State Responsibility and Antitrust in the Energy Charter Treaty: Socialization vs. Liberalization in Bilateral Investment Relations

Theocharis N. Grigoriadis, University of California - Berkeley

Abstract

This paper analyzes state responsibility and antitrust as conflicting forces of investment protection under the Energy Charter Treaty. State responsibility is defined in Art. 22 and 23; it imposes a strict liability rule and reinforces the role of government in the conclusion of energy investment contracts. This phenomenon is what I call the socialization of bilateral investment relations. At the same time, Art. 6 proposes antitrust as a normative commitment for all signatory parts; its goal is to advance energy sector liberalization in the ECT region. International arbitration (Art. 26) is a much more effective dispute settlement mechanism than diplomatic negotiations (Art. 27). Four state-investor disputes in the East European energy sector are used to model the interaction between state responsibility and antitrust (Matrix I). Bilateral investment relations are modeled on the distinction between open and closed markets in the case of German-Russian gas relations (Matrix II). Despite the radically different political environment in Germany and Russia, the calculus of the two governments vis-à-vis energy liberalization is the same; none of them really believes in it. Thus, there is no dilemma between liberalization and socialization in energy market development. States have never been able to boost competition, when they are part of the market play; international economic agreements can.