BTC legal agreements
IGA, HGAs, Joint Statement and Human Rights Undertaking

The BTC Consortium negotiated several legal agreements with each of the three countries through which its Caspian oil pipeline crosses.

An international agreement was signed between Turkey, Azerbaijan and Georgia on 18 November 1999 (the Intergovernmental Agreement, IGA). This commits the three states to co-operate and co-ordinate to establish a uniform set of standards for the construction and operation of the pipeline. The Agreement stipulates that the minimum standards should be "international standards and practices within the petroleum industry" as applied within EU member states. It is binding international law on the three countries.

Three separate private law contracts were signed between the BTC Consortium and the government of each country (the Host Government Agreement, HGA): Azerbaijan (17 October 2000), Georgia (28 April 2000) and Turkey (19 October 2000). The Agreements define the capital and resources that each signatory is to provide to the project, the timetable by which it would be developed and the standards that it must meet.

In addition, a Lump Sum Turnkey Agreement was signed on 19 October 2000 between the BTC consortium and BOTAS, the Turkish state pipeline company, to build and operate the pipeline in Turkey.

The HGAs prevail over national law (aside from each country's Constitution), which means in effect that the BTC consortium is exempt from any domestic obligations that conflict with the terms of the Agreements. The governments have effectively abrogated their executive and legislative powers to protect their citizens from potential environmental damage and associated health and safety hazards or to improve the regulatory regime.

Under the HGAs, the national governments have also effectively granted the consortium exemption from the financial impacts of any new environmental, social or any other laws affecting the pipeline that they may introduce in the subsequent 40 years, the lifetime of the Host Government Agreements. They have also undertaken to compensate the BTC Consortium if new taxes or health or safety or environment laws adversely affect the finances of the project. (These exemptions and compensation provisions are called stabilisation clauses.)

Once the BTC project is underway, only the BTC consortium has the power to terminate the HGA (except in extraordinary circumstances). The national governments cannot therefore regulate or ensure oversight of the construction or operation of the pipeline. Any future national government would not be able to invoke its executive powers to amend the Agreement so as to afford its citizens greater protection.

In response to these issues and concerns, all raised by civil society groups, particularly the implications of the HGAs for the each country's ability to protect and respect its citizens human rights, two other agreements were subsequently signed in 2003 and incorporated into the legal regime for the pipeline, according to BTC Co.

On 16 May 2003, BTC Co and the three host governments issued a Joint Statement, which (among other commitments) binds the Consortium to observing the OECD Guidelines for Multinational Enterprises ¹and the Voluntary Principles on Security and Human Rights.²

And on 22 September 2003, BTC Co issued a Human Rights Undertaking, in which the Consortium undertook not to assert its rights under the project agreements in circumstances where doing so would be inconsistent with the three host government's duty to protect human rights. The Undertaking is legally binding on BTC Co only. The host governments would be able to cite it if BP were to challenge them under the stabilisation clauses.

Although the OECD Guidelines themselves are voluntary, Lord Sainsbury, then Under Secretary for Trade and Industry, confirmed in a statement to the UK Parliament on 12 January 2005 that these additional agreements are legally-binding on the company: "BTC Co is contractually committed to complying with the guidelines".

BTC Co. also signed security protocols with the governments of Azerbaijan and Georgia.

(For more details, see Implications of the Host Government Agreement between Turkey and the BTC Consortium. See also Baku campaign website.)

1 The OECD Guidelines for Multinational Enterprises provide recommendations for "good corporate behaviour" in the areas of employment and industrial relations; environment; combating bribery; consumer interests; competition; and taxation. Multinational enterprises operating in or from Organisation for Economic Co-operation and Development member states are expected to adhere to them.

2The Voluntary Principles on Security and Human Rights is an international code of conduct for multinationals operating in the energy sector.