WTO - Energy Services

The energy sector is one of the sectors for which the new trade negotiations in the World Trade Organisation (WTO) are expected to yield a considerable result. Trade negotiators and WTO member countries show much greater interest in the energy sector than when they negotiated the WTO rules that apply today. In the light of the pending WTO negotiations on energy services, Craig Pouncey, a partner in Herbert Smith's Brussels office describes the general background and discusses the practical implications for companies.

General background

The existing WTO rules that apply to the energy sector are spread out over a number of legal texts. This is related to the nature of the energy sector and the distinction that the WTO makes between trade in goods and trade in services. Trade in goods is covered by the General Agreement on Tariffs and Trade (GATT) while trade in services is covered by the General Agreement on Trade in Services (GATS). The energy sector involves trade in goods and services and is covered by both sets of rules. However, because of the broad interpretation that is given to the concept of trade in services in WTO law, the energy sector is mainly a services sector. This involves, for instance, services related to exploration and production of energy, construction and maintenance of energy facilities, network services, storage services, supply services, energy management, decommissioning of energy facilities etc.

When assessing the impact of the GATS on energy services, it is important to take into account two key features of the GATS. The first is that GATS covers several "modes of supply" one of which is "commercial presence" of a service supplier of one WTO member on the territory of another WTO member. Via this concept of "commercial presence" GATS disciplines are de facto extended to overseas investments in energy infrastructure. The second key feature is that the GATS uses an "opt in" system. The basic GATS disciplines of non-discrimination and regulatory transparency are only applicable to a certain services sector in a certain WTO member country if that country has made a relevant commitment in a relevant sector. In other words, different WTO members have different WTO obligations and in order to know the precise obligations of a WTO member it is necessary to consult that country's "Schedule of Commitments".

Energy services

These "Schedules of Commitments" are based on a services classification list that was drafted in...