INTERNATIONAL AGREEMENT
BETWEEN
THE GOVERNMENT OF THE
REPUBLIC OF TURKEY
AND
THE GOVERNMENT OF THE
REPUBLIC OF AZERBAİJAN
CONCERNING
THE TRANS ANATOLIAN NATURAL
GAS PİPELİNE SYSTEM
A) The Provided Dispute Prevention Mechnisms
Introduction
It is a big issue for many countries that achieving the energy sources and as a solution of that problem, many agreements are being made between states. In this perspective, Turkey is a transit country in the project of “Southern Gas Corridor”.1 The geopolitical position of Turkey is really essential due to several reasons because it is located between Middle East and Asian countries and European countries. Therefore, possible transfers between Europe and Azerbaijan can be made from Turkey. Because of the crucial location of Turkey, an agreement was signed between Turkey and Azerbaijan which will be mentioned only as “Agreement”, is fully named “Intergovernmental Agreement between The Government of the Republic of Turkey and The Government of the Republic of Azerbaijan concerning The Trans Anatolian Natural Gas Pipeline System” (TANAP IGA). It aims to make improvement on the energy sector and increase the convenience in transfer by collaboration of Azerbaijan and Turkey. However, energy security and also dispute resolution ways are essential. As well as the possibility that disputes may come to the fore in every agreement, parties should regulate the dispute prevention mechanisms. This essay will clarify the dispute prevention mechanisms in this agreement and discuss the possible improvements. It is clear that, regulations on dispute prevention is crucial to avoid from financial and timing problems when parties take legal action or choose one of the dispute resolution ways. Therefore, if dispute prevention methods are provided, it can be beneficial to the contractors. Especially in important issues such as energy and its transfer, it can be supported that dispute prevention methods might be useful and advantageous. In this perspective, this question will discuss these prevention mechanisms in generally, which clauses take part in this agreement and also how they are regulated. After that explanations, lastly the deficiencies of these clauses will be clarified respectively.Dispute Prevention Mechanisms
“Prevention is better than cure”
While managing a contract or agreement, analysing the risks, resources, relationships and responsibilities are essential to avoid the disputes. These managements should satisfy the parties and also keep continue to be satisfactory to both parties. Moreover, parties should agree the dispute prevention devices before a dispute has arisen because “prevention is better than cure.” Parties may have economic losses if they have to go to arbitratral tribunal or another dispute resolution way. Therefore, dispute prevention clauses should be regulated in details critically.
Ways of dispute prevention
In an early stage, the dispute can be prevented and it is the main aim of dispute prevention mechanisms. Additionally, the mechanisms can help the parties to strengthen their relationships each other while they are preventing the potential disputes. In this perspective, the ways of dispute prevention are; partnering, claim appeal committee, early neutral evaluation and Dispute Boards. From these methods, “dispute boards” can be used in the dispute resolution and also for prevention of dispute.
In order to prevent the dispute, there are many types of clauses that can be put into agreements. These can be novation clauses, notice clauses, renegotiation clauses. Morover, novation clauses and notice clauses can be regulated for preventing the disputes from early stages. However, it is clear that there are some main approaches for Public Private Partnerships (PPPs) Projects.
The method of “Claims appeals committees” has the advantage of being faster in decision making, having lower cost and being more flexible, while decisions remain within the control of the parties.
TANAP Commitee
In this perspective, according to the Article 4.3 of TANAP, dispute prevention is provided by a committee which is named “TANAP Committee”. There should be two representatives from each State and it supports the balance between these States. The duty of this committee is regulated in the Article 12 of this agreement. According to that, if any dispute arise over about the provisions of this agreement, parties should try to solve that problem in good faith. However, if they cannot, the TANAP Commitee or other diplomatic channels shall resolve the dispute. It shows that, as a dispute prevention way, “Claims appeals committee” methos has been chosen by the parties, States. It is beneficial and suitable in long-term agreements because the purpose of this committee is indicating the disputes, disagreements and conflicts which could not be solved at “lower management levels.”
It is seen that there is two stages about the dispute prevention. Firstly, the agreement invites parties to make decisions in good faith and use their best endeavour to keep in with. Secondly, the role of TANAP Committee or any other diplomatic channels is crucial for resolving disputes without taking any legal action. When a dispute has arisen between the parties, the satisfaction of them is essential. Moreover, the economic interests should be protected. Therefore, if parties are not satisfied with the result of that stage and if they cannot find the solution of the dispute within six months from the date of the dispute arises, it is regulated in the Article 12.2 of the Agreement that “it may be submitted at the request of either State to an arbitration tribunal which shall be composed of three arbitrators appointed in accordance with the provisions of this Article.”
Conclusion
It is also certain that, every dispute cannot be predicted by the parties or everything cannot be explained, described in words easily. There can be always gaps in the regulations. That is why, sometimes the dispute prevention provisions cannot be sufficient and enough. Even if all sorts of possibilities that may cause to a dispute between the parties are considered, an unpredictable issue can be seen. It is clear that dispute prevention mechanism is really important to determine the solution of the problem without an arbitral process.
In this view, in this question the current dispute prevention mechanisms and defencies of them have been evaluated. It is seen that, there is a TANAP Commitee and it is one of the prevention methods generally. Therefore, some improvements about the other methods can be made to make that system more powerful.
B) A dispute has arisen as to whether Turkey had successfully acquired relevant private land to provide for the pipeline project. Discuss whether Azerbeijan may resort to the dispute resolution procedures under the Energy Charter Treaty.
Introduction
The dispute is about providing relevant private land to the pipeline project and if the type of the dispute is indicated, it is certain that it is not a “transit dispute.” It is emphasized because generally transit disputes are related with pipeline projects. However, in this case, the problem is not caused by “the transit of energy materials and products” as regulated in the Article 7.1 of the Agreement. Therefore, the type of the contract and also the type of the dispute that has arisen between them is essential to increase the understanding about the dispute resolution mechanism way.
In the present case, a dispute has arisen between Azerbeijan and Turkey because it is thought by Azerbeijan that Turkey has defaulted about providing the suitable land for the pipeline project.
The question will adress the question of whether Azerbeijan will resort the dispute resolution procedures under the ECT provisions related to this matter. In this perspective, land rights, ECT and dispute settlement mechanism in the Agreement and in ECT will be clarified.
Land Rights
It is regulated in the Article 5 of the Agreement that “The Republic or Turkey shall facilitate the grant or the acquisiton of Land Rights necessary for the realisation of the TANAP Project under fair, transparent and legally enforcable terms and conditions.” It is clear that, the liability belongs to Turkey to find a relevant private land for pipeline project.
The aqcuisiton of land for pipeline construction and generally the land rights are the most crucial issues about the implementation of a gas line project. Firstly, the land corridor should be identified for the acquisition. The main aim of the investors about the land is having the all exclusive rights on the land and restatin the third parties’ interventions to the land because the usage of the land from a third party can affect the pipeline project. In this perspective, the importance of the land for Azerbeijan is obvious. As a general rule, the host government should solve the problems about the acquisiton of the land, make negotiations with the landlords. In this perspective, it is also decided that the land acquisiton will be made by the General Directorate of BOTAŞ Petroleum Pipeline Corporation (BOTAŞ).
Energy Charter Treaty
The Energy Charter Treaty(ECT) can be denifed as “a unique instrument for the promotion of international cooperation in the energy sector and it is an important legal basis for the creation of an open international energy market.”
Actually, ECT is not an arbitration system nor a set of arbitration rules. It just provides to access the arbitration, rules and shows the arbitration ways that parties can choose.Moreover, ECT provides energy security in a crucial level12 and is “a perfect starting point for international coorperation”.
When the relationship between this agreement and other international obligations, it is regulated in the Article 2.2 of the Agreement that “Nothing in this Agreement shall derogate from the rights or obligations of any State under the ECT or any other international treaty or rule of international law.”Moreover, Azerbaijan, Turkey, Georgia, Greece, Albania, Bulgaria and Italy are the signatories and contracting parties to the ECT. It means that all the transit and buyer countries or the gas producing country are the parties to the ECT. The main aim of the ECT is promoting the cooperation between the states and it is legally binding.Therefore, the treaty that have been signed by the states should obey the provisions of ECT.
Expectations from the project of these countries are all different. Consequently, after negotiations and explanations, each country usually have different projects agreements with Azerbaijan. In this perspective, Turkey has a special agreement between Azerbaijan and the land rights are regulated in this agreement in a different article critically and it will be examined in this paper.
IGAs and HGAs
The key legal framework of “Southern Gas Corridor” project is set out in various Intergovernmental Agreements (IGAs), between the gas-producing, transit and consumer countries, and the Host Government Agreements (HGAs), between the transit countries and pipeline owners.
The rules in TANAP that are related with the transit and capacity allocation are regulated by HGA and ECT. It is also beneficial to mention that, HGA is a part of Turkish law and Turkey is a party of ECT. When IGAs and HGAs are compared to each other, it is seen that IGAs regulate the general principles of Southern Gas Corridor but the implementation, obligations of the investors and the host states are detailed in HGAs critically. Furthermore, most importantly, land rights and land acquisition are regulated in HGAs.
Dispute Settlement Mechanism
It is beneficial to emphasise again the Article 12.2 of the IGA between Turkey and Azerbeijan regulated that “it may be submitted at the request of either State to an arbitration tribunal which shall be composed of three arbitrators appointed in accordance with the provisions of this Article.” Therefore, if Turkey did not fulfil the obligations which is regulated as “land rights” in the Article 5 of the Agreement, and if it causes a dispute between Azerbeijan and Turkey, they should follow the stages for dispute resolution.
As an extra information, it should be clarified that only TANAP Company is able to make a claim against Turkey in international arbitration under HGA. Therefore, according to the article 34 of TANAP HGA, other contractors, shippers, companies, shareholders are not entitled to bring a suit against Turkey but in the cases of expropriation, this limitation is not implemented. It is a specific limitation and exception but it is possible that, if Turkey did not provide a relevant private land to that project that may be related with the expropriation.
Dispute Settlement in Energy Charter Treaty
According to the Article 27 of ECT, resolving the dispute firstly through diplomatic channels is recommended. Moreover, as it mentioned before, it is regulated in the Agreement that States shall use their best endeavours via TANAP Committee or diplomatic channels.
Therefore, the regulation about the dispute settlements is similar in the ECT and the Agreement. According to the Article 27 of ECT, parties should try to find a solution of the problem through diplomatic channels or committee and a period of time is given to them. If parties still have not found a way to resolve the dispute between them after these processes, any party can write a notice to as hoc tribunal or UNCITRAL.
It is clear that, Azerbeijan and Turkey should apply the diplomatic channels or the committee first. If the dispute cannot be resolved despite mutual efforts of the parties, it is possible that the dispute can be resolved through international arbitration.