In an increasingly integrated global energy market energy materials and products are transported over large distances from producers to consumers. In particular carriage of network-bound energy, such as natural gas and electricity, often involves crossing of multiple national borders. Even bilateral disputes over energy transit can have immediate multilateral implications for gas supply. This underlines the importance of principles and legal and technical standards mutually accepted on a multilateral basis to promote reliability of cross-border energy flows.
A distinctive feature of the Energy Charter Treaty is that it provides a set of rules that covers the entire energy value chain, including not only investments in production and generation but also the terms under which energy can be traded and transported across various national jurisdictions to international markets.
The Treaty's energy-specific provisions on trade and transit are based on those of the WTO, but with two important additional considerations. Firstly, they extend WTO rules for the energy sector even to those Contracting Parties that are not yet members of the WTO; as of March 2013, this was relevant for six member countries of the Energy Charter Treaty that are not yet members of the WTO.
Secondly, the Treaty addresses in more detail the important strategic issue of energy transit. Current Treaty provisions oblige participating states to take the necessary measures to facilitate transit of energy, consistent with the principle of freedom of transit, and to secure established energy flows. Transit countries are also under an obligation not to interrupt or reduce existing transit flows even if they have disputes with another country concerning this transit.
Through its investment and transit provisions, the Treaty also supports the establishment of new transportation capacity and thereby facilitates the diversification of supply and of export. The substantive provisions of the Treaty in these areas are enforceable through a state-to-state dispute settlement mechanism; this can be particularly valuable for complex cross-border infrastructure projects, such as the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum Gas pipelines.