1. Introduction
Over the last decade, the Eastern Mediterranean has become an important power in the global natural gas industry as a result of major discoveries of natural gas in the region.Footnote 1 Only between 2009 and 2013, Israel made major discoveries of significant gas fields such as Tamar, Leviathan, Tanin, Karish and a number of smaller fields. The most recent discovery of the Athena field located offshore from Israel was confirmed in May 2022.Footnote 2 In 2010, the value of the potential of the newly discovered natural gas reserves was estimated at USD 717 billion.Footnote 3
Apart from stimulating global interest in exploration of the region, the discovery of such vast natural gas resources has had considerable geostrategic significance. These discoveries soon led to maritime territorial disputes, most of which are still unresolved. In order to provide a forum for discussion and cooperation with regard to newly faced energy issues in the region, the East Mediterranean Gas Forum (EMGF, or the Forum) was launched in January 2019.Footnote 4 In 2020, the Forum was granted official status as an energy organisation,Footnote 5 thus establishing common grounds in gas production, consumption and transit in the region. In 2022, two EMGF members – Israel and Egypt – agreed to cooperate in the export of natural gas to Europe, thus contributing to establishing an efficient and competitive regional East Mediterranean gas market.Footnote 6 Furthermore, in October 2023, Israel’s Ministry of Energy and Infrastructure announced the winning bidders for two zones in its fourth Offshore Bid Round; among them are British multinational gas and oil firm BP, Italian energy giant Eni, and SOCAR from Azerbaijan, all new players in the Israeli gas market.Footnote 7 These developments reflect the growing interest in the energy potential of the region and highlight the need for regional cooperation and a common legal tool to regulate these activities.
However, having performed a crucial role in developing a regional gas market and opening it to investors, the EMGF has not resolved all the problems, which include disputes over maritime borders and drilling rights, as well as political conflicts in the Eastern Mediterranean. Therefore, the objective of this study is to propose the establishment of a legal framework outlining the parties’ rights and obligations with a view to creating a sustainable gas market that could attract foreign investors and eliminate commercial risks, in particular, in view of the war in Gaza and ensuing regional instability. This legal framework could be designed as a regional energy treaty and include provisions found in other energy and trade agreements. Being used in parallel with the EMGF principles, it can contribute to the stability, economic growth and sustainable development of the Eastern Mediterranean region.
The authors are well aware of the political obstacles that are likely to stand in the way of reaching the consensus required to establish a comprehensive energy treaty in a region plagued by instability and military conflicts. Nevertheless, we see it as our duty as legal academics to ‘throw deep’ (to use an American football idiom),Footnote 8 proposing what we think is required and beneficial for the region, while making our case with rational arguments, including those that address the practical difficulties and how they can be overcome. Hopefully, the ball thrown deep will be caught by decision makers, if not in all instances, at least in some.
2. The East Mediterranean Gas Forum: Regional conflicts and prospects
2.1. Overview of and prospects for the East Mediterranean Gas Forum
Discovery of natural gas in the exclusive economic zones (EEZ) of countries such as Egypt, Israel and Cyprus over the last decades played a pivotal role in the establishment of the EMGF. Apart from opportunities, these discoveries also posed significant challenges for the region, including energy security issues, risks of geopolitical tensions, and conflicts over gas reserves and maritime boundaries in the Eastern Mediterranean.Footnote 9 In order to mitigate these risks and challenges, the Forum was established as a platform to foster dialogue between gas producers, gas consumers and gas transit countries.Footnote 10
The first effort to establish the EMGF was made by Egypt in 2018.Footnote 11 On 14 January 2019, following the Egyptian initiative, there was a meeting of energy ministers in Cairo – those from Cyprus, Greece, Israel, Italy, Jordan, and a representative from the Palestinian Authority. The participants discussed the idea of creating the EMGF as an energy organisationFootnote 12 and reached agreement to that effect. They signed the Cairo Declaration establishing the East Mediterranean Gas Forum.Footnote 13 This declaration set up the objectives and principles of operation for the EMGF, and directed its senior officials to commence talks on the EMGF structure with a view to agreeing the details.
The objective was to establish an energy organisation that adhered to international law and upheld the natural resource rights of its members. The EMGF was designed to support members’ efforts to monetise their reserves, utilise their existing infrastructure, promote the benefit and welfare of their people, develop a regional gas market, ensure security of supply and demand, foster cooperation, support producing countries, help consumer countries in securing their needs, and ensure the environmental sustainability of gas exploration, production and transportation.Footnote 14
The result of a series of meetings and negotiations with third parties interested in joining the Forum or participating as observers was the Statute of the Forum. It was signed on 22 September 2020 – thus officially establishing the EMGF as a regional intergovernmental organisation.Footnote 15 The Forum’s founding members included Egypt, Cyprus, Greece, Israel, Italy, Jordan, and Palestine, with Cairo established as its headquarters. However, full membership of the EMGF is available to any state in the Eastern Mediterranean region. Furthermore, although strictly speaking France is not located in the Eastern Mediterranean, its application for membership was accepted and it is now a fully fledged member of the EMGF. The United States (US), the European Union (EU) and the World Bank Group also applied for observer status.Footnote 16 Today the EMGF has eight full members – Cyprus, Egypt, France, Greece, Israel, Italy, Jordan, Palestine – and three observers – the US, the EU and the World Bank Group.Footnote 17 Conspicuously absent from the Forum are the remaining states surrounding the East Mediterranean: Lebanon, Libya, Syria and Turkey. Lebanon and Libya do not have diplomatic relations with Israel since its establishment in 1948, and Syria and Israel are in an almost perpetual state of war.Footnote 18 As for Turkey, it has ongoing border disputes with both Greece and Cyprus, and has opposed the establishment of the EMGF, arguing that it ignores Turkish interests and violates its maritime rights in the region.Footnote 19 Additionally, relations between Egypt, which was chosen to host the Forum’s headquarters, and Turkey have been strained since the 2013 overthrow of the Muslim Brotherhood government in Egypt, when its ambassador was expelled from Egypt.Footnote 20 Turkey’s ruling party supported this government and has generally taken opposing stances regarding issues of democracy, political Islam and regional influence with the current Egyptian government.Footnote 21
Apart from the EMGF founding members, the organisation also facilitates participation from the private sector through its Gas Industry Advisory Committee (the Advisory Committee), which engages in various committees to discuss technical matters.Footnote 22 In this context, multinational energy giants – such as Total, BP, Chevron, ExxonMobil and ENI – have already obtained licences to extract gas in the countries of the region and are among the members of the Advisory Committee established as part of the EMGF.Footnote 23 These companies are actively involved in the exploration and development of the gas fields in the EEZs of Egypt, Israel, Cyprus and other countries in the area.Footnote 24
Extraction and transportation of natural gas from the Mediterranean Sea are the subjects of lively discussions today, both because of the discovery of large reserves of natural gas in the region, and because of the war between Ukraine and Russia, which resulted in a major energy crisis in Europe. As one of the ways to resolve the energy crisis, Europe has chosen to import natural gas from the Mediterranean, as evidenced by the Memorandum of Understanding signed during a meeting of the EMGF in Cairo in 2022 between the European Union, Egypt and Israel on cooperation related to trade, transport and export of natural gas to the EU.Footnote 25 This memorandum illustrates the importance of the Forum as a platform for promoting energy cooperation and highlights the potential for the organisation to play a key role in facilitating the export of natural gas from the Mediterranean to the EU. Given the increasing demand for natural gas in Europe and the significant reserves of this resource in the region, EMGF activities are expected to become even more critical in the coming years.
Despite being an important initiative aimed at developing regional energy, the EMGF has also faced some challenges. One of the key challenges is that the Forum has almost no legally binding obligations and it does not set the rules for how its members are to act in this field of energy exploration, trade and transit in the Eastern Mediterranean. Furthermore, the absence of a dispute settlement mechanism could raise questions about the Forum’s effectiveness in resolving potential conflicts or disputes among its members regarding energy activities.Footnote 26 All this may limit its ability to regulate energy issues. There are, of course, the general norms of customary international law, but these are insufficient to resolve all the energy issues arising in the Mediterranean and to ensure the achievement of all EMGF goals.Footnote 27 As for the World Trade Organization (WTO) and its agreements, while they do address some of the issues arising in relation to energy trade, they are not specific to energy and often fail to address the unique needs and issues arising within the energy sector.Footnote 28 There is also a lack of comprehensive protection of foreign investment in the energy sector because many members of the EMGF do not have bilateral investment treaties (BITs) in force between themselves.Footnote 29
As a result, the EMGF is now more of a forum to discuss energy issues than a strong organisation that can influence the regulation of the energy sector in the region.Footnote 30 Decisions of the EMGF can be taken only by consensus,Footnote 31 meaning that the Forum cannot regulate its members’ activities towards creating a sustainable energy market. For the EMGF to become more effective, it needs to be transformed into a strong organisation that sets rules and can influence decision making in the energy field. To achieve this, its members need to make certain efforts and agree a common strategy for developing the organisation.
However, despite these challenges, the EMGF still represents a significant initiative that could become a platform for creating a regional energy treaty with a dispute settlement mechanism. Such a treaty could help to ensure stability and security in the Eastern Mediterranean energy sector, which would help to attract much needed investment in this region and improve cooperation among members. By providing the EMGF with the necessary legal framework, the treaty would give more weight to its decisions. Additionally, the inclusion of a dispute settlement mechanism could enhance the effectiveness of the EMGF coordinating efforts in the energy sector. Moreover, a regional legally binding energy treaty could strengthen the EMGF as an organisation, making it more capable of addressing energy issues in the region, and less susceptible to political risks. Members would have legal rights and obligations that would be difficult to violate in the event of any conflict. The evolution from a non-binding platform for dialogue and cooperation to a binding regional energy treaty would be reminiscent of the Energy Charter Treaty (ECT), a treaty with extensive binding obligations, which grew out of the European Energy Charter, a political declaration that created a forum for discussion and negotiation.Footnote 32
2.2. The EMGF and maritime boundary disputes
One of the most pressing issues in the Eastern Mediterranean region is disputes over maritime borders. The area’s richness in natural gas reserves has led to conflicts between neighbouring countries regarding their EEZs and maritime boundaries.
There are two types of territorial dispute: (i) those relating to sovereignty over disputed land, and (ii) those focused on maritime borders. In many cases, disputes involve claims of both types. Land disputes in the maritime context often concern offshore islands and are governed by international conventions, customary international law and general legal principles.Footnote 33 Maritime border disputes, on the other hand, are subject to the law of the sea.Footnote 34
Much of the international law of the sea is codified in the 1982 United Nations Convention on the Law of the Sea (UNCLOS)Footnote 35 and the 1994 Agreement relating to the Implementation of Part XI (Agreement)Footnote 36 of the Convention. The UNCLOS also established the International Tribunal for the Law of the Sea (ITLOS) as one of the means to resolve disputes between its parties by binding adjudication.Footnote 37 However, not all the disputes arising in the Eastern Mediterranean can be resolved by the ITLOS, as some countries in the region – including Turkey, Syria and Israel – have not signed or ratified the UNCLOS. This makes it difficult to resolve disagreements on maritime boundaries or other issues in the region using the rules established by the law of the sea. The absence of clearly defined maritime borders may lead to uncertainty and tension between these countries and neighbouring states regarding their territorial seas, EEZs and continental shelves. As a result, Eastern Mediterranean countries are often forced to seek alternative methods for resolving maritime disputes, such as negotiation or mediation. While these methods are essential steps in resolving disputes, the process may be complex and time-consuming and does not always lead to resolution of the dispute.Footnote 38 The absence of a formal adjudication mechanism, if the parties were unable to resolve their dispute peacefully, could prolong the resolution process.
Another problem facing the Eastern Mediterranean region is rooted in the fact that, to date, only a few countries in the region have found it necessary to conclude agreements on their EEZs and continental shelves. Cyprus and Egypt were the first Mediterranean countries to sign an agreement on the delimitation of their EEZs and thereby establish the boundaries of their respective EEZs (in 2003).Footnote 39 The next such agreement was signed by Cyprus and Lebanon in 2007, although the agreement has not been ratified by Lebanon and therefore has not entered into force. The agreement has also been strongly criticised by the Turkish authorities on the grounds that the Greek Cypriot Administration of Southern Cyprus did not represent the entire population, and that the Turkish Republic of Northern Cyprus also had claims to the surrounding maritime areas.Footnote 40
Israel signed its first Agreement on the Delimitation of the Exclusive Economic Zone with Cyprus in December 2010, after the discovery of significant gas reserves in the Tamar and Leviathan gas fields.Footnote 41 More recently, in October 2022, following the discovery of major natural gas reserves in the Levant Basin, Israel and Lebanon reached a historic decision to settle their maritime border dispute via a mediator, the United StatesFootnote 42 (through ‘good offices’).Footnote 43 Despite having no diplomatic relations and defined as enemies,Footnote 44 the two countries managed to resolve a decade-long maritime border dispute and finally reach agreement.Footnote 45 This historic decision highlights the importance of cooperation in the energy sector.
At the same time, many maritime boundaries in the region still need to be defined or resolved. This lack of clarity in maritime boundaries could have a negative impact on future economic development and cooperation, especially considering that the Mediterranean Sea is dominated by EEZs.Footnote 46 In particular, officially delineated maritime boundaries could contribute to the exploration, development and exploitation of natural gas, as well as the construction and operation of submarine pipelines. Therefore, it is important to resolve these disputes in order to facilitate the growth of the energy sector and increase overall revenues for the region.Footnote 47
Certain EMGF members, such as Greece and Cyprus, are in dispute with Turkey over maritime boundaries and their EEZs in the region. As noted above,Footnote 48 Turkey opposed the establishment of the EMGF, seeing it as a platform to coordinate support of Greek Cypriots against Turkey’s territorial claims and interests.Footnote 49 Additionally, unresolved maritime boundary disputes pose the risk of escalating into more significant conflicts, which could have severe consequences for the region’s stability and security. For instance, disputes between Turkey and Greece over maritime boundaries in the Eastern Mediterranean have led these countries to the brink of military confrontation and have torpedoed some important energy projects in the region.Footnote 50
The absence of Turkey, Syria and Lebanon from the EMGF reflects the complex geopolitical landscape of the Eastern Mediterranean region, where energy resources have become a source of competition and tension.Footnote 51 While the EMGF aims to promote cooperation and investment in the gas sector as a means to foster peace and stability, its effectiveness will depend on the ability of its members to resolve their disputes and address their concerns. The absence of legal tools to help in resolving these disputes, combined with the risks and tensions in the region, underscores the need for establishing a comprehensive legal framework to mitigate these issues. This framework could lead to a more structured approach to conflict resolution, providing binding means to resolve disputes. As a result, this could also attract new members from the Mediterranean to join in creating a shared sustainable energy market in the region.
2.3. The EMGF and political conflicts
The EMGF operates in a politically sensitive region where historical rivalries and ongoing conflicts pose significant risks. One of the greatest risks facing the organisation is the potential for internal conflicts among its members and neighbouring countries. Such conflicts can have a profound impact on the ability of the EMGF to succeed in its missions. Apart from maritime disputes, several conflicts could potentially affect EMGF operations, including the ongoing conflict in Syria, and the conflict between Israel and the Palestinians, magnified by the Hamas attack on Israel and the ensuing war in Gaza.Footnote 52
This latter conflict is a prime example of a potential threat to the stability and success of the EMGF. It is one of the most significant and long-standing political disputes in the Eastern Mediterranean and has gradually turned into a religious war. From Gaza, the Sunni Islamist Hamas waged a surprise attack and invasion of southern Israel on 7 October 2023, massacred over one thousand civilians in one day, and took some 240 hostages back to the Gaza strip, while continuing to shell Israeli towns.Footnote 53 In response, Israel launched a ground invasion of the Gaza strip, which remains ongoing at the time of writing this article. From Lebanon, the Shi’ite Islamist and Iran-backed Hezbollah joined the hostilities by waging artillery and rocket attacks on northern Israel in support of Hamas, leading to immediate retaliation by Israel.Footnote 54 At the time of writing, there is a serious risk that these border clashes will develop into a full-blown war in Lebanon too, possibly even escalating into a wider regional war. These armed conflicts have already had negative implications for the regional energy market. Chevron was ordered by Israeli authorities to shut down production for five weeks at the Tamar platform for safety reasons, as it is located just north of the Gaza strip.Footnote 55 This, in turn, has led to a shortage of gas in Egypt, which has had to cut its export of liquefied natural gas (LNG) to Europe, which does not bode well for Egypt’s worsening economic situation.Footnote 56 Israel was also forced to close its oil terminal in Ashkelon to vessels amid rocket attacks.Footnote 57 If the skirmishes on the Lebanese border escalate into a war, it will exacerbate Lebanon’s already acute energy crisis.
For the EMGF, any political conflicts pose a considerable threat. Such conflicts can violate international law and erode respect for the rights of members, which are the principles upon which the EMGF is based.Footnote 58 The heightened tensions and growing popular animosity in Arab countries towards Israel are likely to create a climate where cooperation within the EMGF may become difficult.Footnote 59 This and other prolonged political conflicts can have a detrimental effect on the natural gas industry in the region, and disrupt the production of natural gas, thus causing loss of revenue for its members. As a result, there can be a significant decline in investor confidence, which may make it difficult to secure financing for new energy projects in the region.
A proposed regional energy treaty, while not aimed at resolving political conflicts, could mitigate their consequences for the energy sector. While difficult to imagine at this moment, the consensus necessary for such a treaty could be reached through the help of US and EU mediation. Participating in the EMGF as observers,Footnote 60 the US and the EU have the interest and the potential to facilitate the proposed regional energy treaty despite the political conflicts existing in the region, thus furthering peace and economic cooperation in the Middle East.
In particular, the United States has long been playing a crucial role in promoting peace and contributing to stable economic relations in the Middle East. Its hegemonic power has been instrumental in resolving a maritime dispute between Israel and Lebanon,Footnote 61 brokering the Abraham AccordsFootnote 62 between Israel and several Arab countries by making its own commitments and concessions to the parties, and even raising the chances for an unprecedented peace agreement between Israel and Saudi Arabia.Footnote 63 Further to signing the Abraham Accords Peace Agreement with the State of Israel, the United Arab Emirates entered into the Comprehensive Economic Partnership Agreement with Israel (CEPA),Footnote 64 which strengthened the economic ties between the two countries through the creation of a free trade area. This allowed businesses in Israel and the UAE to sign over 35 business agreements in diverse areas in 2022 alone.Footnote 65
Like the US, the EU has long been undertaking efforts to mitigate political tensions in the Mediterranean, and promote regional political, economic and social cooperation. One of the first attempts to do this was the Barcelona Declaration of 1995,Footnote 66 which established the Euro-Mediterranean Partnership, also known as the Barcelona Process, aimed at fostering cultural and economic unity in the Mediterranean region. Among the signatories to the Declaration were the Council of the European Union, the European Commission and several Middle Eastern countries, including Israel, Egypt, Jordan and the Palestinian Authority. Building upon the Barcelona Declaration, Euro-Mediterranean heads of state and governments in 2008 adopted the decision to create a reinforced partnership: the Union for the Mediterranean (UfM).Footnote 67 The UfM members expressed their commitment to strengthen regional economic integration through free-trade agreements in the Euro-Mediterranean space and establish an efficient and business-friendly mechanism of trade facilitation.Footnote 68 As of today, the UfM has provided support to over 60 regional cooperation projects with a budget of over 5 billion euros, and organised 12 regional policy platforms and over 300 expert fora.Footnote 69
Thus, there are grounds to believe that political conflicts can be overcome on the way to conclude and implement a proposed regional treaty – provided that the EU and the US will take an active role in facilitating it. In its turn, this regional treaty could reduce the impact of political conflicts on the Mediterranean energy sector.
3. A regional binding energy treaty as a solution for the East Mediterranean Gas Forum
3.1. Potential benefits of the regional energy treaty for the EMGF
As shown in Section 2, despite its potential, the EMGF faces a number of challenges that may limit its effectiveness as an energy organisation. To overcome the problems and disagreements in the region, it would be helpful to create a regional binding energy treaty. The treaty could include an agreed dispute settlement mechanism, which would ensure that conflicts are resolved fairly and efficiently, thereby strengthening the EMGF as an organisation. It could also establish a legal framework for free transit of energy resources throughout the Mediterranean and protect future submarine pipelines and other transit infrastructure. It, furthermore, could include much needed provisions on the protection of the marine environment in the course of exploring and producing energy from the seabed. In addition, a stable and legally binding framework for energy cooperation would bolster investor confidence and increase investment in the development of the region’s energy sector. This, in turn, would help to boost economic growth in the region, further strengthening the EMGF as a regional energy organisation.
A suggested regional energy treaty can be based on existing similar treaties. There are examples of countries showing a willingness to cooperate on energy issues through existing treaties and organisations. One such intergovernmental organisation that successfully maintains peace and stability in Southeast Asia is the Association of Southeast Asian Nations (ASEAN).Footnote 70 It was founded in Thailand in 1967 through the ASEAN Declaration (Bangkok Declaration).Footnote 71 Further, in 2007, to mark its 40th anniversary, the organisation adopted the ASEAN Charter to serve as its legal and constitutional framework.Footnote 72
To foster cooperation as well as efficient development and use of energy, the governments of the ASEAN countries signed the Agreement on ASEAN Energy Cooperation (AAEC) in 1986.Footnote 73 This agreement aims to enhance energy security, promote sustainable energy development and facilitate integrated energy markets within the ASEAN region.Footnote 74 Additionally, the ASEAN has implemented a long-standing energy cooperation plan, including objectives such as developing renewable energy sources and promoting energy efficiency. Another document seeking to establish an inclusive and dynamic economic integration in the region is the ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 Phase II: 2021–2025.Footnote 75 Its focus is on energy connectivity, market integration and the transition to cleaner energy sources
Indeed, the ASEAN and the EMGF share several key similarities. Firstly, both organisations comprise neighbouring countries with shared interests in promoting economic development and energy security.Footnote 76 Additionally, both organisations encompass a diverse range of energy producers and consumers among their members. For instance, the ASEAN includes major exporters such as Malaysia and Indonesia, as well as importers like Singapore and Thailand.Footnote 77 Similarly, the EMGF consists of natural gas producers such as Egypt, Israel and Cyprus, alongside potential transit and consumer members like Jordan, Palestine, Greece and Italy.Footnote 78 Secondly, both regions face similar challenges, which include rising energy demands, the need to diversify supplies and the pursuit of sustainable development goals.Footnote 79 These similarities underscore the common needs and opportunities for energy trading in both regions, highlighting the importance of establishing clear rules and obligations for a sustainable energy market.
Another similarity between the ASEANFootnote 80 and the EMGF lies in their encounters with geopolitical tension and conflict among their members. Despite these issues, the ASEAN has demonstrated the effectiveness of employing legal frameworks to manage disputes and foster cooperation.Footnote 81 A prime example of this is the significance of the ASEAN Charter.Footnote 82 This Charter, ratified by all ASEAN member states,Footnote 83 provides a comprehensive legal framework and establishes various organs to enhance cooperation among member states.Footnote 84
One notable success of the ASEAN legal approach is its contribution to the resolution of the long-standing territorial dispute between Cambodia and Thailand over the Preah Vihear Temple.Footnote 85 In 2011, amid escalating tension and armed clashes between the two countries, the ASEAN invoked the Charter’s provisions for dispute settlement and offered to mediate the conflict.Footnote 86 Through this facilitation, Cambodia and Thailand agreed to establish a provisional demilitarised zone and withdraw troops from the disputed area, effectively de-escalating the situation.Footnote 87 At the same time, both parties committed to adhering to the ruling of the International Court of Justice on the temple’s ownership, demonstrating the ability of the ASEAN Charter to promote adherence to international legal frameworks.Footnote 88 Hence, by learning from the ASEAN experience and adapting its legal frameworks to the unique context of the Eastern Mediterranean region, the EMGF could enhance regional stability and unlock the full potential of energy cooperation.
Another energy treaty that could serve as an example for the suggested regional energy treaty is the Treaty establishing the Energy Community, signed in 2005.Footnote 89 The primary goals of the established European Energy CommunityFootnote 90 include promoting energy market integration, bolstering energy security and fostering sustainable development among its member countries in south-east Europe.Footnote 91 In order to effectively resolve potential conflicts or disagreements concerning the interpretation or implementation of its provisions, the Energy Community Treaty includes a dispute settlement mechanism.Footnote 92 The Energy Community serves not only as a prime example of regional energy cooperation, but also as a tool for the EU to export its energy acquis communautaire to its neighbours in south-eastern and eastern Europe. With its emphasis on energy market integration, security, renewable energy and sustainable development, as proclaimed in the Treaty and ensured through the dispute settlement mechanism, the Energy Community plays a role in promoting a more integrated pan-European energy market.
However, the most relevant source that can be used as the basis for a regional energy treaty is the Energy Charter Treaty,Footnote 93 which was signed in 1994 and has since been ratified by over 50 countries.Footnote 94 The ECT is a legally binding multilateral treaty focused on the energy sector. It aims to foster long-term cooperation among its member states, promoting mutual benefits and complementarities in line with its objectives and principles.Footnote 95 As a binding multilateral instrument in the energy sector, the ECT provides a legal framework for energy cooperation, including provisions on investment protection, dispute settlement mechanism and transit rights.Footnote 96 Lately, however, after the ECT members failed to approve the European Commission’s proposal to reform the treaty, the EU expressed its intention to withdraw from the ECT.Footnote 97 The reforms proposed by the EU seek to eliminate disproportionate protection for fossil fuels, which will facilitate addressing the issues of climate change, thus aligning the ECT with the EU law on investment, climate and renewable energy. Despite this failed effort to reform the Energy Charter Treaty, it can still be considered a useful model for a regional energy treaty. The latter can incorporate the ECT provisions modernised to balance green objectives with protection of international investment.
The ECT has contributed to the establishment of a stable legal environment for investment in the energy sectors of its members, potentially easing the influx of foreign capital and expertise into major projects, such as the development of energy infrastructure.Footnote 98 One such example could be Azerbaijan – where, upon ratifying the ECT (in 1997), the government committed to improving the country’s legal framework and making its market more attractive for foreign investors. With its rich oil and gas reserves and a robust legal framework for investment protection under the ECT, the country has been successful in attracting foreign investment in energy infrastructure.Footnote 99 In particular, one infrastructure project that needed foreign investment and expertise was the cross-border Baku-Tbilisi-Ceyhan (BTC) pipeline, which transports oil from the Caspian Sea (Azerbaijan) to the Mediterranean (Turkey) and was constructed between 2002 and 2005. Being one of the world’s major energy projects, the BTC involved enormous costs – from USD 2 billion to USD 3.5 billion.Footnote 100 Of these costs, 30% is reported to have been financed by investors,Footnote 101 with the remaining 70% received from the US Exim Bank, Japan’s Exim Bank, the International Finance Corporation, and the European Bank for Reconstruction and Development.Footnote 102 Therefore, foreign investment played a meaningful role in the construction and operation of the BTC, contributing to Azerbaijan’s energy sector development, while a robust legal framework ensures regional energy security.Footnote 103
On a separate note, some ECT members – such as Cyprus, Greece and Jordan – are also members of the EMGF. Therefore, any provisions in a regional energy treaty should take into account potential overlaps with ECT provisions. This could include ensuring compatibility between the two treaties, as well as avoiding any conflicts or inconsistencies between their provisions.
While the proposed regional energy treaty would undoubtedly bring numerous benefits for the EMGF members, it is important to admit that states are often hesitant about accepting limitations on their energy sovereignty. However, a regional energy treaty would not mean that states would be required to give up their sovereignty in the energy sector. Rather, it aims to establish a framework that balances national energy sovereignty with regional cooperation and stability. The proposed treaty takes a significant step forward by setting clear rules and establishing a dispute settlement mechanism. While this indeed can impose certain limitations on the members’ sovereignty, they can expect their rights under the treaty to be respected by other signatories, which may create a more stable and predictable business environment in the energy sector. Additionally, the treaty can be designed to respect the sovereignty of each member over its energy resources while still creating a set of common rules and principles that guide the functioning of the organisation.
3.2. Main provisions of a regional energy treaty: Transit, trade and investment, environmental protection and dispute settlement
3.2.1. Transit
The transit of energy resources in the Mediterranean is a major challenge as a result of unresolved maritime borders and ongoing political conflicts in the region. A regional energy treaty, being the first regional treaty to focus specifically on energy, could serve as a possible resolution of these problems. Such a treaty could potentially become an important contributor to international law concerning transit issues in the Mediterranean.
From a commercial perspective, efficient transit rules are essential for attracting new companies to invest in the energy market. Thus, a regional energy treaty could confirm basic transit principles, such as the right to free and safe transit, while also introducing clarifications and amendments relevant to energy trade. The main objectives of transit under a regional energy treaty would be to provide members of the EMGF with freedom of transit through the territory of each member, using the most convenient routes for international transit. This would include sea routes, submarine pipelines, submarine electricity cables, as well as other types of infrastructure. It is also crucial for a potential regional energy treaty to ensure that in the event of a dispute related to energy transit, the existing flow of energy should not be interrupted or reduced pending settlement of the dispute.
In the absence of clear rules to regulate energy transit, there is always the risk of disruptions to the movement of energy resources, as occurred in Iraq v Turkey.Footnote 104 In this case, disagreements arose between Iraq and Turkey as a result of the latter’s use of the Iraq–Turkey pipeline (ITP) for pumping and storing crude oil from Kurdistan under instructions from the Kurdistan regional government, without the authorisation of the Iraqi central government, and an arbitral award in favour of Iraq.Footnote 105 Turkey stopped the transit of Iraqi crude oil through the ITP; this occurred on 25 March 2023, and as at July 2024, the transit is still halted.Footnote 106 The parties are still negotiating the conditions for resuming the transportation of oil – around 450,000 barrels per day worth no less than USD 30,000,000.Footnote 107
To avoid the above disruptions, a regional energy treaty should include provisions on transit to promote stable and safe energy transit in the Mediterranean region. Only a regional treaty can bind all the states in the East Mediterranean towards each other, and thus provide a reliable legal and political basis to guarantee safe energy transit. A useful model for these transit provisions can be found in Article 7 of the Energy Charter Treaty.Footnote 108 The provisions of this article ensure free and uninterrupted transit of energy materials and products through transit states, thus guaranteeing energy security. At the same time, it is imperative for the proposed energy treaty to remedy the shortcomings present in ECT Article 7, primarily its unclear terms. The need to clarify the existing text of transit provisions contained in the ECT led to the establishment of a transit working group in 1998, which seeks to further work on transit issues and begin negotiations on an Energy Charter Protocol on Transit. The draft of this proposed protocol,Footnote 109 released in 2003, was never adopted.Footnote 110 By incorporating and refining the provisions of Article 7, a regional energy treaty could establish clear and fair rules for energy transit, thus protecting all parties involved from transit-related risks or at least considerably reducing these risks.
A specific example of a project that could benefit significantly from a regional energy treaty is the Eastern Mediterranean pipeline (EastMed). This project involves the construction of a natural gas pipeline that will link the Eastern Mediterranean with Europe, passing through Cyprus, Greece and Italy.Footnote 111 Since Cyprus, Greece, Israel and Italy are members of the EMGF, they are committed to enhancing cooperation and integration in the regional energy sector, but currently are not bound by any international obligations in relation to transit of energy resources.Footnote 112 A regional energy treaty could lay down a legal framework for shipping natural gas through the EastMed, allowing for free, uninterrupted and non-discriminatory transit. This could result in a more stable and secure energy supply, benefiting both producers and consumers in the region.
3.2.2. Trade and investment
The Eastern Mediterranean has recently enjoyed considerable attention as a gas producing region and is becoming increasingly important in the global energy market. The region is also becoming more attractive for foreign investors, especially in view of the energy crisis in Europe and the need to replace Russian gas.Footnote 113 At the same time, regional conflicts in the area (maritime boundary disputes, political and military conflicts) are creating more risks for foreign investors. Although being formally committed to protecting the interests of its members and contributing to economic cooperation based on gas production and trade, the EMGF has no binding rules to ensure that these objectives will be achieved.
Insufficient legal tools for the EMGF can lead to trade barriers among its members, hindering the free flow of natural gas resources and impeding regional energy cooperation. A case in point is Israel, which in 2013 introduced an export quota on natural gas. Based on the recommendations of the Zemach Committee, the government limited natural gas exports to about 40% of the country’s newly discovered offshore reserves, with the objective of guaranteeing that the gas would serve all of Israel’s future energy needs.Footnote 114 This decision was met with criticism by exploration companies that were concerned about the consequences for investment in developing Israel’s gas fields, on the one hand, and by various environmental groups demanding the lower of the quota, on the other.Footnote 115 In a broader context, such export quotas on natural gas can hinder the free flow of natural gas resources and impede energy cooperation in the region.
Another country that has resorted to limiting its gas exports is Egypt. Since the mid-1980s, its government has been actively promoting the substitution of gas for oil in the industrial, residential, commercial and transport sectors. This was caused initially by the ongoing depletion of oil reserves in the country, after the peak in crude oil production reached in 1993. In 2008, when gas demand exceeded domestic gas production, the Egyptian government froze new gas export projects until 2010 to 2012.Footnote 116 A related factor that is important for regional energy stability is energy subsidies. In Egypt, to allow citizens to benefit from the national energy resources, the government introduced a subsidy system.Footnote 117 These subsidies are a heavy burden on the economy of the country and can affect energy prices in the region.
A solution for the problems discussed above could be to include in the suggested regional energy treaty specific trade and investment provisions aimed at regulating the export, import and production of energy. Such provisions should clarify that the fundamental principles of the General Agreement on Tariffs and Trade (GATT)Footnote 118 apply to all energy resources of the parties to the treaty.Footnote 119 This would ensure that energy products are subject to the same rules as other traded goods, including non-discrimination, national treatment, most-favoured-nation treatment, subsidies rules and transparency.Footnote 120 These provisions could also extend their coverage to the Palestinian Authority, which is not a member of the World Trade Organization,Footnote 121 and ensure a level playing field for energy trade and investment among all members.
While covering trade in general, GATT focuses on goods and services, and lacks any specific provisions for energy trade.Footnote 122 A regional energy treaty with provisions similar to the ECT would fill this gap by establishing specific rules and regulations governing energy trade, investment and cooperation among participating members.Footnote 123 This comprehensive framework would complement the principles and objectives of GATT,Footnote 124 providing clarity and legal certainty for energy trade. The key issues to address here are market access, transit, transparency and non-discrimination. Additionally, a regional energy treaty could also include provisions on harmful subsidies, as addressed above.
One way to incorporate these provisions into a regional energy treaty is through provisions similar to Articles 4 and 16 of the Energy Charter Treaty, which state that the provisions of the ECT do not prejudice the rights and obligations of the parties under other international agreements. Therefore, the parties to the ECT must still comply with their commitments under other agreements, including those related to trade and investment.Footnote 125 Incorporating similar provisions into a regional energy treaty would guarantee that the treaty will not infringe other agreements while simultaneously protecting the parties’ rights and obligations related to energy trade and investment.
Furthermore, existing trade agreements such as the North American Free Trade Agreement (NAFTA)Footnote 126 have provisions related to energy trade that could also be incorporated into a regional energy treaty. Though being replaced by the Canada-United States-Mexico Agreement (CUSMA) in 2020,Footnote 127 it can still be viewed as a model for successful regulation of commercial relationships in the energy sector. For instance, Chapter Six of NAFTA addresses energy and basic petrochemicals, and includes provisions that could be relevant for a regional energy treaty. Article 606 lists the principles of non-discrimination and national treatment in the energy sector.Footnote 128 If added to the provisions of a regional energy treaty, similar principles would ensure that its members treat energy resources of other countries as fairly and responsibly as they treat their own resources. Besides, to promote a stable commercial environment in the region, the treaty could provide a mechanism for tariff negotiations between the parties, whereby they could reach agreement on mutual reductions of tariffs, subsidies and other restrictions.Footnote 129 Alternatively, it could establish a regime of free trade in energy products between members. These provisions could significantly reduce the cost of energy products for consumers and promote the development of the energy sector in the region.
At the same time, Article 607 of NAFTA (addressing national security measures in relation to energy and basic petrochemical goods) provides for certain restrictions. More specifically, it allows parties to impose import restrictions on energy or basic petrochemical goods from another party, or to restrict exports of such goods in cases where it is necessary to supply a military establishment, respond to armed conflict, implement non-proliferation policies or agreements regarding nuclear weapons, or address direct threats to the supply of nuclear materials for defence purposes. It is worth mentioning that the grounds for invoking the national security exception outlined in Article 607 are narrower than those set out in GATT Article XXI or in the NAFTA general national security provision.Footnote 130 Similar security provisions could also be incorporated in a regional energy treaty in order to ensure that the parties retain their right to protect their national security even by measures that otherwise would conflict with the treaty’s provisions, but do so sparingly and only in justified circumstances.
Another critical component of any international treaty aimed at promoting trade and investment between members include provisions on investment promotion and protection. For this purpose, the Energy Charter Treaty includes several provisions that can serve as a useful model for a regional energy treaty. For instance, Article 10 of the ECT guarantees the fair and equitable treatment of investments made by investors of one contracting party in the territory of another contracting party.Footnote 131 This provision ensures that investors are treated fairly and without discrimination, and are protected from arbitrary or discriminatory measures.
However, despite its significance, Article 10 of the ECT has faced criticism because of the broad and ambiguous wording of the provision, which has led to challenges in its interpretation and application. This has resulted in an increasing number of claims filed under the fair and equitable treatment (FET) standard, with both claimants and contracting parties struggling to articulate clearly how the FET standard has been violated or upheld. Being shaped by the political and economic realities of the early 1990s, the ECT and, in particular, its Article 10 were aimed primarily at investment protection, providing protection for the EU investments in the fossil fuel sector of the former USSR republics.Footnote 132 In the modern context, however, these investment protection provisions have been used increasingly by fossil fuel investors to oppose governmental efforts to enact climate change policies, and to block the legislation that reduces their profits.Footnote 133 For this reason, the provisions of ECT Article 10, in their original wording, are criticised for failing to address the current political and economic challenges, and to protect legitimate policy objectives such as the environment, safety and public health. There is, therefore, a recognised need to revise the FET standard, in order to reflect a shift in modern global energy policy from traditional fossil fuel to low carbon sources, and to different financing schemes aimed at incentivising renewable energy.Footnote 134 To implement this objective, the EU tried unsuccessfully to convince ECT contracting parties to modernise the treaty and, in particular, to strengthen their right to regulate.Footnote 135
Another article of the Energy Charter Treaty that was to undergo considerable revision in the EU text proposal for the modernisation of that treaty is Article 13. It requires that investments should be protected from expropriation unless it is for a public purpose, is non-discriminatory, and provides prompt, adequate and effective compensation.Footnote 136 The need to modernise Article 13 was rooted in its imprecise definitions, the lack of an accurate definition of what constitutes ‘a measure or measures having effect equivalent to nationalisation or expropriation’, and lack of valuation criteria to be used for compensation.Footnote 137 A modern expropriation provision for our proposed regional energy treaty will need a more precise definition of ‘expropriation’, clearly excluding regulatory restrictions aimed at achieving public policy objectives, such as the protection of public security, public order and public morals, and protection of the environment. It would also need to establish a clear framework for assessing compensation, taking into account factors such as market value, economic impact and the legitimate public purpose behind the expropriation. Hence, this would provide investors with greater clarity and assurance regarding their rights in the event of expropriation, thereby fostering a more conducive environment for cross-border investment in the energy sector.
We would also propose the inclusion of a provision similar to ECT Article 12 (compensation for losses). This provides for compensation to investors in the event of war, armed conflict, a state of national emergency or any other similar event that prevents the normal operation of investments.Footnote 138 Including this provision in a regional energy treaty could help to mitigate risks associated with investing in a region that is prone to conflict. In the event of war, armed conflict or other similar event that prevents the normal operation of energy projects, this provision would ensure that investors in the energy sector are not left without recourse and are provided with adequate compensation for any losses incurred. This could help to provide a sense of security and stability for investors in the region, which can further incentivise investment and contribute to the economic development of the region. Provisions similar to ECT Articles 10, 12 and 13 can be found in many bilateral investment treaties (BITs).
At the same time, there is no unanimous consensus on whether BITs help in attracting foreign investment; based on some studies, they are of little effect.Footnote 139 Other researchers claim that BITs can increase foreign direct investment (FDI) in developing countries,Footnote 140 play a positive role in promoting investmentFootnote 141 and increase FDI inflows into countries that have mutually ratified BITs.Footnote 142 In the Israeli context, this suggests that Israel could gain considerable benefit from concluding BITs with capital-exporting countries with politically stable regimes (developed countries).Footnote 143 Being members of the EMGF, such developed countries as France, Italy and Greece have no BITs with Israel. Similarly, Jordan does not have a BIT in force with Italy,Footnote 144 and the BITs of Jordan and Egypt, respectively, with France are aged and do not include an investor-state dispute settlement (ISDS) mechanism.Footnote 145 For this reason, a regional energy treaty with a strong investment chapter could be beneficial for attracting foreign investment from these countries into Israel, Egypt and Jordan. There are also no existing BITs between Israel, on the one hand, and Egypt or Jordan, on the other, despite several joint energy projects concluded or currently planned.
We are not ignoring the fact that not all foreign investments are inherently positive for the host state. Certain foreign investments can jeopardise national security by posing risks to strategic assets and critical infrastructure.Footnote 146 For instance, the attempted acquisition of the US oil company Unocal by the China National Offshore Oil Corporation (CNOOC) in 2005 raised significant concerns within the US government. The USD 18.5 billion deal raised concerns about granting China access to sensitive information regarding energy operations and critical infrastructure in the US, thereby jeopardising national security.Footnote 147 As a result, the CNOOC withdrew its bid amidst political opposition and regulatory scrutiny.Footnote 148
To address similar risks, many countries have adopted domestic legal frameworks to screen and control foreign investments, with the aim of evaluating and mitigating potential national security threats.Footnote 149 Among the members of the EMGF, FranceFootnote 150 and ItalyFootnote 151 have implemented such mechanisms to screen foreign investments with national security considerations. Greece is currently in the process of establishing a screening mechanism.Footnote 152 However, Egypt, Cyprus and Jordan lack such mechanisms, leaving these countries potentially vulnerable to national security risks posed by certain foreign investments.Footnote 153 Israel, recognising the importance of safeguarding its national security interests, established in 2019 the Advisory Committee for Evaluating National Security Aspects in Foreign Investments.Footnote 154 However, this committee convenes at the request of its members and lacks a mandatory screening mechanism for all foreign investments.Footnote 155 In addition, Israel lacks a comprehensive domestic legal framework for regulating foreign investment,Footnote 156 unlike many other countries with similar screening mechanisms in place.Footnote 157 Thus, considering the potential attraction of foreign investors by a regional energy treaty, some of these EMGF members would be well advised to establish or revise their foreign investment screening mechanisms.
To sum up, a regional energy treaty could offer a reliable and consistent regulatory environment for investors operating in the Eastern Mediterranean region. It could include provisions for trade and investment, and the Energy Charter Treaty and other trade agreements (such as NAFTA) could be utilised as useful models for its provisions. At the same time, it is crucial to avoid the potential shortcomings and controversies analysed above, in particular those contained in Articles 10 and 13 of the ECT. This can be achieved by prioritising renewable energy and the need to tackle climate change, as well as building upon the revised text proposal for the modernisation of the ECT.
3.2.3. Environmental protection
The pursuit of sustainable development and environmental conservation is of paramount importance in today’s global energy landscape.Footnote 158 In this light, Article 19 of the ECT offers valuable insights that could serve as model provisions for a regional energy treaty on environmental protection and energy efficiency.Footnote 159 With these provisions, each contracting party would be bound to make efforts to minimise harmful environmental impacts arising from energy operations within its territory and in the surrounding maritime areas; this would prevent or mitigate environmental degradation in the maritime domain. Similar to the ECT principles, a regional energy treaty could stipulate provisions that require contracting parties to legislate to put the cost of pollution onto the polluters (polluter pays principle), to include transboundary pollution. Such provisions should be formulated in a manner that respects the public interest and does not hinder international trade.Footnote 160
In addition, to complement the efforts on environmental protection and energy efficiency, the proposed regional energy treaty could incorporate provisions from the non-binding Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA).Footnote 161 The objectives of PEEREA, as highlighted in its Article 1,Footnote 162 include promoting energy efficiency policies consistent with sustainable development, encouraging efficient energy markets, and fostering cooperation in the field of energy efficiency.Footnote 163 Adapting these provisions to the needs of the suggested regional energy treaty would ensure that producers and consumers utilise energy resources in an economically, environmentally and socially sound manner within the maritime context.
While the existing Statute of the EMGF already includes a declared commitment to ‘environmentally conscious development’,Footnote 164 this needs to be strengthened in a future regional treaty. Incorporating provisions of ECT Article 19 and PEEREA would help to promote responsible energy use, strengthen protection of the marine environment, and support international cooperation in pursuit of a greener and more secure future for the region.Footnote 165
3.2.4. Dispute settlement mechanism
As discussed above, the Eastern Mediterranean region is facing numerous challenges, which include disputes over maritime borders, geopolitical tension and fragmented legal frameworks. The absence of a common dispute settlement mechanism has hindered efforts to create a stable investment environment in the energy sector and resolve these issues. There is therefore a need for a comprehensive and customised dispute settlement system. This system could be created within the framework of a regional energy treaty, drawing on best practices established in international law.Footnote 166 The proposed mechanism would set up a robust legal framework for resolving complex disputes, fostering investment and turning the East Mediterranean Gas Forum into an influential stabilising factor in the region.
One type of dispute to be covered by the suggested dispute settlement mechanism is the state-to-state dispute. It should be noted that disputes of this type – which have gone to third party settlement – are relatively few compared with investor-state disputes.Footnote 167 One notable example of a state-to-state dispute, with implications in the energy field, is the case between Qatar and Bahrain regarding the delimitation of their maritime boundary and the distribution of hydrocarbon resources in the disputed area. Qatar and Bahrain had conflicting territorial claims over the Hawar Islands, and over sovereign rights to maritime resources and certain offshore gas fields. Unable to resolve the dispute through bilateral negotiations, they turned to the International Court of Justice (ICJ) for a binding resolution. The ICJ judgment, issued in 2001, determined the maritime boundary between Qatar and Bahrain and allocated the rights to explore and exploit the hydrocarbon resources in the disputed area.Footnote 168 This case demonstrates how a binding dispute resolution mechanism can help to resolve energy disputes even in the Middle East, thereby providing a clear legal framework for the two countries to effectively manage their energy resources, thus promoting stability and cooperation in the region.
Another helpful example of provisions that establish a dispute settlement mechanism can be found in the Energy Charter Treaty. In particular, its Article 27 provides effective procedures for the resolution of state-to-state disputes related to transit and investment. Establishing a framework for the resolution of such disputes, it sets up dialogue and negotiation through diplomatic channels as the first stage of dispute resolution. In cases where settlement cannot be achieved, either party involved in the dispute may initiate arbitration proceedings.Footnote 169 The arbitration process is designed to be flexible and adaptable, following the UNCITRAL Arbitration Rules, unless the parties involved have specifically agreed a different approach. This ensures that established and recognised rules govern the conduct of the arbitration, thus promoting fairness and consistency. To initiate the arbitration process, the party seeking recourse must provide written notice to the other party and submit the matter to an ad hoc tribunal.Footnote 170 The tribunal’s decision making is guided by the provisions of the ECT and applicable rules and principles of international law.Footnote 171 This ensures that the resolution aligns with the treaty’s objectives and relevant international legal standards. Once the tribunal reaches a decision, the arbitral award is considered final and binding upon the contracting parties.Footnote 172
In addition to state-to-state disputes, the dispute settlement mechanism of the suggested regional energy treaty should also include provisions for investor-state disputes, which are by far more common. Being included in over 3,000 international investment treaties,Footnote 173 investor-state dispute settlement mechanisms seek to resolve disputes between foreign investors and host states. Through these mechanisms, investors may seek redress if they believe their investments have been treated unfairly or subjected to expropriation or other actions by the host state. Like state-to-state disputes, investor-state disputes are settled typically via mediation (through a neutral third party) or arbitration (where neutral arbitrators hear and decide the case).Footnote 174
A potential model for a provision setting up a dispute settlement mechanism between investors and host governments is Article 26 of the ECT. The article affords investors the right to initiate arbitration against a contracting party in the event of a dispute related to investments. This provision serves to protect foreign investors from discriminatory and unfair treatment by host states. The rules and forum for the arbitration are selected by the investor from among the International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules, the Arbitration Institute of the Stockholm Chamber of Commerce, or any other arbitration rules agreed by the parties.Footnote 175 The investor may also choose to resolve the dispute in local courts of the host state.Footnote 176 This flexibility in selecting the forum and rules for arbitration allows investors to choose the venue where they believe their claims will be resolved most fairly and impartially.
The effectiveness of applying Article 26 of the ECT was illustrated in the case of Eiser Infrastructure Ltd and Energía Solar Luxembourg Sàrl v Kingdom of Spain. The claimants initiated arbitration against Spain under Article 26 in relation to the measures implemented by Spain that deprived them of their investments in the renewable energy sector. The arbitration was conducted according to ICSID rules. On 4 May 2017, the tribunal issued a decision finding that Spain had breached its obligations under the ECT by depriving the investors of their investments in an unfair and non-equitable manner, and ordered Spain to pay the claimants €128 million in damages.Footnote 177 The case highlights the significance of a dispute resolution mechanism provided in Article 26 of the ECT, which allows investors to protect their investments and seek redress for breaches of treaty obligations by host states.
On the other hand, Article 26 of the ECT has been criticised for providing foreign investors with a powerful tool to challenge government policies.Footnote 178 Provisions of Article 26 have been used by investors to oppose government policies related to renewable energy and climate change, which can hinder the transition to clean energy. Critics argue that these provisions lack transparency in the investment arbitration proceedings and prioritise the rights of investors over protection of the environment and human rights.Footnote 179 In view of that, some countries are considering withdrawing from the ECT or renegotiating the terms of Article 26 to ensure that it does not undermine their ability to implement renewable energy policies.Footnote 180
To address these issues, a regional energy treaty could prioritise environmental, social and human rights of the contracting party over investor rights. This could be achieved through explicit recognition of the importance of protecting the contracting parties’ rights, and by limiting disputes between investors and contracting parties to cases with a clear violation of a specific provision of the treaty. Such provisions can be based on similar ‘environmentally friendly’ dispute settlement provisions found in some of the new model BITs. For instance, Article 8(9) of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) guarantees fair treatment for foreign investors, while confirming the parties’ right to regulate at all levels of government to protect public health, safety and the environment, or to promote cultural diversity.Footnote 181 It clarifies that regulatory measures or modifications to laws that negatively affect an investment or investor’s expectations do not as such amount to a breach of obligations under the agreement.Footnote 182 These provisions in Article 8(9) of CETA demonstrate a balanced approach that considers the right to regulate in the public interest while providing guarantees for investors. They serve as an example of how a specific provision in an international economic agreement can prioritise the contracting parties’ rights and interests, including environmental and social concerns, without unduly constraining their ability to implement necessary policy measures. This would prevent investors from using the dispute settlement mechanism against legitimate public interests in protecting the environment or human rights.Footnote 183
In addition to the above, it seems crucial for energy treaties to include provisions on how to settle transit disputes. First, these provisions should guarantee uninterrupted transit of energy resources in the event of a potential dispute, as stipulated in Article 7(6) of the ECT. This provision does not allow any interruption or reduction in the existing flow of energy resources initiated by the transit party before the end of the dispute resolution procedures.Footnote 184 Second, the proposed regional energy treaty should outline a dispute settlement mechanism for transit disputes; such a mechanism could be based on the approach developed in Article 7(7) of the ECT.Footnote 185 According to this provision, a contracting party may refer the dispute to the Secretary-General of the Energy Charter Secretariat. In its turn, the Secretariat may elect to appoint a conciliator with a view to seeking a compromise between the disputing parties. It can be viewed as an advantage that these provisions apply not just to the contracting parties involved in the dispute, but also to other entities that are part of the dispute. Therefore, the framework outlined in the ECT (with necessary amendments) could serve as a model for the procedure of resolving transit disputes in a regional energy treaty. By incorporating a similar approach, such a treaty could establish a conflict resolution centre (CRC) that would offer resolution through ‘good offices’, mediation and conciliationFootnote 186 to the parties involved in the dispute.
We would suggest several amendments to the model provided by ECT Article 7(7) to make it more effective. First, after one of the parties to a dispute refers the dispute to the CRC, the proposed regional treaty should mandate the immediate appointment of a conciliator. If, despite the conciliator’s efforts, a compromise has not been achieved, the conciliator should be invested with the power to impose a temporary settlement that will be binding on the parties. The conciliator then should decide whether the dispute requires an urgent or delayed response. For instance, a dispute will require an urgent response if it blocks or significantly impedes the transit of energy resources. If an urgent response is required, the proposed treaty should impose short time frames for handling the dispute.Footnote 187 In the suggested treaty, the CRC would have no more than seven days in which to appoint a conciliator, and the conciliator should aim to reach a compromise within 30 days for urgent cases and within 90 days for cases allowing delayed responses. Once this time period has expired, we suggest applying the Med-Arb dispute resolution approachFootnote 188 and vesting the conciliator with the power of an arbitrator. Upon hearing the parties’ oral arguments, this arbitrator would make a binding decision on a temporary settlement, with the decision remaining in force until the final decision is made by the arbitral tribunal. This tribunal would be made up of a panel of three arbitrators who can rule on the final resolution of the dispute after hearing the parties.
Thus, the approach based on revised provisions of ECT Article 7(7) would establish a binding and effective mechanism for resolving transit disputes in the energy sector.
3.3. Expanding the EMGF scope to include renewable energy: The role of a regional energy treaty
The global energy crisis facing the world today is caused by factors such as the depletion of fossil fuel reserves, increasing energy demand and adverse effects of climate change. This has forced many countries to rethink their energy policies and invest in renewable energy sources such as bioenergy, geothermal energy, hydrogen, hydropower, marine energy, solar energy and wind energy.Footnote 189 For the Mediterranean region, with its limited natural resources and growing population, the shift towards renewable energy is particularly crucial. Several countries in the region, such as Israel and Jordan, have already made significant investment in renewable energy, and others are exploring its potential.Footnote 190 Moreover, all of the EMGF members, except the Palestinian Authority, are also active members of the International Renewable Energy Agency (IRENA).Footnote 191 This underscores their commitment to renewable energy and the necessity for international collaboration in this emerging field.Footnote 192
The region’s transition to renewable energy can be facilitated through the EMGF, which was established to promote regional cooperation in developing natural gas resources. While natural gas is currently a significant contributor to the region’s energy mix, the East Mediterranean region also has significant supplies of renewable energy, particularly solar and wind energy. A regional energy treaty could help to facilitate cooperation among its members in relation to renewable energy where there is still much to strive for.
Regional cooperation in this field may range from overcoming seasonal fluctuations in the production and consumption of electricity, to utilising differences in natural endowments of the parties, as well as building common expertise. First, renewable energy is notably affected by weather conditions, such as sunlight and wind.Footnote 193 Interconnecting the grids of multiple countries in the region will smooth out the production of renewable energy by capitalising on diverse weather patterns, time differentials and consumption trends. It will not only guarantee a reliable energy supply but also optimise resource utilisation, creating a more robust and sustainable energy landscape. Additionally, interconnecting national electric grids will also reduce aggregate annual energy costs compared to operating through isolated grids in each country, or in each ‘energy island’.Footnote 194 A first step in this direction is the underwater electric cable that will connect Israel and Cyprus.Footnote 195
The proposed regional energy treaty could facilitate the amalgamation of common expertise and knowledge about renewable resources, and foster innovation in energy production and distribution among the EMGF members. An example of such mutually beneficial cooperation is the 2022 Memorandum of Understanding between Israel and Jordan. Here the parties have agreed to trade desalinated water supplies from Israel for solar energy produced in Jordan.Footnote 196 Similarly, by leveraging the resources and expertise of its members, the EMGF can play a key role in promoting the development and integration of renewable energy into the region’s energy mix.
To reflect the expanded scope of its activities, the EMGF may need to consider changing its name to something that is more inclusive and representative. First, the focus could shift from gas to all types of energy, including renewable energy. Second, being no longer just a platform for dialogue (as is reflected in the term ‘forum’), it could instead be renamed the ‘East Mediterranean Energy Organisation’.
Finally, it seems important to establish a legal framework to regulate the organisation’s expanded range of operation and create decision-making organs that can reach binding decisions, either by majority voting or by consensus, as will be agreed by the parties. A regional energy treaty proposal, as previously discussed, could address potential legal issues and provide a comprehensive framework for coordinating energy production, distribution and consumption in the region. Such a treaty could also include provisions for attracting investment in renewable energy, developing infrastructure, connecting the members’ electricity systems and resolving disputes. Expanding the EMGF activities and creating a regional energy treaty that recognises the importance of renewable energy can strengthen energy security in the East Mediterranean region and contribute to global efforts to mitigate climate change. It requires a collaborative and forward-thinking approach that recognises the potential of renewable energy as a key contributor to the region’s future energy needs. Unlike the ECT, which faced harsh criticism for failing to align with environmental principles,Footnote 197 a regional energy treaty would demonstrate a commitment to sustainable development and climate action. As a result, it could attract new members to join the EMGF, fostering greater regional cooperation and stability.
4. Summary and conclusions
In its ongoing energy crisis, Europe is looking for ways to import natural gas from the Mediterranean. The platform for promoting regional energy cooperation and facilitating the export of natural gas from the Mediterranean to the European Union is the East Mediterranean Gas Forum. While the EMGF has become an important organisation promoting regional cooperation in the energy sector, it lacks an effective legal framework, with a proper governance structure, binding rules to ensure freer energy trade, safe transit and investments, promotion of renewable energy and protection of the environment. It also lacks a mechanism that could make its decisions binding on its members. To create this framework, this article suggests a new legal tool: a regional energy treaty.
With such a treaty, the EMGF could become a powerful and legally binding energy organisation. The treaty has the potential to offer significant benefits to the EMGF and its members. It could provide a solid legal foundation for energy cooperation, promote sustainable energy development and create a stable investment environment that could unlock economic growth in the East Mediterranean region. Additionally, a regional energy treaty has the potential to ensure security in the East Mediterranean energy sector. It can play a vital role in preventing and resolving disputes in the region – such as disputes over maritime borders, transit disputes, and political disputes over issues that are a potential threat to the stability and success of the EMGF. Lack of security, on the other hand, can have a negative impact on the production of natural gas, its profitability and investor confidence in the region.
To be an effective legal tool, a regional energy treaty should include provisions related to transit, trade and investment. It also requires decision-making organs and comprehensive dispute settlement mechanisms that could foster investment, ensure free transit and strengthen the EMGF position as a leading energy organisation in the region. In addition, it is worth considering the expansion of the organisation into renewable energy in order to facilitate regional cooperation in this important area. Respective provisions could promote energy security and sustainability, and help the region to meet its future energy needs while contributing towards a greener and more sustainable future.
Acknowledgements
This article is based on PhD research performed by the author under the supervision and guidance of Professor Arie Reich.
Funding statement
The authors have not received any funding for this specific research.
Competing interests
The authors declare none.
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