1. Georgia and the Energy Charter Treaty
The 1994 Energy Charter Treaty (“ECT”), ratified by Georgia on 22 February 1995, entered into force on 16 April 1998 (the “Effective Date”). Georgia also became a party to the 1994 Protocol on Energy Efficiency and Related Environmental Aspects and the 1998 Amendment to the trade-related provisions of the ECT.
The ECT provides legal protections for foreign investment in the energy sector, ensures non-discriminatory transit of energy and energy products, promotes transparency and competition, and aims to guarantee open access to the sector.
In our previous article, we offered an overview of the main obligations of member states in the investment sphere under the ECT. This article focuses on the ECT provisions relating to trade.
2. Main Obligations of Member States in the Trade Sphere Under the ECT
The Trade Amendment (“TA”) to the ECT was adopted in 1998 by the Energy Charter Conference. The goal of the ECT trade regime is to promote open and nondiscriminatory energy markets among Contracting Parties. The TA aims to establish a stable, predictable, and non-discriminatory framework for all energy-related trade between ECT members.
Because the World Trade Organisation (“WTO”) does not have sector-specific rules for energy, the ECT trade regime extends WTO-style benefits and obligations to the energy sectors of Contracting Parties that are not WTO members. In practice, this means that trade in the energy sector between WTO and non-WTO members—and among non-WTO members—is treated as if all parties were WTO members.
2.1 Basic WTO Principles Incorporated in the ECT
2.1.1 Non-Discrimination
This principle includes two core obligations:
(a) Most-Favoured-Nation Treatment (“MFN”)
Countries must not discriminate among their trading partners. Any advantage granted to one country regarding imports or exports must be extended immediately and unconditionally to all other members.
MFN applies to all goods, services, and investments in the energy sphere.
Exceptions exist for customs unions, free trade agreements, and imports from developing countries.
(b) National Treatment (“NT”)
Foreign and domestic “like” products must be treated equally once they enter the domestic market. NT does not apply at the border; therefore, customs duties on imported energy-related products are allowed even if equivalent domestic products are not taxed.
2.1.2 Elimination of Quantitative Restrictions
The ECT requires the removal of all quantitative limits on trade—such as quotas, licensing rules, or any measures imposing quantitative restrictions.
This applies to both imports and exports.
Governments may retain customs duties if they remain below the maximum levels agreed in their WTO commitments. Qualitative product regulations, or Technical Barriers to Trade (“TBTs”), are acceptable if they serve a legitimate purpose and are the least trade-distortive option.
2.2 New Elements Introduced by the Trade Amendment
The TA expanded the ECT’s coverage to include not only “Energy Materials and Products” but also an extensive list of energy-related equipment.
With respect to customs duties, the TA preserved the “best endeavours” approach: Contracting Parties commit not to increase tariffs beyond certain levels but are not legally bound.
However, the TA introduced the possibility of transforming these soft-law pledges into a binding customs tariff standstill regime, requiring member states to negotiate toward binding commitments on tariff non-increase.
3. Trade Dispute Settlement Under the Trade Amendment
The ECT’s trade dispute settlement system mirrors that of the WTO but is lighter, less detailed, and simpler.
When a trade-related dispute arises between Contracting Parties, it is referred to a dispute settlement panel appointed by the Energy Charter Conference. Once the panel issues its report, the Energy Charter Conference adopts it by a three-fourths majority of those present and voting, with at least a simple majority of all Contracting Parties supporting the decision.
In contrast, WTO panel reports are automatically adopted unless there is a unanimous rejection.
This means the TA preserves a degree of political decision-making, which can encourage mutually acceptable, out-of-court settlement of disputes.
The ECT and the obligations stemming from it are highly significant for Georgia as the country seeks to strengthen its role in the regional energy market and better utilise its energy resources. We will continue to explore additional aspects of the ECT in future articles.
For a broader overview of Georgia’s commitments under the Energy Charter Treaty, you can also review our detailed analysis here.