UK: International Law Regime of Transboundary Pipelines

Last Updated: 11 October 2002

In recent years, technology has dramatically improved the distances that pipelines can carry hydrocarbons underwater and overland. As a result, the potential for exporting hydrocarbons from isolated production centres to consumers via pipeline has expanded. The number of long-distance pipelines has increased as a result of this and other, often geopolitical, factors.

Exporters, consumers, and the global energy industry have become increasingly and mutually dependent on the transportation of hydrocarbon products through long-distance pipelines. Indeed, it is estimated that over half of the world’s oil production is now traded across at least one border. Many of these pipelines – sometimes referred to as "transboundary pipelines" – cross international frontiers, and as a result implicate the rules of public international law.

Which framework model to use

The international legal regime applicable to these transboundary pipelines is developing quickly to match the commercial practice. There are a number of existing international legal norms and treaties that deal with issues related to transboundary pipelines. Many of these sources of law arise from general public international law sources, and so are often not known to general commercial lawyers.

There are two basic models under public international law that can be used as the framework for a transboundary pipeline project: the Interconnector model and the Unified Project model. Which one is chosen can have significant legal implications for political and business relationships of the States and commercial players involved in such a project.

The Interconnector model is really two separate pipelines that are joined together at the common boundary between two States. Each State retains separate and distinct sovereignty over that part of the pipeline that lies within its territory. National laws on taxation, employment, health and safety and so on are applied separately by each country on "its" part of the pipeline. An analogy would be a highway that started in one country and continued into another country. The two interconnected pipelines are usually (but not necessarily) built by two separate entities. There is no requirement for an interstate agreement for an Interconnector model pipeline, although the commercial execution of such a project will be greatly simplified by a properly crafted agreement. The legal regime applicable will be the national laws of the relevant States, and any coordination can be accomplished by way of a host government agreement.

The Unified Project model is a true international pipeline. It is a single pipeline that straddles one or more boundaries. One single legal regime is created between the relevant States that applies to the entire length of the pipeline and all coordination problems (such as a common fiscal, safety and employment regime) are resolved by way of an IGA. This model has many other advantages for commercial actors and governments in simplifying the rules to be applied to the construction and maintenance of the pipeline.

The most significant difference between the two models revolves around the issue of national jurisdiction over the pipeline. In the Interconnector model, there must be a prior agreement as to the location of the common boundary. Without that agreement, the delineation of sovereignty by virtue of control over a segment of the pipeline will in practice prejudice the territorial claims of the countries concerned. By way of contrast, the Unified Project model enables countries to by-pass sovereignty issues and isolate territorial and boundary disputes, without prejudicing a State’s territorial or boundary claims. Because the Interconnector model requires the two governments to agree on a physical separation of the pipeline into two national sectors, over which their separate national sovereignty and control would be exercised, to our knowledge, this model has never been used in situations where a pipeline would be required to traverse disputed territory.

Mostly as a result of the growing awareness from industry players of the relevance of public international law to their international business activities, and transboundary pipelines in particular, the past five years or so have witnessed an increase in the use of interstate agreements to facilitate pipeline projects regardless of the particular model used. In some instances, it may be possible to rely on the same international law principles that are applied to joint development zones. Partners in our Public International Law group have experience in negotiating and drafting these types of agreements.

Offshore versus land-based transboundary pipelines

One obvious distinction has to be drawn in the international law applicable to transboundary pipelines is between offshore pipelines and land-based pipelines. The United Nations Convention on the Law of the Sea (UNCLOS) has a number of provisions that specifically deal with transboundary pipelines. In particular, Article 79 of UNCLOS clearly states that, subject to certain conditions:

1 all States are entitled to lay submarine pipelines on the continental shelf (i.e., beyond the usually 12-mile territorial sea limit); and

2 a coastal State may not impede the laying or maintenance of such pipelines.

The consent of the coastal State is required for the delineation of the particular course of a seabed pipeline, but not for the fact of the pipeline being built.

Intra-field pipelines connecting the sub-sea well to the production installation, or bringing oil and gas onshore, are often regulated by interstate agreement. Examples of these include:

  • Agreement between Norway and UK relating to the Ekofisk Oil and Gas Pipeline System 1973
    This provided for the building of a pipeline from Ekofisk field across Norway’s continental shelf to the UK. The UK agreed not to object and relevant license were to be issued when needed. The pipeline was to be operated by a International law regime of transboundary pipelines continued from page 11 Norwegian company. The tariff had to be fair and agreed to by Norway (the party transporting the oil and gas from its continental shelf).
  • Agreement between the UK and Ireland relating to the transmission of Natural gas by Pipeline 1993
    This provided for an interconnected pipeline between the two states. Jurisdiction in accordance with Article 16 is divided between the States along the continental shelf delimitation. The owner or operator must seek the approval of the Irish Minister for Transport, Energy and Communications. Although each State is obliged to maintain the pipeline to uniform safety standards in their jurisdiction there is a right of inspection of the other States part of the pipeline.
  • Agreement between UK and Belgium relating to the transmission of natural gas through a pipeline 1998
    This agreement also provides for a split of jurisdiction between the States’ boundaries. The operator has to be approved by both States. The safety measures are determined by each state though there is provision for consultation to ensure that uniform standards are implemented. The states agree that, provided there is sufficient capacity and a contractual arrangement has been entered for transportation, ‘fair commercial terms’ will be imposed.

Land-based transboundary pipelines in general have no international legal regime equivalent to UNLCOS. As such, each particular land pipeline and transit arrangement depends on the particular circumstances involved. There are a number of key public international law considerations to be kept in mind when energy companies negotiate the legal regime for a transboundary pipeline. These include:

  • Security/freedom of Transit
  • Commercial Tariffs
  • Government Fees
  • Environmental Protection
  • Safety and Inspection
  • Quality control of petroleum
  • Operation of pipeline
  • Security of the pipeline (non-interference or siphoning in transit States)

Transit pipelines cross more than one international border, thus usually transporting oil or gas from a producer State through one or more States into the final consumer State. There have been some interesting developments in the area of transit pipelines. The EU has adopted a directive (EC Council Directive 91/296/EEC (1991)) which allows for the free and unimpeded transit through the EU. Although this has less relevance for cross-border pipelines as it focuses primarily on establishing a single energy market within the EU it was still a significant step.

After the collapse of the Soviet Union, the question of energy transit gained new significance. As a result the European Commission in 1994 launched an Interstate Oil and Gas Pipeline Management Project, which analyses and reviews the situation of regional pipeline transport in Central Asia and the Caucasus. Its objective was to design and implement an acceptable institutional framework for interstate oil and gas transport and transit. As part of this review an umbrella agreement on the Institutional Framework for the Establishment of Interstate Oil and Gas Transport Systems was adopted Public international law group subsequently by 10 CIS states (Commonwealth of Independent States) by December 1998. The Energy Charter Secretariat through its transit working group has made some significant progress in refining the international legal regime of transnational pipelines.

Energy Charter Treaty

No discussion of transboundary pipelines would be complete without reference to the Energy Charter Treaty (ECT). The ECT is the only multilateral instrument of general application that creates a general legal framework for securing unimpeded transport of energy products through pipelines. Forty-six States have ratified the ECT and, although it is Euro-focused, it has members outside Europe. Indeed, Japan became the forty-sixth signatory to ratify the treaty on 23 July 2002.

The ECT deals with a number of aspects of transboundary pipelines. It is not possible to discuss all the relevant provisions of the ECT here, but it might be helpful to note a few. For example, the ECT imposes an obligation on all member States to facilitate the transit of energy materials and products without distinction as to the origin, destination or ownership of such products and without imposing any unreasonable delays, restrictions or charges. It also imposes a minimum standard on transit States by providing that they must impose the same treatment and conditions to their own imports and exports.

Perhaps the most important provision of the ECT in this respect is Article 7, which deals specifically with the issue of energy transit. Article 7(6) of the ECT imposes an obligation on the State parties not to interrupt or reduce the existing flow of energy in the event that a dispute arises over such transit prior to the conclusion of the dispute resolution procedures set out in article 7(7).

A working group on transit was established in December of 1998 by the ECT member States to try to deal with outstanding problems related to transit in transboundary pipelines that had not been entirely resolved in the ECT. The transit working group has identified critical issues to be resolved, including the sanctity of energy transit, the prevention of diversion or any form of illegitimate redirection from transit to domestic markets not provided for in the contract, the efficient use of available capacity and existing infrastructures, the transparency of tariffs and the avoidance of discrimination. The ECT signatories are currently negotiating a Transit Protocol to supplement and refine the transit obligations set out in the ECT. Key issues currently under negotiation include (i) the criteria which should be applied when setting transit tariffs (ii) the obligation on states to prevent any unlawful taking of energy materials passing through their territory in transit and (iii) what constitutes ‘available capacity for transit’.

The Energy Charter Secretary has recently confirmed that in preparing transparent rules for "interstate cooperation in energy transit, the Energy Charter process (through the draft protocol) is pursuing not only an economic objective but also the political objective that energy transit will play a significant role in promoting regional stability and security."

Conclusion

The number of long-distance, transboundary pipelines is clear evidence of the growing importance of the unimpeded transport of energy products around the world. The ability of oil and gas producing States and companies to transport energy products unimpeded and without risk of siphoning or contamination to consumers via transit States is perhaps one of the most significant international legal issues for the energy industry in the 21st Century. Public international law is a critical – and indeed unavoidable – component of the legal framework necessary to build and maintain such a transboundary pipeline system successfully.

© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.