Competition Law and Negotiated Settlements in Competition Proceedings

1. Introduction

Customary international law consists of rules that develop from general and consistent State practice accepted as legally required (opinio juris). It is important in energy governance because energy activities can create effects beyond national borders. Oil and gas production, pipelines, hydropower projects, nuclear activities, coal production and greenhouse-gas emissions may affect neighbouring States or areas beyond national jurisdiction.

Customary international law therefore provides basic principles for how States should exercise their sovereignty over energy resources while respecting international responsibilities.

2. Sovereignty Over Energy Resources

States generally have sovereignty over their natural resources. This allows governments to decide how their oil, gas, coal, renewable resources and other energy resources should be developed.

However, sovereignty is not unlimited. A State must exercise its resource rights consistently with applicable international obligations, particularly the obligation to prevent significant environmental harm to other States and areas beyond national jurisdiction.

The International Court of Justice has repeatedly connected sovereignty with environmental responsibility.

3. Prevention of Transboundary Harm

One of the most important customary principles for energy governance is the prevention principle.

Under this principle, a State must use appropriate measures to prevent activities within its jurisdiction or control from causing significant environmental harm to other States.

This is particularly relevant to energy projects such as:

oil and gas facilities;

pipelines;

dams;

nuclear plants;

offshore energy installations; and

large industrial power projects.

The principle is strongly associated with the Trail Smelter Arbitration (United States v Canada), where the tribunal addressed transboundary pollution from a Canadian smelter. The case became an important foundation for the rule that States must not allow activities within their territory to cause serious injury beyond their borders.

4. Due Diligence

Customary international law generally requires States to exercise due diligence.

Due diligence means that a State must take reasonable measures to prevent foreseeable environmental harm. It is not an absolute guarantee that harm will never occur.

In Pulp Mills on the River Uruguay (Argentina v Uruguay), the ICJ explained that due diligence includes not only adopting appropriate rules but also maintaining vigilance in their enforcement and exercising administrative control over public and private activities.

For energy governance, this means governments should establish effective:

environmental regulations;

licensing systems;

monitoring mechanisms;

safety standards;

environmental assessments; and

enforcement procedures.

5. Environmental Impact Assessment

Environmental impact assessment (EIA) has become particularly important for major energy projects.

In Pulp Mills, the ICJ recognised that where there is a risk of significant transboundary harm, international law requires appropriate environmental assessment as part of the State's due-diligence responsibilities. The precise content of an assessment depends on the circumstances of the proposed activity.

For energy governance, this is relevant to projects such as large dams, offshore drilling, pipelines and major power infrastructure.

6. Climate Change and Customary International Law

Climate change has expanded the relevance of customary international law to energy governance.

The ICJ's recent climate-related proceedings have examined whether the customary prevention obligation applies to greenhouse-gas emissions. Materials submitted in the proceedings describe customary international law as requiring States to use available means to prevent transboundary environmental harm.

This is important because energy production and consumption are major sources of greenhouse-gas emissions.

Customary international law can therefore influence how States regulate fossil-fuel activities and develop climate-related energy policies.

7. Energy Governance and Private Companies

Customary international law primarily imposes obligations on States, but States may have responsibilities concerning private energy companies operating within their jurisdiction.

The due-diligence principle requires States to establish and enforce appropriate regulatory controls over private and public operators.

The ICJ has explained in the context of environmental protection that due diligence includes monitoring activities undertaken by private operators.

Thus, a government cannot necessarily satisfy its international responsibilities merely by passing legislation. It must also take reasonable steps to implement and enforce that legislation.

8. Energy Investment and International Law

Energy governance also involves foreign investment. Many energy projects are protected by bilateral investment treaties, the Energy Charter Treaty (ECT) and other international instruments.

Cases concerning renewable-energy regulation demonstrate how changes in domestic energy policy can produce international investment disputes.

For example, 9REN Holding S.à r.l. v Spain concerned reforms to Spain's renewable-energy regulatory framework under the ECT. The tribunal awarded compensation to the claimant under the applicable treaty framework.

Similarly, EDF Energies Nouvelles v Spain concerned renewable-energy investments and obligations under the ECT.

These are treaty-based cases rather than pure customary-international-law cases, but they show how international energy governance operates through overlapping customary and treaty rules.

9. Customary Law and Sustainable Energy Governance

Customary international law supports several important principles relevant to modern energy governance:

State sovereignty over natural resources

Prevention of significant transboundary harm

Due diligence

Environmental protection

Assessment of environmental risks

Monitoring and enforcement

Cooperation concerning transboundary risks

These principles help balance a State's right to develop energy resources with its responsibility to avoid serious environmental harm.

10. Conclusion

Customary international law provides a basic legal framework for responsible energy governance. States retain sovereignty over energy resources, but that sovereignty operates alongside duties to prevent significant environmental harm and exercise due diligence.

Cases such as Trail Smelter and Pulp Mills establish important foundations for prevention, due diligence and environmental assessment. Recent international climate proceedings have further highlighted the relevance of these principles to greenhouse-gas emissions.

For energy governance, the practical lesson is that States should not only create energy and environmental laws but also monitor, enforce and continuously improve them. Customary international law therefore connects national energy sovereignty with international environmental responsibility and provides an important foundation for sustainable energy governance.