start exporting gas through Ukraine.174 However, Naftogaz had reconfigured the pipeline network to transport gas from its storage facilities in west Ukraine to its domestic consumers in east Ukraine: the reverse flow barred gas transit from Russia to Europe. From 13 to 17 January 2009, Gazprom allegedly attempted to export, but Ukraine blocked transit.175

Even assuming that Ukraine did not act diligently (ECT Article 7(1)) or the restriction was not necessary (GATT Article V incorporated in ECT Article 29), the fact that it prioritized the supply of gas to its domestic population, may have fallen within the ambit of ECT Article 24(3)(c) (‘maintenance of public order’) or GATT Article XXI(b) respectively. However, Ukraine did not invoke the ECT exceptions, nor did it invoke circumstances precluding wrongfulness, such as state of necessity or distress,176 which could have given some indication about Ukraine’s understanding concerning the interpretation of the ECT and its relationship to circumstances precluding wrongfulness under custom, including countermeasures.177 Nor did any other ECT Contracting Parties that (p. 93) were affected by the interruption of gas make any statement that could denote their understanding about that relationship.178

3.2.2.5  The 2010 Belarus-Russia Gas Transit Dispute

Between January and April 2010, Beltransgaz (Belarusian company) refused to pay an increased price for gas sold by Gazprom.179 On 15 June 2010, Russia (which was no longer provisionally bound by the ECT and not as yet a WTO member)180 threatened to respond, if Belarus (provisionally bound by the ECT) did not pay off its debt to Gazprom.181 On 18 June 2010, Belarus responded that the gas debt is equal to the transit debt, and the gas debt could be offset.182 Gazprom and Beltransgaz failed to reach agreement on the price of gas, and Belarusian officials met with Russian officials to discuss the cost of gas imports to Belarus and Gazprom’s debt for transit to Europe.183

On 21 June 2010, the Russian President ordered Gazprom to cut gas exports to Belarus (ASR Article 8).184 This conduct did not violate the ECT, since the ECT was no longer provisionally binding on Russia.185 On 22 June 2010, the Belarusian President informed the Russian Foreign Minister that he had ordered the interruption of gas transit to Europe via Belarus, ‘until Gazprom pays the debt for transit’ (ASR Article 8).186 On 23 June 2010, gas transit across Belarus was reduced in proportion to the reduction of Belarus’ imports from Russia. A number of ECT Contracting Parties, to whom Belarus owed transit obligations (ECT Article 7; GATT Article V by incorporation in Article 29), were affected: Lithuania, which depended entirely on gas deliveries from Russia via Belarus, experienced a reduction by 30 per cent to 40 per cent, as well as Poland and Germany (although less significantly).187 Since Russia was not provisionally applying the ECT, it did not have a right to transit, nor could it resort to dispute settlement under the ECT. Belarus (p. 94) did not invoke ECT Article 24(3) (or GATT Article XXI by incorporation in ECT Article 29), or any circumstance precluding wrongfulness under customary international law vis-à-vis ECT Contracting Parties. ECT Article 7(1) permits Belarus to impose reasonable restrictions to transit, and GATT Article V permits necessary restrictions (incorporated by reference in ECT Article 29). The restriction arguably was reasonable and necessary, and consistent with ECT Article 7(1) (and GATT Article V), given that there had been no payment for services of transportation. Perhaps this is why no ECT Contracting Party invoked Belarus’ responsibility.188

The foregoing analysis shows that subsequent practice of ECT Contracting Parties in the application of the ECT is inconclusive as to the relationship between ECT Article 24(3) and circumstances precluding wrongfulness under customary international law.189 Moreover, preparatory works of the ECT, as a supplementary means of interpretation (VCLT Article 32), confirm the intention of some delegations that ECT exceptions should be limited to ‘an absolute minimum’.190 While the preparatory works provide evidence that ECT Article 24(3) was intended to be restrictive and exhaustive, there is no evidence that such exclusiveness was intended to overlap with and supersede circumstances precluding wrongfulness under the law of international responsibility as lex specialis.

ECT Article 24(3) and GATT Article XXI as incorporated in ECT Article 29 are not special secondary rules. If a transit ECT Contracting Party undertakes conduct within the scope of ECT Article 24(3) (or GATT Article XXI), it has no obligation under ECT Article 7 (or ECT Article 29, respectively).191 If its inconsistent conduct does not fall within the scope of ECT Article 24(3), the wrongfulness of that conduct may be precluded under the law of international responsibility, including as a countermeasure.192

3.2.3  Bespoke pipeline treaties

The incorporation of treaty exceptions in bespoke pipeline treaties is the exception rather than the rule. Of all the bespoke pipeline treaties examined in this study (p. 95) only the WAGP and TAP Treaties, and the Nabucco and BTC Agreements include exceptions in relation to the obligation not to interrupt transportation, and these are not in separate provisions on exceptions. The South-Stream Agreements, the China-Central Asia Pipeline Agreement, the Burgas-Alexandroupolis and ITGI Agreements include neither separate provisions on exceptions nor provisions followed by specific exceptions. This section discusses as examples only the WAGP Treaty and the Nabucco Agreement, and chapters 7 and 8 examine whether provisions in other bespoke pipeline agreements exclude countermeasures as circumstances precluding wrongfulness. The following section also examines the 2008 Model IGA drafted under the auspices of the Energy Charter Secretariat,193 because it includes a provision relevant to circumstances precluding wrongfulness. It is analysed here to contrast it to the language in existing treaties, and to show the implications of inserting the Model clauses in future bespoke pipeline treaties.

3.2.3.1  WAGP Treaty

Article VIII.1 of the WAGP Treaty obliges treaty parties ‘not [to] interrupt or reduce, permit any entity subject to its jurisdiction or control to interrupt or reduce, or require any entity subject to its jurisdiction or control to interrupt or reduce, the existing flow of Natural Gas […]’. Section 2 of the same provision states that each party ‘reserves the right […] to restrict by lawful regulation the transit […] across its territory in the event of a national emergency declared in accordance with its Constitution’. The language ‘reserves the right’ suggests that the treaty parties have no obligation not to interrupt transit when the conditions of section 2 are met. It thus delineates the scope of the primary rule in Article VIII, and does not overlap with circumstances precluding wrongfulness under customary international law.194

3.2.3.2  Nabucco Agreement

Article 7.2 of the Nabucco Agreement establishes a primary obligation not to interrupt transportation of gas via the Nabucco pipeline. Article 7.3 obliges parties not to interrupt the Project Activities, including transportation, ‘unless justified in advance to the other States Parties with reference to a legitimate purpose and agreed with them’. Article 7.4 provides that ‘[n]‌otwithstanding Article 7.3, a State Party may interrupt the Project Activities […] only to the extent and for the length of time necessary to remove a Hazard […].’195 The language ‘unless justified’ could suggest that what follows is an excuse to what would otherwise constitute a breach of the obligation not to interrupt gas transportation. The object and purpose of the treaty is the ‘collective energy security’ of the treaty parties (Article 1.2) (p. 96) and ‘the creation of a corridor for the transportation of natural gas amongst [treaty parties] for the secure and uninterrupted transportation of gas’ and ‘for the benefit of the EU, Turkey and every citizen thereof’ (Preamble). In the light of this object and purpose, the categorical language in Article 7.3 may be understood as envisaging a special circumstance precluding wrongfulness, which incorporates consent (ASR Article 20). If this is so, the question arises as to whether the express reference to consent excludes all other circumstances precluding wrongfulness, which can apply unilaterally, such as countermeasures.

On the other hand, the same language could be interpreted as delineating the scope of the primary obligation not to interrupt transportation via the Nabucco pipeline. The problem about consent is a reflection of a wider problem surrounding consent in international law.196 Consent can be perceived as part of the primary rule, and this point was raised in the drafting of the ASR.197 However, the ILC decided to retain consent among secondary rules on circumstances precluding wrongfulness,198 as initially proposed by Special Rapporteur Ago.199

Given that the wording ‘may interrupt’ in Article 7.4, which is the immediate context of paragraph 3, suggests that the provision determines the existence and scope of the obligation under Article 7.2, it can be argued that paragraphs 3 and 4 are primary obligations, and do not overlap with or exclude circumstances precluding wrongfulness, including countermeasures. In other words, assuming that a Nabucco Agreement party interrupts gas transportation without the prior agreement of all other treaty parties, or not in accordance with Article 7.4, it will violate its obligation under Article 7 and the question will be whether the wrongfulness of that conduct can be precluded by reference to circumstances precluding wrongfulness under customary international law. The current provisions do not allow the interpretation that circumstances precluding wrongfulness under custom have been excluded by the terms of Article 7 of the Nabucco Agreement. This issue is further discussed in chapter 8.

3.2.3.3  Model Intergovernmental Agreement

The 2008 Model IGA requires that states do not interrupt project activities in their territory. Model Article 9 entitled ‘Non-Interruption of Project Activities’, includes some exceptions: paragraph 1 (‘except as specifically provided in the applicable Host Governmental Agreement or specifically authorised by a competent dispute settlement authority’) and paragraph 3 (‘[n]‌otwithstanding paragraph 9.1, where there are reasonable grounds to believe that the continuation of the Project Activities […] creates or would create an unreasonable danger or hazard to public health and safety, property or the environment, the State may interrupt the (p. 97) Project Activities in its Territory, but only to the extent and for the length of time necessary to remove such danger or hazard’).200 The language used in these paragraphs (besides being similar to that used in the Nabucco Agreement) does not suggest that they preclude the wrongfulness of treaty parties’ conduct in breach of the treaty. Rather it delineates the scope of the primary obligation not to interrupt project activities, including transportation.

On the other hand, the Model IGA includes a provision on ‘Force Majeure’ (Model Article 17), which in paragraph 1 provides:

[r]‌esponsibility for non-performance […] on the part of any State with respect to any obligations […] under this Agreement […] shall be suspended to the extent that such non-performance is caused or occasioned by Force Majeure, as defined in this Agreement. [Emphasis added]

Despite the imprecise language ‘responsibility for non-performance shall be suspended’,201 the provision deals with international responsibility, rather than with the undertaking or not of primary obligations in the Model IGA. It relates to the preclusion of responsibility, as circumstances precluding wrongfulness under customary international law do.202

However, Article 17 of the Model IGA does not correspond to the content of force majeure under the law of international responsibility (ASR Article 23). Rather the definition of what constitutes ‘Force Majeure’ under Model Article 17 is wider. More specifically, paragraph 2 provides that:

Force Majeure with respect to [any State] shall be limited to:

  1. (a)  natural disasters (earthquakes, landslides, cyclones, floods, fires, lightning, tidal waves, volcanic eruptions and other similar natural events or occurrences);

  2. (b)  wars between sovereign states where the relevant State has not initiated the war under the principles of international law, acts of terrorism, rebellion or insurrection and

  3. (c)  international embargoes against states other than the relevant State; […] [Emphasis added]

This definition is exhaustive (‘shall be limited’). It incorporates (at least partially) a number of circumstances precluding wrongfulness under custom: force majeure (ASR Article 23; Model Article 17.2(a)–(b)), self-defence (ASR Article 21; Model Article 17.2(b), and countermeasures (ASR Article 22; Model Article 17.2(c)). In fact, the language ‘international embargoes against states other than the relevant State’ (Model Article 17.2(c)) is wider than the concept of countermeasures under the law of international responsibility, and as it stands it also includes sanctions of international organizations against their member states, such as those adopted by the UN Security Council.203

(p. 98) The question then arises as to whether there is an intention to deviate from the rules of customary international law and to exclude circumstances precluding wrongfulness altogether: (a) those that are specifically referred to in the treaty, because they are replaced by lex specialis (even though they resemble the general rules), and (b) those that are not mentioned in the treaty on the basis of the expressio unius est exclusio alterius. It is submitted that if this Model provision is included in a treaty it could allow the interpretation that all other circumstances precluding wrongfulness under customary international law that are not mentioned in the provision are excluded, such as consent, the full content of self-defence, distress, state of necessity, while special circumstances precluding wrongfulness that go beyond those available under custom will be added: for instance, sanctions of international organizations (‘international embargoes’). It may thus be advisable that, when drafting bespoke pipeline treaties, states contemplate the implications that the insertion of such a provision would have for the availability of circumstances precluding wrongfulness under the law of international responsibility.

4.  Interim Conclusion

This chapter has demonstrated the primacy of the interpretation of primary rules for ascertaining the scope and content of obligations regarding transit of energy. It also illustrated the diversity of primary rules in this area of international law. GATT Article V creates an obligation of result (in generic terms) and requires WTO members to abstain from impeding transit and from imposing unreasonable and discriminatory conditions on transit even when private entities operate transit pipelines. However, WTO members may choose the means they employ to achieve that result. ECT Article 7 creates a matrix of obligations of conduct as well as of result. The obligation to take the necessary measures to facilitate transit is an obligation of conduct, which may be breached when ECT Contracting Parties do not employ a degree of due diligence in taking the necessary measures to facilitate transit, even in relation to private operators of transit pipelines, as well as when organs of ECT Contracting Parties or entities, whose conduct is attributed to the state, interrupt transit. Bespoke pipeline treaties establish different obligations concerning transit and transportation through each pipeline: some establish obligations of conduct and others obligations of result. All these obligations would be breached if states interrupt transit or transportation via the pipeline in question.

No implied customary security exceptions exist under the law of treaties generally or in transit treaties specifically. Moreover, when security exceptions are included in treaties on transit, these do not ipso facto displace circumstances precluding wrongfulness under customary international law, including countermeasures. When the ordinary meaning of the exceptions indicates that the conduct of treaty parties that falls within the exceptions does not constitute a breach of the treaty obligations, the provisions delineate the scope of the obligation incumbent on treaty parties; they are part of the primary obligations. As such, they do not (p. 99) overlap with circumstances precluding wrongfulness, which provide excuses to the wrongfulness of breaches of primary obligations.

The WTO Panels and the AB have not addressed the relationship between GATT Article XXI on security exceptions, and circumstances precluding wrongfulness under the law of international responsibility. Countermeasures in the form of suspending compliance with the GATT are not excluded by the exceptions in GATT Article XXI, because the latter does not deal with excuses to the wrongfulness of breaches of GATT. Countermeasures, as circumstances precluding wrongfulness, remain available, despite the fact that Panels and the AB may be inclined to interpret GATT exceptions as special secondary rules.204 Additionally, the language in ECT Article 24(3) that contains security exceptions delineates the primary obligations of ECT Contracting Parties, and does not exclude countermeasures as circumstances precluding wrongfulness. The same is true for GATT Article XXI as incorporated in ECT Article 29.

The majority of the bespoke pipelines treaties examined in this study do not contain exception provisions. The WAGP and TAP Treaties, and the Nabucco Agreement contain specific exceptions within particular substantive provisions.205 These deal with the scope of the primary obligations undertaken by treaty parties. In contrast, the Model IGA prepared under the auspices of the ECS contains a provision concerning the preclusion of responsibility of treaty parties for not performing their obligations under the agreement. This provision, which is entitled ‘force majeure’ overlaps with the subject matter of circumstances precluding wrongfulness under the law of international responsibility, but is wider than force majeure under customary international law. If inserted in a bespoke pipeline treaty it would replace circumstances precluding wrongfulness under customary international law by special rules, which resemble but are different from those under customary international law, and would displace a number of circumstances precluding wrongfulness under custom.

Treaties establishing obligations regarding transit of energy via pipelines are important ‘remedies’ against the choice of transit states to use their geographical position as a weapon against the economic development of other states.206 When breaches of obligations are attributed to the transit state and their wrongfulness is not precluded, the transit state’s international responsibility is engaged. The following chapter discusses who may invoke the responsibility of the transit state (or international organization). The answer to this question relies upon the nature of the transit obligations under the treaty breached.(p. 100)

Footnotes:

1  As explained in chapter 1, section 2.1, the treaties discussed in this study have been chosen because they contain obligations regarding exports/imports incumbent on the transit state and/or the user states, or in the case of tailor-made pipeline treaties, obligations regarding transportation (including implicitly transit, exports, and imports) through the pipeline. This study focuses on obligations regarding transit.

2  For attribution, see chapter 1, section 3.1.1.

3  I.J. Wani, An Evaluation of the Convention on the Law of the Sea from the Perspective of Landlocked States, 22 VJIL (1982) 642. Contra: S.C. Vasciannie, Land-Locked and Geographically Disadvantaged States in the International Law of the Sea (1990) 190.

4  For literature on the freedom of the high seas: D.R. Rothwell and T. Stephens, The International Law of the Sea (2010) 145–158; R.R. Churchill and A.V. Lowe, The Law of the Sea (3rd ed., 1999) 203–208; R.J. Dupuy and D. Vignes, (eds.), A Handbook on the New Law of the Sea, Vol. II (1991) 383–400.

5  For instance, in relation to human rights: P. Alston and R. Goodman, International Human Rights (2012) 181–182.

6  H. Kelsen, Pure Theory of Law (translated from the 2nd ed. by M. Knight) (1967) 128; C.P. Economides, in J. Crawford, A. Pellet and S. Olleson (eds.), The Law of International Responsibility (2010) 374.

7  The distinction here is separate from the distinction between binding (‘hard law’) or non-binding (‘soft law’) instruments: J. Klabbers, The Redundancy of Soft Law, 65 NordicJIL (1996) 167–182.

8  A. Fatouros, An International Legal Framework for Energy, 332 RCADI (2007) 434. See also examples listed by P. Weil, Towards Relative Normativity in International Law?, 77 AJIL (1983) 414; R.R. Baxter, International Law in ‘Her Infinite Variety’ 29 ICLQ (1980) 554. However, such terminology is used (unpersuasively) by some authors to draw conclusions about the obligation being ‘loose’: M. Roggenkamp, Transit of Network-bound Energy: A New Phenomenon? Transit Examined from the Barcelona Transit Convention to the Energy Charter Treaty, 19 WComp (1995–1996) 142.

9  Weil (n.8) 414.

10  Gabčν‎kovo-Nagymaros, [135]–[136]; Djibouti v. France, [104]; Application of the Genocide Convention (Merits), [430]; Pulp Mills, [185]–[187].

11  Special Rapporteur Crawford, Second Report on State Responsibility, A/CN.4/498, 17 March 1999, [89]–[90]. The initial classification by Special Rapporteur Ago was diametrically different from the civil law distinction. Special Rapporteur Ago, Sixth Report on State Responsibility, A/CN.4/302 and Add.1–3, ILCYB 1977-II, 4–20. It was approached with scepticism: P.-M. Dupuy, Reviewing the Difficulties of Codification: On Ago’s Classification of Obligations of Means and Obligations of Result in Relation to State Responsibility, 10 EJIL (1999) 371–385.

12  ILC ASR Commentary, 56[11]. Economides argues that the silence of the ILC Commentary cannot mean that the ILC renounced the distinction between obligations of conduct and of result. Rather, the removal of the earlier distinction proposed by Ago could be interpreted as an implicit endorsement of the traditional distinction between obligations of conduct and of result. Economides (n.6) 377.

13  Application of the Genocide Convention (Merits), [430]. J. Crawford, State Responsibility (2013) 231.

14  International Seabed Mining, [110].

15  Iran v. United States, Award N.590-A15(IV)/A24-FT, 28 December 1998, [95]. ILC ASR Commentary, 57[12]; Special Rapporteur Crawford, Second Report on State Responsibility, A/CN.4/498, 17 March 1999, [60]–[68].

16  Economides (n.6) 377. A contrario interpretation of Application of the Genocide Convention (Merits), [430].

17  Ibid. [430]; International Seabed Mining, [110].

18  Djibouti v. France, [104].

19  J. Combacau, in D. Bardonnet, Mélanges offerts à Paul Reuter (1981) 196; P.-M. Dupuy, Le Fait Générateur de la Responsabilité Internationale des États, 188 RCADI (1984) 47.

20  Application of the Genocide Convention (Merits), [430].

21  International Seabed Mining, [110].

22  Application of the Genocide Convention (Merits), [430]–[431]; Economides (n.6) 377; Crawford (n.13) 231–232.

23  ICJ: Pulp Mills, [187]. ITLOS: International Seabed Mining, [110]. For due diligence in customary international law: Corfu Channel Case, 22–23. In relation to protection of aliens: Hostages in Iran case, 31; DRC v. Uganda, [179]. In relation to the security of foreign states: The ‘Alabama’ case; Military and Paramilitary Activities, Merits, [157]. In relation to cross-border environmental harm: (implicitly in) Trail smelter case; Legality of the Threat or Use of Nuclear Weapons, [29]; Pulp Mills, [101]. S. Heathcote, in K. Bannelier and T. Christakis (eds.), The ICJ and the Evolution of International Law (2012) 295–314; R. Pisillo-Mazzeschi, The Due Diligence Rule and the Nature of International Responsibility of States, 35 GYIL (1992) 9–51.

24  In relation to the obligation to ‘preserve the environment and prevent pollution’ under the bilateral agreement between Argentina and Uruguay concerning the river Uruguay: Pulp Mills, [195]–[197]. Concerning obligations of conduct in general: International Seabed Mining, [112].

25  Crawford (n.13) 227.

26  Ibid.

27  Application of the Genocide Convention (Merits), [166].

28  There may be obligations that belong to a different category, such as obligations of performance. In Gabčvkovo-Nagymaros the ICJ referred to ‘obligations of performance’ and classified as such obligations of construction of the systems of locks on the Danube pursuant to the 1977 bilateral agreement between the parties to the dispute: Gabčν‎kovo-Nagymaros, [135]–[136]. However, the Court did not define ‘obligations of performance’, nor did it explain the legal consequences of such classification for the purposes of state responsibility. For this reason, this study focuses on the distinction between obligations of conduct and of result. Kelsen’s ‘obligation of performance’ means an obligation to act, as opposed to an ‘obligation to tolerate’, which requires one to refrain from preventing another or impairing another in her/his behaviour: Kelsen (n.6), 126. But, it is unclear that this is the definition that the ICJ had in mind in Gabčν‎kovo-Nagymaros.

29  M. Roggenkamp, in T. Wälde (ed.), The Energy Charter Treaty (1996) 499–519; Roggenkamp (n.8); D. Azaria, Energy Transit under the Energy Charter Treaty and the General Agreement on Tariffs and Trade, 27 JENRL (2009) 559–698; L. Ehring and Y. Selivanova, in Y. Selivanova (ed.), Regulation of Energy in International Trade Law (2011) 49–104.

30  Ehring and Selivanova (n.29) 70.

31  On the other hand, GATT Article V departed from and does not incorporate the wording ‘routes in use’ found in Barcelona Statute Article 2, which could suggest that GATT Article V implicitly covers construction of new transit routes. Although GATT Article V cannot be interpreted as obliging WTO members to construct transit routes, the question arises as to whether they are obliged to permit such construction. The importance of this question is exemplified by the Canada-US dispute concerning the construction of the Keystone XL pipeline for the purpose of transit of oil from Canada through the US: Report Opens Way to Approval for Keystone Pipeline, New York Times, 31 January 2014. This issue is not further discussed here, but it could be argued that GATT Article V may entail the obligation to negotiate in good faith the construction of new pipelines when the provision is read in the context of Article 55 of the UN Charter, which requires UN members to cooperate in order to resolve economic problems, or in the context of the principle of abuse of rights (as a general principle of law within the meaning of Article 38(1)(c) of the ICJ Statute and binding on all WTO members) (VCLT Article 31(3)(c)). H. Lauterpacht, The Function of Law in the International Community, Reprinted (2012) 303–306. However, an obligation to negotiate is not an obligation to reach an agreement: Railway Traffic, 116; FYROM v. Greece, [132].

32  Panel Report, Colombia—Ports of Entry, [7.397], [7.402].

33  Panama’s argument in Colombia–Ports of Entry, which implicitly was taken on board by the Panel, [7.399].

34  Ibid. [7.400]–[7.401].

35  Azaria (n.29) 571.

36  The accession of Middle East transit states to the WTO would improve the temperamental fluctuation of transit pipeline tariffs witnessed in the early twentieth century outside the 1947 GATT: Trans-Arabian Sets Accord on Royalties and Arrears, New York Times, 13 March 1962; Mideast Countries Demand More and More Revenue From Oil Transport, New York Times, 7 January 1958; Lebanon Lays a Legal Basis To Seize Foreign Pipelines, Lebanon Drafts Seizure Action, New York Times, 21 August 1956.

37  For the Barcelona Convention taken into account as preparatory works of GATT Article V: Panel Report, Colombia—Ports of Entry, [7.394], [7.469], [7.470]; J.H. Jackson, World Trade and the Law of GATT (1969) 506–507; Report on the Draft Convention on Freedom of Transit, presented to the General Communications and Transit Conference by the Commission of Enquiry, Annex to Section IV, in Barcelona Conference: Verbatim Reports and Texts, 1921, 284; Vice-President, Seventh Meeting of the Conference, 14 March 1921, in Barcelona Conference: Verbatim Reports and Texts, 1921, 3.

38  Communication from the Former Yugoslav Republic of Macedonia, the Republic of Moldova, Rwanda, Switzerland, and Swaziland, WTO Negotiating Group on Trade Facilitation, TN/TF/W/133/Rev. 2, 10 October 2008; Communication from the Former Yugoslav Republic of Macedonia, the Republic of Moldova, Rwanda, Switzerland, and Swaziland, WTO Negotiating Group on Trade Facilitation, TN/TF/W/133/Rev.3, 26 June 2009.

39  Communication from Cuba, Georgia, Moldova, Paraguay, and Turkey, WTO Negotiating Group on Trade Facilitation, TN/TF/W/146/Rev.2, 29 June 2009.

40  Draft Consolidated Negotiating Text, Revision, Negotiating Group on Trade Facilitation, TN/TF/W/165/Rev.8, 21 April 2011, 23.

41  Ministerial Decision on the Agreement on Trade Facilitation, appended to the Bali Declaration, adopted 7 December 2013, WT/MIN(13)/DEC, 11 December 2013. For potential relevance of the Decision on Trade Facilitation to the interpretation of the WTO Agreement, see chapter 1, section 5.2, especially (n.176).

42  Panel Report, Colombia—Ports of Entry, [7.387], [7.397].

43  Ibid. [7.402].

44  See section 2.1 in this chapter.

45  GATT Panel Report, US—Superfund, [5.2.2]; Panel Report, US—Section 301, [7.41].

46  ILC ASR Commentary, 43[3]‌. See analysis in chapter 1, section 3.1.1.

47  But, even if the operation of transit pipelines constitutes the exercise of ‘governmental authority’, it has not been possible to find evidence that Naftogaz has been empowered by the state in this respect. See analysis in chapter 1, section 3.1.1.

48  For the nature of this provision, see analysis in chapter 1, section 3.1.1.

49  The amount of capital that the state must have in the company in order for the company to be a state trading enterprise is not spelt out in the GATT. See also chapter 1, section 3.1.1. Enterprises afforded special rights and privileges would be considered entities empowered to exercise elements of governmental authority under the rule set forth in ASR Article 5. However, the former would not.

50  S. Villalpando, Attribution of Conduct to the State: How the Rules of State Responsibility May be Applied within the WTO Dispute Settlement System, 5 JIEL (2002) 406.

51  Cf: M. Roggenkamp, Implications of GATT and EEC on Networkbound Energy Trade in Europe, 12 JENRL (1994) 66. On expressio unius est exclusio alterius: A.D. McNair, The Law of Treaties (1961) 399–410.

52  For the purposes of the rule reflected in ASR Article 5, it has not been possible to find evidence that Gazprom has been empowered by the state to exercise elements of governmental authority. <http://www.gazprom.com/investors/stock/>.

53  See analysis in chapter 1, section 3.1.1.

54  Ibid.

55  The ordinary meaning of the term ‘principle of freedom of transit’ is not restricted to the rule contained in GATT Article V. If the drafters intended to restrict the meaning of the term to GATT Article V, they would have done so expressly, as in numerous other instances in the ECT. Moreover, the preparatory works confirm this interpretation. Legal Sub-Group, 27 May 1993; European Energy Charter Conference Secretariat, 14.5.93/1396. Azaria (n.29) 591. Contra: C.S. Bamberger and T. Wälde, in M. Roggenkamp, C. Redgwell, I. Del Guayo, and A. Ronne (eds.), Energy Law in Europe (2nd ed., 2007) 173; P. Laffont and L. Simonet, La Charte de l’Energie et Le Transit des Matières Primières: Trop Loin? Trop Tot?, 51 AFDI (2005) 536.

56  Fatouros (n.8) 433. The obligation to take measures to facilitate transit is not new here. The Barcelona Convention (Barcelona Statute Article 2) and the NY Convention (Article 2) included obligations in relation to the facilitation of transit before the conclusion of the ECT. See chapter 2, sections 3.1 and 3.2. The drafters of the Barcelona Convention intended not only to guarantee transit but also to facilitate it. See, Czecho-Slovakia, Seventh Meeting of the Conference, General Discussion, 14 March 1921, in Barcelona Conference: Verbatim Reports and Texts, 1921, 9.

57  For customary nature of the rule set forth in VCLT Article 33(3) (implicitly): AB Report, US—Upland Cotton, [424]. See also chapter 1, section 2.2

58  See section 2.1 earlier in this chapter.

59  See analysis of obligations of conduct in section 2.1 earlier in this chapter. Also, Pulp Mills, [195]–[197]; International Seabed Mining, [112].

60  Application of the Genocide Convention (Merits), [382].

61  These provisions establish primary rules: they employ language that deals with the conduct of ECT Contracting Parties vis-à-vis such entities/enterprises, and there is no evidence that they exclude secondary rules of international responsibility concerning attribution. See also chapter 1, section 3.1.1.

62  While the term ‘entity’ is defined as ‘any enterprise, agency, or other organization or individual’ (ECT Article 22(5)), the term ‘state enterprise’ is not defined. The term includes state-owned companies, but the question remains about the degree of participation in the company’s capital that is required in order for the company to be characterized under the treaty as a ‘state enterprise’.

63  This obligation is wider than the situation captured by the secondary rule of attribution set forth in ASR Article 5, as there is no requirement for the enterprise to exercise governmental authority.

64  For the rule in ASR Article 8, see analysis in chapter 1, section 3.1.1.

65  This obligation coincides with the situation captured by ASR Article 5. The only possible divergence is the language ‘establishes and maintains an entity and entrusts [it]’ [emphasis added], which may be narrower to the situation under ASR Article 5, because arguably the provision requires that the entity is established and maintained by the ECT Contracting Party. However, under the law of international responsibility, the rule set forth in ASR Article 5 does not require that the entity is established by the state since it can be a private entity with no state involvement, but that the empowerment with some element of governmental authority has been made by the law of that state.

66  While this obligation overlaps with the situation under ASR Article 5 (in that the entity is authorized to exercise some governmental authority), it deals with a more specific situation: it prohibits encouragement or mandating by ECT Contracting Parties, leaving aside situations where the state omits to prohibit such conduct.

67  See analysis in chapter 1, section 3.1.1.

68  Ibid.

69  Oxford French-English, German-English, Italian-English, Russian-English, and Spanish-English Dictionaries.

70  For customary nature specifically of the rule set forth in VCLT Article 33(4): LaGrand, [99]–[101]; AB Report, Chile—Price Band, [271]. See also chapter 1, section 2.2.

71  See analysis in chapter 6, section 4.3.

72  For analysis of object and purpose of the ECT, see chapter 4, section 5.2.

73  The same Russian term ‘обеспечивают’ used in LOSC Article 139 has been interpreted as supporting the existence of a ‘due diligence’ obligation. International Seabed Mining, [114].

74  Mutatis mutandis in International Seabed Mining, [110]–[116]. In contrast, paragraph 6 of ECT Article 7 establishes obligations of result.

75  Hostages in Iran, [63]. Crawford (n.13), 228–229.

76  Emphasis added.

77  The term ‘access’ was used in earlier drafts, inter alia, in: Room Document 2, WG II, European Energy Conference, Conference Secretariat, 1 June 1992, Basic Agreement-Article 11, file 1; Article 8-Transport and Transit, Paragraphs 4 and 5, Room Document 6, WG II, 22–23 April 1993, 23 April 1993; Article 8-Transport and Transit (4), Room Document 21, Plenary Session 26–30 April 93, 28 April 1993.

78  Understanding with respect to the Treaty as a whole, in The Energy Charter Treaty and Related Documents, 2004, 25. The understandings with respect to the treaty were adopted by representatives when signing the Final Act of the ECT. They constitute agreements relating to the treaty, which were made between all the parties in connection with the conclusion of the treaty, and they are part of the treaty’s context (VCLT Article 31(2)(a)).

79  ECT Article 7(1) provides MFN treatment among instances of transit.

80  Plama v. Bulgaria, [170]. Case law in relation to the use of ‘or’ in other treaties as alternative: Indus Waters (Interim Measures), [132]; Dissenting Opinion of Judge Read, Anglo-Iranian Oil. Co. case, ICJ Reports 1952, p. 142, at 146. The use of the word ‘or’ in Article 22 of the Convention on the Elimination of All Forms of Racial Discrimination, 7 March 1966, 660 UNTS 195 (‘CERD’) as cumulative or alternative was part of the dispute in the CERD case, but the ICJ did not answer this question. CERD case, [119], [183].

81  European Energy Charter, Conference Secretariat, Informal Note from 5 October LGS Meeting, Brussels, 5 October 1994, LSG/Notes/Report (folder 3 on Article 7), 2[4]‌.

82  European Energy Charter, Conference Secretariat, 14 November 1994/775 (folder 3 on Article 7), 3.

83  European Energy Charter, Conference Secretariat, 13 December 1994/842 (folder 3 on Article 7).

84  The Conference agreed without objection to this proposal resolving the outstanding interpretative issues. The Energy Charter Treaty and Related Documents (2004) 157.

85  Given that no negotiating party objected to this statement at the adoption session (or subsequently), the statement constitutes either an agreement relevant to the treaty made by all parties in connection to the treaty (VCLT Article 31(2)(a)) or more convincingly an instrument which was made by a party in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty (VCLT Article 31(2)(b)). M.K. Yasseen, L’Interprétation des Traités d’après la Convention de Vienne sur le Droit des Traités, 151 RCADI (1976) 37–39.

86  Nabucco Agreement Article 10; BTC Agreement Article II(4)(iv); ITGI Agreement Article 2.10; Burgas-Alexandroupolis Agreement Article 8; China-Central Asia Pipeline Agreement Article 9; Russia-Greece South Stream Agreement Article 9.

87  WAGP Treaty Article II; Greece-Russia South Stream Agreement Article 9; BTC Agreement Article II(4)(vi).

88  Nabucco Agreement Article 7; WAGP Treaty Article V; BTC Agreement Article V; Burgas-Alexandroupolis Agreement Article 9; China-Central Asia Pipeline Agreement Article 11; Greece-Russia South Stream Agreement Article 10.

89  While the exporting state undertakes an obligation of conduct: ‘to examine the possibility of additional natural gas supplies via the transit pipeline for both transit purposes and taking into account the domestic needs of transit states’. Article 4, Greece-Russia South Stream Agreement.

90  See analysis in section 2.1 earlier in this chapter. The Model IGA (second edition) prepared under the auspices of the ECS reproduces mutatis mutandis ECT Article 7(1) ‘shall take the necessary measures to facilitate’, but also includes obligations of result (‘shall permit Transport’ (Model Article 7); ‘[shall not] interrupt […] or otherwise impede’ (Model Article 9.1)).

91  Nationality Decrees case, 24; Iron Rhine, [51], [56]; Military and Paramilitary Activities, Merits, [276]. N. Politis, Le Problème des Limitations de la Souveraineté et la Théorie de l’Abus des Droits dans les Rapports Internationaux, 6 RCADI (1925-I) 52.

92  This study focuses on security interests, because these relate to countermeasures. But, regulatory measures by the transit state could be taken for other purposes, such as the protection of the environment. In the context of international investment law, as a matter of custom, regulatory measures are ‘not unlawful merely if they harm investors and are not expected by them’, except if the state has undertaken obligations to refrain from such regulation. Methanex Corp v. United States, Jurisdiction and Merits, (NAFTA chapter 11 Arbitral Tribunal, 3 August 2005), [7]‌. S.R. Ratner, Regulatory Takings in Institutional Context: Beyond the Fear of Fragmented International Law 102 AJIL (2008) 481; K. Yannaca-Small, in K. Yannaca-Small (ed.), Arbitration Under International Investment Agreements (2010) 445–477.

93  This understanding was based on a distinction between non-performance (‘performance […] must be resumed so soon as the circumstances justifying non-performance have ceased to exist’) and the ‘circumstances causing or justifying termination or indefinite suspension of a treaty, in whole or in part’. Special Rapporteur Fitzmaurice, Fourth Report on the Law of Treaties, A/CN.4/120, ILCYB 1959-II, Commentary to Articles 10, 44 [1]‌–[2], and to Article 23(2)(b), 73[117].

94  Special Rapporteur Fitzmaurice, Fourth Report on the Law of Treaties, A/CN.4/120, ILCYB 1959-II, Commentary to Article 23(2)(b), 73[116].

95  Special Rapporteur Waldock, Second Report on the Law of Treaties, A/CN.4/144 and Add.1, ILCYB 1963-II, 64–68.

96  G. Christakis, in O. Corten and P. Klein (eds.), The Vienna Conventions on the Law of Treaties (2011) 1256–1257; K. Widdows, The Unilateral Denunciation of Treaties Containing No Denunciation Clause, 53 BYIL (1982) 84–114.

97  VCLT Article 57 concerning the suspension of the treaty’s operation stipulates that such suspension can take place ‘in conformity with the provisions of the treaty’.

98  Articles 5 and 7, Barcelona Statute; GATT Articles XX-XXI; ECT Article 24; EnComT Article 41; LOSC Article 125(3) mentions the land-locked states’ ‘legitimate interests’; NY Convention Articles 11–12.

99  E. Lauterpacht, Freedom of Transit in International Law, in The Grotius Society Transactions for the year 1958 & 1959, vol. 44, 346.

100  In support: G. Schwarzenberger, International Law and Order (1971) 148.

101  R.R. Baxter, Treaties and Custom, 129 RCADI (1970) 81.

102  Asylum case, 276–277; North Sea Continental Shelf, [74]; Military and Paramilitary Activities, Merits, [186]. On formation of custom: ILA Statement on Principles Applicable to the Formation of Custom; M. Mendelson, The Formation of Customary International Law, 272 RCADI (1998) 155–410; P. Haggenmacher, La Doctrine des Deux Eléments du Droit Coutumier dans la Pratique de la Cour Internationale, 90 RGDIP (1986) 5–125.

103  Evidence of acceptance of the rules set out in the treaties should be demonstrated outside the treaty framework to operate as opinio juris in this case: North Sea Continental Shelf, [76]. Similar reasoning concerning bilateral investment treaties and security exceptions: T. Christakis, L’État avant le droit?: l’exception de ‘sécurité nationale’ en droit international, 112 RGDIP (2008) 29–31. While case law acknowledges the possibility, there is a presumption against the formation of custom by succession of similar treaty provisions: North Sea Continental Shelf, [70]–[78], [81]. In 2007, the successive conclusion of bilateral investment treaties was not sufficient evidence for the ICJ that the customary rule on diplomatic protection has changed: Ahmadou Sadio Diallo, [90]. Some literature supports the view that the proliferation of BITs has created customary rules concerning the substantive protection of investors: A.F. Lowenfeld, International Economic Law (2nd ed., 2008) 586. Contra pointing to the lack of opinio juris: M. Sornarajah, The International Law on Foreign Investment (3rd ed., 2010) 233. Overview of arguments: P.T. Muchlinski, Multinational Enterprises and the Law (2007) 701–702.

104  Iron Rhine, [163].

105  Ibid. [160]. This is in line with PCIJ reasoning in Nationality Decrees case, 24. Politis (n.91) 52.

106  Iron Rhine, [163].

107  Ibid. [165]. This was found to stem from the ‘general principles of good faith and reasonableness’, ibid. [163]. Reasonableness is a subjective concept: R. Higgins, Problems & Process (1994) 219–221.

108  Iron Rhine, [221].

109  Costa Rica v. Nicaragua, [87]. This reasoning is similar to that in Iron Rhine, [160].

110  The ICJ recognized that the protection of the environment constituted a legitimate purpose pursued by Nicaragua’s regulatory measures over Costa Rica’s right of navigation. Costa Rica v. Nicaragua, [88]–[89]. See also, R Higgins, Time and the Law: International Perspectives on an Old Problem, 46 ICLQ (1997) 501–520.

111  Both the arbitral tribunal and the ICJ used the criterion of ‘reasonableness’, rather than proportionality. Additionally, it has been suggested that reasonableness incorporates proportionality: El Paso Energy, [241], [243].

112  Panel Report, China—Raw Materials, [7.121]–[7.129], [7.154], [7.159].

113  AB Report, China—Raw Materials, [291].

114  As did paragraph 5.1 of the Protocol of China’s Accession (‘[w]‌ithout prejudice to China’s right to regulate trade in a manner consistent with the WTO Agreement’). The AB had found in China—Audiovisual Products, [221] that this language allowed China to invoke GATT Article XX(a).

115  AB Report, China—Raw Materials, [304]–[306].

116  ILC ASR Commentary, 71[2]‌, 72[7].

117  E. David, in J. Crawford, A. Pellet, and S. Olleson (eds.), The Law of International Responsibility (2010) 29.

118  Emphasis added.

119  Wall case, [140]: ‘already address[ed] considerations of this kind within their own provisions’.

120  North Sea Continental Shelf, [72]; ILC ASR Commentary, 140[3]‌.

121  Railway Traffic case, 113–114 and 122; CMS v. Argentina (ad hoc Annulment Committee), [129]–[135]; Sempra v. Argentina (ad hoc Annulment Committee), [200]–[204]; Continental Casualty Company (Award), [162]–[167]; Dissenting opinion of Judge Sir Robert Jennings, Military and Paramilitary Activities in and against Nicaragua, Merits, Judgment of 27 June 1986, ICJ Reports 1986, p. 528 at 541; Oil Platforms, [34]. A. Reinisch, Necessity in Investment Arbitration, 41 NYIL (2010) 156.

122  ILC ASR Commentary, 140[3]‌. LG&E v. Argentina (Decision on Liability), [245]–[261]; Patrick Mitchell v. DRC (Annulment), [55]. Christakis (n.103) 34.

123  CMS v. Argentina (Award), [315]–[382]; Enron v. Argentina (Award), [333]–[334].

124  Resolution of the Council of the League of Nations, 10 December 1927, reproduced in Section C, Written Statements, Railway traffic between Lithuania and Poland, 174–175.

125  Emphasis added. For Advisory Committee, see section 3.1, chapter 2.

126  Convention Concerning the Territory of Memel, 8 May 1924, 29 LNTS 86.

127  Section C-Written Statement, Exposé Ecrit du Gouvernement de la Republique Lithuanienne, Railway Traffic between Lithuania and Poland, Railway Sector Landwarow-Kaisiadorys, PCIJ, Advisory Opinion, Series A/B, No. 42, 26 May 1931, 218.

128  Railway Traffic between Lithuania and Poland, Railway Sector Landwarow-Kaisiadorys, PCIJ C-54, Pleadings, Oral Statements and Documents, Written Statements, Exposé Ecrit du Gouvernement de la République Lithuanienne, 26 May 1931, 194, 208–209; Réponse du Gouvernement de la Republique Lithouanienne, 10 July 1931, 262.

129  Railway Traffic between Lithuania and Poland, Railway Sector Landwarow-Kaisiadorys, PCIJ C-54, Pleadings, Oral Statements and Documents, Written Statements, Exposé Ecrit du Gouvernement de la République Lithuanienne, 26 May 1931, 192–220, particularly 215–220.

130  Railway Traffic between Lithuania and Poland, Railway Sector Landwarow-Kaisiadorys, PCIJ C-54, Pleadings, Oral Statements and Documents, Written Statements, Deuxième Exposé du Gouvernement Polonais, 15 Juillet 1931, 280–289.

131  Emphasis added. Railway Traffic case, 114.

132  Emphasis added. Ibid. 121–122.

133  ILC ASR Commentary, 140[4]‌. See also analysis in chapter 1, section 3.2.

134  AB Report, US—Gasoline, [23]; AB Report, Brazil—Retreaded Tyres, [142]; AB Report, US—Shrimps, [135]–[138].

135  Note the almost identical language in XX (‘nothing in this Agreement shall be construed to prevent […]’) and in XXI(b) (‘nothing in this Agreement shall be construed […] to prevent […]’). The AB has taken into account the meaning of identical language in other provisions within the same covered agreement: AB Report, US—Upland Cotton, [336]–[338].

136  AB Report, US—Shrimps, [118]–[119], [147]; AB Report, US—Gambling, [292]; AB Reports, China—Raw Materials, [354].

137  Panel Report, US—Gasoline, [6.24]–[6.29]; GATT Panel Report, Thailand—Cigarettes, [75]; AB Report, Korea—Various Measures on Beef, [164]–[167]. C. Bown and J. Trachtman, BrazilMeasures Affecting Imports of Retreaded Tyres: A Balancing Act, 8 WTR (2009) 118.

138  D. Akande and S. Williams, International Adjudication on National Security Issues: What Role for the WTO?, 43 VJIL (2002–2003) 365–404; H.L. Schloemann and S. Ohlhoff, ‘Constitutionalization’ and Dispute Settlement in the WTO: National Security as an Issue of Competence, 93 AJIL (1999) 424–451; R.E. Browne, Notes, Revisiting ‘National Security’ in an Interdependent World: The GATT Article XXI Defense After Helms-Burton, 86 GeoL.J. (1997–1998) 405–432; M.J. Hahn, Vital Interests and the law of GATT: An Analysis of GATT’s Security Exception, 12 MJIL (1990–1991) 558–620. For ICJ case law acknowledging the competence of the Court where treaty provisions give states wide discretion: Military and Paramilitary Activities, Merits, [282] (‘whether a given measure is necessary is not purely a question of subjective judgment of the party’); Oil Platforms, [43].

139  The AB has approached the wording ‘necessary’ in GATT Article XX in a similar manner: ‘[I]‌t is undisputed that WTO Members have the right to determine the level of protection of health that they consider appropriate in a given situation’: AB Report, EC—Asbestos, [168]; AB Report, Korea—Various Measures on Beef, [186]. Concerning necessity in Article XX: B. McGrady, Necessity Exceptions in WTO: Retreated Tyres, Regulatory Purpose and Cumulative Regulatory Measures, 12 JIEL (2009) 153–173; D.H. Regan, The Meaning of ‘Necessary’ in GATT Article XX and GATS Article XIV: the Myth of Cost-benefit Balancing, 6 WTR (2007) 347–369.

140  Review of good faith in cases of state discretion: Djibouti v. France, [145]. Also: Akande and Williams (n.138) 389–390.

141  Dissenting opinion of Judge Sir Robert Jennings, Military and Paramilitary Activities in and against Nicaragua, Merits, Judgment of 27 June 1986, ICJ Reports 1986, p. 528 at 541; O.Y. Elagab, The Legality of Non-Forcible Counter-Measures in International Law (1988) 186.

142  AB Report, US—Shrimps, [121]; AB Report, EC—Asbestos, [115]–[116].

143  AB Report, China—Audiovisual Products, [223].

144  AB Report, Mexico—Soft Drinks, [69]–[76], [79].

145  Ibid. [77].

146  See analysis in chapter 6, sections 3.1 and 3.2.

147  AB Reports, China—Raw Materials, [334].

148  See analysis in chapter 6, section 3.1.

149  Contra: Hahn (n.138) 604. Nor is there any subsequent practice of WTO members in the application of the GATT/WTO Agreement that establishes their agreement (or even the understanding by some) that circumstances precluding wrongfulness are excluded (e.g. owing to the fact that GATT Article XXI establishes special secondary rules). For instance, no WTO member (nor Ukraine or those sixteen WTO members, including the EU, that were significantly affected) made any statements concerning the relationship between GATT Article XXI and circumstances precluding wrongfulness during the interruption of gas transit in 2009. See section 3.2.2.4 in this chapter.

150  Emphasis added. UN Doc. E/PC/T/C.II/W.11, 1; WTO Secretariat, Article V of GATT 1994—Scope and Application, TN/TF/W2, 12 January 2005, 5.

151  About the availability or not (and lawfulness) of countermeasures by subjects other than the injured state, see chapter 1, section 3.2.

152  Communication from EEC, Australia, Canada, Trade Restrictions Affecting Argentina Applied for Non-Economic Reasons, L/5319, 5 May 1982.

153  Council, Minutes of Meeting Held in the Centre William Rappard on 7 May 1982, C/M/157, 22 June 1982, 10.

154  GATT Council, Minutes of Meeting Held on 18 February 1975, GATT Doc. C/M/103, 18 February 1975, 15–16. Fisheries Jurisdiction (Merits), 175.

155  GATT Council, Ibid. 15–16.

156  Publicly available awards are listed at: <http://www.encharter.org>. Article 24 does not apply to Articles 12 (compensation for losses) and 13 (expropriation), but applies to Article 10 concerning investors’ treatment.

157  Preparatory works indicate this intention: European Energy Charter, Conference Secretariat, Note from the Chairman of Working Group II on Article 27, Room Document 10, 22–27 February 1993, 4. By analogy, the preparatory works of the Barcelona Convention confirm the understanding that recourse to the PCIJ was available in relation to situations where a treaty party invoked vital interests: France, Sixth Meeting of the Plenary Committee, 18 March 1921, in Barcelona Conference: Verbatim Reports and Texts, 1921, 87. The statement was not objected to by any other negotiating state in the Plenary Committee.

158  Similar reasoning concerning GATT Article XXI: section 3.2.1 earlier in this chapter. Akande and Williams (n.138) 381–386.

159  See also Understanding 15 adopted with respect to the ECT: ‘[Article 29] specifies the provisions relevant to the subjects covered by Article 24’ (VCTL Article 31(2)(a)).

160  See chapter 1, section 5.3.2.

161  Georgia reduces Russian gas shipments to Armenia, Agence France Presse, 11 November 2008.

162  Informal contact with Georgian and Armenian officials.

163  ‘Ukraine accused of stealing gas’, BBC News website, 2 January 2009. The dispute between Russia and Ukraine revolved around gas transit tariffs and import prices that were agreed on 2 October 2008, under an intergovernmental agreement, which would become applicable in January 2009. Pursuant to this agreement, Gazprom and Naftogaz signed a contract. However, because on 1 December 2008 Naftogaz did not pay its debt for gas imports, Gazprom, in agreement with the Russian President, threatened to increase the price of gas exported to Ukraine and to interrupt gas exports. Interfax, 20–26 November 2008 and 4–18 December 2008. On 30 December 2008, Ukraine only partially paid its debt.

164  The provision and WTO case law is unclear as to the degree of ownership needed for the enterprise to be a ‘state enterprise’ within the meaning of GATT. See chapter 1, section 3.1.1.

165  See analysis in chapter 1, section 3.1.1.

166  ‘Gazprom to sue Naftogaz Ukrainy with international arbitration court’, Gazprom Ukraine Facts, 3 January 2009, <http://www.gazpromukrainefacts.com>.

167  The ‘Naftogaz of Ukraine’ has transported to the European countries for the period of six (6) days of January, 2009 approximately 1.436 billion cubic meters of natural gas, 7 January 2009, <http://www.naftogaz.com>.

168  Russia’s conduct may have met the threshold (of attribution under customary international law) of direction or effective control (ASR Article 8) or that of ASR Article 11. ‘Gazprom reduces the volumes of gas supply to the Ukrainian gas transportation system’, Ukrainefacts, 5 January 2006. 12 out of 27 EU member states, which were ECT Contracting Parties, were affected by export restrictions. Additionally, 4 ECT Contracting Parties (not EU members) were affected: Bosnia-Herzegovina, Croatia, FYROM, and Moldova. For details, see Gas Coordination Group, Member State General Situation according to Significance of Impact, Memo 09/3, 9 January 2009: <http://europa.eu/rapid/press-release_MEMO-09-3_en.htm>.

169  However, this could not have been a lawful countermeasure against Ukraine, because it was targeted to third (non-responsible) ECT Contracting Parties. See analysis in chapter 7, section 3.2. Additionally, there is no evidence that Russia called on Ukraine to comply with its obligation to cease the wrongful act and to make reparation, or that it notified Ukraine that it would take countermeasures and that it offered to negotiate. If it did not, it could be argued that it was not under the obligation to notify and to offer to negotiate as it was taking an urgent countermeasure. Nor is there any evidence that, as a separate matter, Russia’s conduct was a partial suspension of the ECT’s operation as a response under the law of treaties to a prior material breach of the ECT by Ukraine. However, as will be explained in chapter 5, section 2.1, such a response ought to have taken the form of a suspension between itself and Ukraine (VCLT Article 60(2)(b)), while the measure taken by Russia would be a suspension of the treaty’s operation with regard to itself (and a breach of the ECT). Nor is there any evidence that it was acting on the basis of the exceptio non adimpleti contractus, analysed in chapter 5, section 3, since its conduct involved non-performance vis-à-vis other treaty parties.

170  ‘Ukraine closed last transit pipeline to Europe’, Ukrainefacts, 7 January 2009. This conduct could have been attributed to Russia if it had directed or effectively controlled Gazprom’s actions, or if it endorsed that conduct as its own.

171  ‘NJSC Naftogaz of Ukraine is indignant at OJSC Gazprom’s statements’, Naftogaz Ukrainy website, 7 January 2009: <http://www.naftogaz.com>.

172  Terms of Reference for the Monitoring of the Transit of Natural Gas through Ukraine, 10 January 2009: <http://ec.europa.eu/deutschland/pdf/tor_observers.pdf>; Statement from President Barroso and Commissioner Piebalgs on the agreement for the gas monitoring, IP/09/33, 11 January 2009.

173  On inquiry/fact-finding: J.G. Merrills, International Dispute Settlement (5th ed., 2011) 45–63.

174  War-war, not jaw-jaw; Russia, Ukraine and gas, The Economist, 17 January 2009; The Ukrainian Prime Minister confirmed this in a discussion with the European Commission and Eurogas, Interfax, 30 December 2008–14 January 2009, 4.

176  This may be because it could not successfully have resorted to such circumstances, since it had contributed to the situation (ASR Article 25(2)(b) and ASR Article 24(2)(a) respectively; Gabčν‎kovo-Nagymaros, [57]), but it has not been possible to obtain further evidence for the purposes of this study.

177  On subsequent practice in relation to treaty interpretation, see chapter 1 section 2.2. Publicly available information does not indicate that any injured ECT Contracting Party invoked Ukraine’s or Russia’s responsibility for breaches of the ECT. On 19 January 2009, Gazprom and Naftogaz signed 10-year supply and transit contracts. The EU and its member states were informed of the agreement without participating in the negotiations. On 20 January 2009, supplies to and transit via Ukraine began: Statement of President Barroso on the resolution of the Ukraine-Russia Gas Dispute, Press point, Brussels, 20 January 2009: <http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/09/12&format=HTML&aged=0&language= EN&guiLanguage=en>. The international monitoring staff remained on the ground to provide technical assistance, if necessary. On 22 January 2009, gas flows to all importing states returned to the levels before the interruption.

178  Seventeen states were affected. Twelve were EU member states, and five other states in the Balkan region were affected but of them only four were ECT Contracting Parties at the time. Fifteen were WTO members (along with Ukraine). See Gas Coordination Group, Member State General Situation According to Significance of Impact, Memo 09/3, 9 January 2009: <http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/3&type=HTML>.

179  Belarus ‘to suspend Russian gas transit to Europe’, BBC News, 22 June 2010; Lithuania gas supply falls after Russia-Belarus dispute, BBC News, 23 June 2010; Belarus Reduced Gas Transit to Europe Proportionally to Reduced Supplies from Russia, Interfax, 22 June 2010.

180  For provisional application of ECT by Russia, see chapter 1 (n.13).

181  Belarus owes nothing to Russia’s Gazprom–Lukashenko, RIA Novosti, 18 June 2010.

182  Belarus says Russia’s cuts in gas supplies to affect transit to Europe, RIA Novosti, 20 June 2010.

183  Minsk, Moscow to talk over energy row on Monday, Xinhua General News Service, 20 June 2010.

184  Belarus promises no interruption in Russian gas transit to Europe, Xinhua General News Service, 21 June 2010. Concerning Gazprom, see (n.52).

185  Nor at the time was either of the two states a WTO member. But the conduct may have breached other treaty obligations concerning exports not examined in this study.

186  Belarus ‘to suspend Russian gas transit to Europe’, BBC News, 22 June 2010; Belarus to stop supply to Europe in ‘gas war’ with Gazprom, Xinhua General News Service, 22 June 2010.

187  Ibid. Notably Kaliningrad (Russian territory) experienced the same reduction: Lithuania gas supply falls after Russia-Belarus dispute, BBC News, 23 June 2010.

188  The dispute was resolved, as soon as Beltransgaz paid its debt to Gazprom, and Gazprom paid its debt to Beltransgaz: Belarusian Deputy Prime Minister Announced that Belarus Paid Off its Debt for Russian Gas, Vzgliad, 23 June 2010 [in Russian].

189  Such practice does not establish any agreement between ECT Contracting Parties (VCLT Article 31(3)(b)) and in any case it is inconclusive even as a supplementary means of interpretation (VCLT Article 32). Nor is there any evidence that this practice related to responses to material breach under the law of treaties, or under the exceptio non adimpleti contractus, discussed in chapter 5.

190  European Energy Charter, Conference Secretariat, Delegation of [C]‌ Proposed Amendment to Article 27, 18.2.93/1054 BA, folder on Article 24; European Energy Charter, Conference Secretariat, Note from the Chairman of Working Group II on Article 27, Room Document 10, 22–27 February 1993, 3.

191  The relationship between ECT Article 24 and 7(6) is discussed in chapter 8, section 2.2.2.

192  Further analysis in chapters 7 and 8.

193  See chapter 1 (n.46).

194  Chapters 6 and 7 show that the terms of another provision (Article VII.2(3)) overlap with countermeasures.

195  Article 2(6) of the Nabucco Agreement defines the term ‘Hazard’ as ‘any disproportionate, deleterious danger to or effect on public health, safety, property or the environment’.

196  Crawford (n.13) 288.

197  Special Rapporteur Crawford, Second Report on State Responsibility, A/CN.4/498/Add.2, 30 April 1999, [238]–[239].

198  A.B. Mansour, in J. Crawford, A. Pellet, and S. Olleson (eds.), The Law of International Responsibility (2010) 439–447.

199  Special Rapporteur Ago, Eight Report on State Responsibility, A/CN.4/318 and Add.1 to 4, ILCYB 1979-II, 30–31.

200  Emphasis added.

201  For the sake of clarity, it is advisable to change the title and wording in the provision to ‘circumstances precluding wrongfulness’ and ‘wrongfulness precluded’ or ‘excused’ in order to align it with the terminology used under the law of international responsibility.

202  For function of circumstances precluding wrongfulness under the law of state responsibility, see chapter 1, section 3.2, especially (n.146).

203  Countermeasures differ from sanctions. See chapter 1, section 3.2.

204  For exclusion of countermeasures as a means of inducing compliance with WTO obligations, see chapter 6, section 3.1.

205  For other obligations that may overlap with countermeasures in these treaties, see analysis in chapter 7, section 2.3.

206  Similar suggestion about the Barcelona Convention: G.E. Toulmin, The Barcelona Conference on Communications and Transit and the Danube Statute, 3 BYIL (1922–1923) 170.