China, Japan and South Korea are undergoing rapid and comprehensive transformations in developing the intelligent and sustainable use of energy and other natural resources. These changes are driven by new strategies towards energy security and climate change mitigation. Given that future China-Japan-South Korea energy cooperation will become even more important (because the focus of the international energy market shifts to Asia) it is imperative to make progress in this specific trilateral cooperation.[1] In this respect, regulatory progress must address the lack of comprehensive security architecture regarding the regional cooperation and more efficient dispute resolution mechanisms to strengthen conflicts prevention and resolve the energy disputes in this region.

With the increasing need to increase the energy governance, the Energy Charter Treaty (“ECT”), which entered in effect in April 1998 with 53 state signatories, could be potential model for this trilateral cooperation.[2] The purpose of ECT is to advocate freedom in energy transit, trade, investment, and efficiency. Firstly, the ECT can contribute a comprehensive understanding of protection to be provided regarding the commercial activities on energy resources. For energy sector, a stable and predictable legal framework for trans-border trade is crucial to encourage and attract infrastructure investments. Secondly, after identifying the common energy security issues and addressing matters of common interests, ECT can serve as a feasible solution in a long-term negotiation and consultation. Thirdly, ECT enhances many aspects of sustainable development through its investment protection provisions, by encouraging all the participants to pursue sustainable development at a global level. The trilateral cooperation with the ECT-based approach could adequately responds to the challenges of climate change.

With regard to the dispute resolution mechanism, the investor-state arbitration is generally perceived as a useful tool to protect investment in the energy sector. However, it could be also a double-edged sword as the three governments are undertaking a series of legislative and policy reforms for the energy section, which could expose states more likely to be sued for possible violations. In addition, investor-state arbitration has been considerably criticized in the last years and there are some attempts to reshape the investment dispute resolution system as demonstrated by the ongoing work of the Working Group III of the United Nations Commission on International Trade Law (UNCITRAL) which continues discussions on possible reform of investor–state dispute settlement (ISDS).[1] In the circumstances, the state to state mediation could be introduced under the trilateral cooperation for the potential disputes.[2] By doing so, states can carefully calculate the strategic benefits in terms of when and where mediate, and whether to act as a mediator.

The energy security and climate change in East Asia-Trilateral Cooperation is moving towards a Sustainable Future and it is a major development for the world. The challenges are manifold, and some are still unknown. Much remains to be done but regulatory progress will gradually unfold and pave the way for a global change which should ensure global sustainable development for all.

[1] Energy Security And Climate Change in East Asia – Jointly Getting on Track for A More Sustainable Future, the 3rd Young Leader’s Forum http://www.kas.de/japan/en/events/77881/

[2] The Energy Charter Treaty provides a multilateral framework for energy cooperation that is unique under international law, see https://energycharter.org/process/energy-charter-treaty-1994/energy-charter-treaty/

[3] More information is available on the working group website. The working group will convene again in Vienna in late 2018. See http://www.uncitral.org/uncitral/en/commission/working_groups/3Investor_State.html

[4] See [ https://www.armomediation.com/menu ]. See also Chang-fa Lo, Julien Chaisse et al. ‘Concept Paper on the Creation of a Permanent “Asia-Pacific Regional Mediation Organization” for State-to-State (Economy-To-Economy) Disputes’ 321-336.

Posted by Xu Qian

Xu is currently a Ph.D. candidate at the Chinese University of Hong Kong, faculty of law. Xu’s project examines the international governance and regulation of global sanitation and water services. The PhD research verges on both international investment law and human rights law, with a focus on the interplay between these bodies of law in the context of international arbitration. Xu’s PhD thesis seeks to provide the first exhaustive analysis of international disputes in the increasingly globalized challenges of water resource allocation. The stakes in arriving at a rational and effective normative regime for international water governance are considerable given the potential for high profits, the development of new technologies and the basic need of all human populations for water access. Her objective is to suggest legal developments that might enable states to better manage the privatization of water services. Xu’s academic publications include: " Trans-Pacific Partnership: A World Trade Revolution?,” APEC Currents (2016); “Investment Rule-making in Asia-European Union Relations,” Cambridge University Press (2018); “Challenges of Water Governance (and Privatization) in China”47 Georgia Journal of International and Comparative Law (2018). Xu is currently working on a new article which critically examines the application of the proportionality principle across two decades of investment disputes. Qian Xu has presented her work at many academic events including the “water event” (Lisbon, June, 2016) and the Asia FDI Forum II, III and IV (respectively, May 2016, March 2017 and March 2018). More recently, Qian Xu was the Hong Kong delegate to the 2018 Young Leaders' Energy Forum which allowed her to foster her research on the impact of climate change on water services regulation. Xu also was the team leader of CUHK law team at the Tsinghua Moot (April 2017) which achieved a third place. She also co-organized the 2018 Hong Kong Law Research Postgraduate Symposium (http://webapp1.law.cuhk.edu.hk/2015conference/0411/conf/symposium_2018.php) Qian Xu holds a BA from Heilongjiang University (2012), a LLM from CUHK Law (2014), and a post-graduate diploma from the Academy of International Trade and Investment Law (2015). She is a member of the Asian Academy of International Law (AAIL).

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