Provisional Application of the Energy Charter Treaty: The Yukos Arbitration and the Future Place of Provisional Application in International Law

The provisional application of treaties is a relatively recent development in international treaty law designed to address some of the shortcomings of the traditional practice of concluding treaties. Generally, the process of concluding a treaty has taken place under a three-step process of signature, ratification, and entry into force.1 Parties to a treaty must express their consent to be bound, a process most commonly achieved through a simple signature that expresses a party's consent to be bound subject to domestic ratification of the treaty. Signatories then must ratify the treaty under their respective domestic procedures. Once the required number of signatories has ratified the treaty, the treaty will definitively enter into force. It is only at this point that positive legal obligations arise under the treaty.2 Prior to entry into force, a treaty does not impose positive legal duties and obligations on signatory parties; and as a result of each state's varying process of ratification, there is often a substantial gap in time between treaty signature and entry into force. By contrast, provisional application imposes duties and obligations on signatories during this gap period and can be best understood as an attempt to solve collective action problems created by this gap. Under the provisional application of a treaty, signatory states undertake to give effect to treaty obligations prior to the completion of the domestic ratification procedures, with the intention of acceding to the treaty once domestic ratification has been completed.3 However, the extent to which these obligations are binding, affirmative legal obligations has not been firmly established in international law. This Comment will examine the obligations imposed by the provisional application of treaties through an analysis of the Energy Charter Treaty ("ECT") in the context of the Yukos Arbitration. The ECT is an energy-sector specific multilateral treaty designed to promote long-term cooperation in the energy sector. Currendy, fifty-one states, including Russia, are signatories to the ECT. One important feature of the ECT is that it provides for the provisional application of the treaty by a signatory pending formal domestic ratification by that signatory. As a signatory that has not expressly indicated an inability to apply the ECT provisionaky, Russia is obligated to comply with its terms prior to ratification by the Russian State Duma "to the extent that such provisional application is not inconsistent with its constitution, laws, or regulations."4 Russia's agreement to apply the ECT provisionally is an important factor in resolving the arbitration Russia is currently engaged in under the dispute resolution provisions of the ECT ("Yukos Arbitration") with subsidiaries of Group Menatep ("Menatep")5 over Russia's forced dismantlement of the Yukos Oil Company ("Yukos"). A threshold issue in this arbitration will be whether Russia, in agreeing to apply the ECT provisionally, incurred binding, affirmative legal obligations that could expose it to liability for the actions taken against Yukos. Furthermore, the extent to which the provisional appkcation of treaties imposes binding, affirmative legal obligations is not an isolated question without future significance. Recently, Russia has again presided over what appears reminiscent of a Yukos-esque forced nationakzation of the Sakhakn II liquefied natural gas project.6 Russia also continues to indirectly threaten further nationalization and consokdation in the energy sector. It seems probable that the efficacy of the ECT and the obligations imposed by its provisional application will again be put to the test. Section I discusses the basis, use, and advantages of the provisional application of treaties in international law. Section II will provide a general overview of the ECT, with a specific emphasis on the treaty provisions likely to arise in the Yukos Arbitration; and Section III presents a brief factual background to the Yukos Arbitration. …