1. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 1 Capacity Development for CDM Egypt, Second National Workshop The Legal and Regulatory issues in relation with the implementation of the CDM Samir Amous, APEX, Tunisia Regional Centre for North Africa and Middle-East Tel : +216 71 848 094 --- Fax : +216 71 843 453 amous.apex@gnet.tn amous.apex@gnet.tn

2. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 2 Status A specific background paper on Legal/Regulatory issues has been commissioned by UNEP RISO Draft to be available by April 2004 This presentation  presenting some thoughts and indications on the issues that should be considered when studying L&R issues in the countries

3. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 3 Foundation for Regulatory and Legal Framework in the host countries Compatible with International Treaties and Laws Compatible with International Treaties and Laws where the country is a Party Compatible with national Laws and Regulations Enforçability in the country context Attractive enough for CDM investors

4. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 4 The CDM and the international treaties and Laws: Interactions/coherence/major issues

5. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 5 International Public Law applies between States/Int. organisations…but…  Rapid globalisation of the World  Proliferation of international treaties  Establishment of the World Trade Organization  Emergence of rules regulating international trade and relations between individuals/entities

6. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 6 Two classes of rules  Rules originating from international Treaties, aimed at regulating transactions between individuals (e.g. Vienna Convention on International Sale of Goods)  Norms to regulate transactions that are adopted by the Parties involved (e.g. UNIDROIT)  Agreements should stipulate to which National or international trade rules the Parties should refer to in case of dispute

7. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 7 CDM is :  Subject to international law, as it emanates from an international Treaty (KP) Might be regulated both through International Public Law (two nations involved), Standard international set of rules, and National law (e.g. a multi- national organisation established in the host country, etc.), agreed by Parties

8. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 8 CDM becoming effective: PK should enter into force CDM should be ratified by officiall act of the country  it operationalize CDM as a National law While cornestones are decided by the EB, COP/MOP, CDM practicalities will be specific to each country

9. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 9 However, CDM practicalities: Might be in conflict with the World Trade Organisation regime  might affect Local laws (possibility to any WTO member to challenge any local law as a contravention to WTO rules): e.g. a Party that would tax carbon-intensive goods e.g. A Party that would only buy cogenerator from the investor country, or from a Party to the Kyoto Protocol.  Discrimination….

10. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 10 However, CDM practicalities might be affected if: The WTO includes an agreement on investment Other International (bilateral, multilateral, regional) Investment laws governing foreign direct investments might be inconsistent with national CDM rules:  affect CDM  should be evaluated

11. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 11 Legal and regulatory implications of the CDM at national level

12. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 12 Need to:  Establish attractive CDM regulations  Limit incompatibilities between CDM and the nationals laws Investigate on interaction and compatibiliy of the current country laws with the CDM rules

13. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 13 Major National Regulations to which CDM should be coherent with Environmental, Energy Conservation Laws/Regulations Investment Laws/Regulations Sustainable Development Rules Legitimacy of the DNA decisions

14. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 14 Environmental/energy conservation Laws What environmental criteria should a CDM project apply ? National norms ? Environmental Impact Assessement ? How to involve Public participation in the decision? Case of dispute between the CDM project holder and a third Party on unexpected Environmental impacts Should th project benefit from the Environment Protection/Cleaner Production/Energy Conservetion incentives ?

15. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 15 Investment Laws/Regulations Does a foreign investor benefit from the subsidies/tax removal targeting environment Protection/Energy Agency ? Does a foreign investor benefit from the loan facilities in the host countries ? Should the cashflows generated by CERs be considered in the turnover ? What are the general regulations to apply for income taxes ?

16. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 16 Investment Laws/Regulations Does a project-separate accounting system applies or the project is integrated to the entities involved ? (e.g. should we allow that a private foreign investor merging its existing Combined Cycle utility and its ongoing Wind power plant ?)

17. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 17 Investment Laws/Regulations What are the appropriate regulations to adopt for foreign exchange control for rapatriation of profits ? How to treat currency exchange risks ? How to treat cases of insolvency ? How to treat cases of Leakage ? How to treat the risks linked to confidential information ?

18. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 18 Investment Laws/Regulations For instance how to treat cases where a third Party action has fully or partially affected the CERs results (e.g. a court decision that would have closed an industrial unit benefiting from a CDM project) What kind of Land property laws to apply in the CDM context? What kind of insurance laws to apply ? What labour regulations to apply ? What are the possible cases of « force-majeure » ?

19. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 19 CDM and Sustainable Development:  The host country must certify that a CDM project assists in achieving SD  Prerogative of the host country  How the concept of SD should be legally operationalized in the host countries ?

20. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 20 CDM and Sustainable Development:  How to develop SD criteria that appropriately reflect country circumstances  How to resolve cases of dispute among national stakeholders on the SD related decisions?  What actions to undertake during the course of a project (and after) in relation with the achievement of SD goals ?  What are the possible rights of the project proponent in relation with the actions taken as regards to SD ?

21. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 21 Legitimacy of the DNA decisions  Highest Political Decision ? (Presidential Decree, Parlianment Clearance ?)  What laws regulate the interactions between DNA and: National Actors; International actors  Is the DNA decision definitely binding and not subject to appeal in any jurisdiction ? What are the enforcement procedures ?

22. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 22 Next steps in Egypt in relation with Legal/Regulatory set up

23. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 23 Address properly Legal/Regulatory issues  Status of the current investment/business laws in the host countries that would be impacted by the CDM  Integration of the CDM into the national Legal and regulatory investment/business framework  Interaction/coherence with other International laws and Treaties  Preparation of Legal and regulatory Guidelines for CDM  Consultations/training

24. UNEP Collaborating Centre on Energy and Environment Capacity Development for CDM - Egypt, Second Nationa Workshop - Phase II - Cairo, 12-13 January 2004 24