Is Reform of International Trade in Energy Resources Necessary, and Is a New Energy Agreement the Way to Go?

In this essay, Dr. Grigorova - by criticizing the inadequacy of currently existing rules argue that a new Energy Agreement (EA) within the WTO framework would raise more problems than it would give solutions, and considers alternative options. After providing a brief overview of the state of affairs of the international trading regime of energy resources, she focuses on the possibility to use existing models for designing a new Energy Agreement. She, therefore, examines whether this approach could be adequately transposed to the energy sector, given its specificities. Indeed, trade in energy is unique in many regards. Energy resources are not regularly distributed, and this calls for a clear division between “net importing” and “net exporting” countries. Traditional energy resources (oil and gas, for example) are exhaustible, and the peak in their production, although impossible to predict with certainty, may have already been reached, or not be very far along the way. This makes it all the more relevant for public policies to promote ways of limiting production and consumption. In this context, environmental considerations are also of great importance in the sector, and State involvement is crucial, both for internalizing environmental externalities1 and for promoting more environmentally friendly energy sources. Besides, the market for energy is extremely politicized. All of these specificity features are inevitably reflected in different energy policies. The singularity of the energy sector has been used to uphold arguments as to the inapplicability of WTO rules to trade in energy resources. Legally, these arguments consist in finding a kind of tacit agreement among the trading nations, excluding the energy sector from the framework of the multilateral trading system. The argument of the existence of such an agreement is rather difficult to sustain and seems to only be supported by a very limited number of WTO Members. It is largely contested in legal scholarship and recent cases brought before the Dispute Settlement Body (DSB) prove that the energy sector falls undoubtedly within the scope of application of WTO disciplines. However, the issue of applicability differs from questions related to the actual application. While it may be true that WTO law applies to trade in energy resources, the way in which the specificities of the sector should be reflected in its application is still debatable. As a conclusion, it is submitted that WTO law may in some cases appear not flexible enough to take into consideration the specificities of this sector. If a sectoral Energy Agreement is to be designed, its provisions will need to be carefully drafted in order to avoid as many interpretation predicaments as possible. However, the need of consensus on all of these issues will undoubtedly result in somewhat reduced obligations and there is still no guarantee that all possible complications will be resolved in advance. Arguably, such a modification of the existing general framework will be insufficient. By changing the perspective, and by suggesting that the flexibilities of the general rules, combined with some new interpretations by panels and the Appellate Body, allow for sufficient consideration of the specificities of energy trade, this will not only prove to be a less conflictual way of dealing with the problem, but also reinforce the system instead of fragmenting it.