What is a Protecting Power Agreement?
A protecting power agreement is an instrument entered into between one or more sovereign states permitting another state to represent the interests of the signatory(s) state in the territory of another state with which it may not have diplomatic relations. The relationship of the territorial state with the protecting power may vary according to the circumstances and the purposes for which the protecting power has been appointed. The functions of protecting powers , formerly consisting essentially in the representation of the territorial state towards third states, have in recent years been extended in many cases to the representation of the interests of other states and organizations also. Historically, countries have appointed such representations when they have broken or terminated diplomatic relations. In short, it is an agreement that binds two or more States.
The Function of Protecting Powers in International Relations
Under international law, the ‘duty of states to be represented by diplomatic missions is conveniently counterbalanced by their right to be so represented’. As such, a state’s refusal to accept a diplomatic representative does not amount to a breach of international law. (Sun Treaty, 15 U.S. 163 (1820)). That said, a protecting power exists to serve the interests of a country without diplomatic representation. It acts as an intermediary for communication, and aims to safeguard the rights of nationals in the interests of the country not represented (United Nations Association of the USA, 2016). A protecting power can also appoint a consig to provide consular services (UN Treaty Collection, 1963). The Vienna Convention on Diplomatic Relations (VCDR), 1961 sets out the privileges afforded to protecting powers. It states that, so long as a receiving state does not object, the protecting power can provide services for the interests of the sending state, and its nationals (Article 45). However, according to the Vienna Convention on Consular Relations (VCCR), 1963, while the protecting power may exercise various functions in the receiving state, it does not assume the duties and responsibilities of the sending state (Article 80). The Vienna Convention on the Privileges and Immunities of the United Nations (VPIUN), 1946 provides specific legal immunity for all who are part of the UN, including protecting powers and their representatives. In this context, a protecting power must, upon request, assist the purposes of the UN within their territory as a matter of priority (Article XIX). Further, under article XXII, protecting powers should enjoy immunity from arrest or detention in the performance of official duties. However, they shall not enjoy immunity from suit (Art. XXII(2)). The VPIUN also states that protecting powers and their representatives must be treated in the same manner as UN representatives, meaning that they will be entitled to the same privileges, immunities and facilities (Article VII). Meaning, in effect, that they will have limited immunity from arrest/ detention, as outlined in the preceding paragraph (Law Library of Congress, 2012).
Legal Basis of Protecting Power Agreements
The legal framework that governs protecting power agreements derives from both treaty and customary international law. While there has yet to be a specific treaty dedicated solely to protecting power arrangements there are a number of binding agreements that contain rules relevant to protecting powers. The most important treaty in this field is also the most comprehensive – the Vienna Convention on Diplomatic Relations ("Vienna Convention"), adopted in 1961. Article 45 of the Vienna Convention holds that a State Party shall not materially breach a provision of the Vienna Convention (such as Articles 41 through 46 which govern certain aspects of protecting power agreements) unless it is in good faith and exercising a right to withdraw; however, a dispute that is of high enough nature can be resolved by the International Court of Justice. The Vienna Convention also prohibits suspending the operation of a provision of the Convention by simply notifying the Secretary-General of the United Nations (Article 73) "unless such action is "by a State which has adopted a later Convention." Vienna Convention parties cannot suspend their obligations under Vienna Convention terms unless the State is at war (Article 57(b)) or if the Convention is suspended through the operation of Article 71 (one of the State Parties first ceases to be a party to the Vienna Convention) or Article 73 (a similar rule on suspension of treaties generally). International customary law relevant to protecting powers can be found in a number of forms. Customary rules include "the requirement of no inter-ference in the internal affairs of other states" and a continuing responsibility of the State that recognizes a treaty, through Article 18 of the Vienna Convention, to "refrain from acts which would defeat the object and purpose of a treaty" (my emphasis). In cases of possible withdrawal from a treaty, any act that defeats the object and purpose of the treaty must amount not only to a breach of the treaty that could cause damage but to a breach of customary law such as the above rule.
Case Studies of Protecting Power Agreements
To illustrate how protecting power agreements work in practice, consider the case of a government withdrawal of personnel and closing of an embassy in a high-threat environment. The government withdrawing the personnel has the option to first notify and request a withdrawal from the foreign country’s Nominated Authority (often a foreign government employee or military member). But more often than not, withdrawing governments do not first try to obtain permission and fail to abide by the laws of the foreign country. Once a government directs the evacuation of personnel, the recipient country is supposed to facilitate the withdrawal and exempt the personnel from deportation. Even though the withdrawing country may request diplomatic protection, the process can be a long tenuous exercise. In many cases, the requested personnel withdrawal can take months if not longer. During this interval, personnel can become subject to arrest, detention, and deportation by the receiving country.
The Republic of Turkey has entered into dozens of protecting power agreements with foreign states, and has entered into more than 200 agreements in total. One such agreement was created to serve as the basis for Turkey’s protection of Turkish nationals in Libya beginning in March 2011, when a civil war broke out in that country. Turkey first tasked the then-Ottawa, Canada embassy, as the protecting power for Turkish nationals in Libya. Within a few weeks, however, Canada withdrew the embassy staff from Libya over fears of violence.
Turkey then entered into another protecting power arrangement with Spain, via the Spanish Embassy in Libya , to protect Turkish nationals in Libya. Within two weeks, the Spanish withdrew over fears of violence in Libya. What began as a protecting power agreement between Turkey and Spain morphed into an exclusive agreement between Turkey and Japan. So for a period of time, Turkey sent commercial flights to fly mostly Japanese citizens to Istanbul from Tripoli. Japan in turn outfitted several aircraft with basic international medical assistance to assist in the evacuation efforts, although in too many instances medical evacuation was not possible. Midway through this agreement the cargo evacuations from Turkey were measured in thousands and curfews were being imposed by the United Nations Security Council (UNSC). The Kingdom of Saudi Arabia and Qatar (both UNSC members) were against such a move so Turkey finally sent five aircraft to evacuate both Turkish and other foreigners still trapped in Libya.
This and past events have demonstrated that most governments react when faced with a withdrawal of personnel in environments with security threats. For so many governments, including Japan, walking away from its "duty to protect" its citizens was not an option. The challenge now is for Japan to try to recoup some of the large financial losses it incurred during the operation. The United States in fact absorbed the costs of airlifting its citizens out of Libya. It is likely that Turkey will refuse to absorb any financial loss for any future events to demonstrate Turkey’s "duty to protect." Turkey nevertheless incurred a significant debt to airlift its citizens and others including American citizens from Libya.
Criticisms and Challenges of Protecting Power Agreements
The challenges of protecting power agreements, especially when it comes to charging fee rates and payment methods, are not insignificant. This has led to questions, challenges and criticisms of the approach by the international community as to whether the Agreements are effective, and whether they treat all members of the industry in a fair and equitable manner. Significant shifts in the market across the world may well lead to more scrutiny being placed on them by domestic regulators.
The structure of the supplying company, both in terms of commercial operation and ownership, can make a difference to regulators, and lead to some criticism. IPP companies that have the most aggressive supply of energy tend to be those that due to cashflow issues have drawn in a larger share of family or state ownership. A robust regulatory structure that works for investors in the longer term may inevitably discriminate against fast repayment regimes that fund the growth of those who can take a significant amount of debt in order to reduce or eliminate risk. In coming years, the move towards investment strategies of the biggest fuel suppliers and power producers might rebalance the playing field – any skewed balance is likely to be resolved.
The second key concern surrounding protecting power contracts is whether they are current with modern energy procurement service strategies. For instance, no matter how the methodology for pricing a power purchase agreement (PPA) is structured, during the period when construction financing is being drawn, the tariffs charged to the buyer of power frequently do not cover the debt service obligations. Any slight mismatch in the timing of the rate increases on the tariff and the debt repayment schedule can significantly alter the seller’s risk profile. It is this that attracts contest within the international community about the willingness and ability of the authorities to provide adequate recourse to the major power producers should they suffer from drag on cash flow for whatever reason.
If the agreement guarantees the returns of an independent power producer (IPP), for example, by selling power at a tariff designed to pay back loans and return capital, then it is a de facto sovereign guarantee. The International Monetary Fund (IMF) confirmed in 2007 that Furthermore, the IMF emphasises that in order for these agreements to give sufficient re-assurance to the investors and financiers that their funds are secure, "such Protection Power Agreements should be designed carefully to avoid creating excessive levels of risk. Excessive protection might force governments either to raise the tariff excessively or to raise taxes to pay for the protection. This would harm the development process …"
The criticisms of protection power agreements (PPAs) within the industry are that these agreements are not purely for the benefit of the lender – they also let equity providers into a market that presents a favourable risk profile. Currency risk is also a consideration – if a project is financed in US dollars, and another in local currency, the price of the local currency PPA will be lower. As a result, a developer that can finance a project in local currency will be able to offer a lower price than a competitor constrained to financing in US dollars – even though the underlying projects are otherwise similar. This has implications for liquidity in the market.
As the energy market changes, the criticisms are more likely to focus on both how fair the arrangements are to the supplier and how incentive driven they may be for the power purchaser. It is through engagement with these issues that more equal arrangements can be reached to ensure protection for both parties, and to ensure that investors are better attracted to the market.
The Future of Protecting Power Agreements
The future of protecting power agreements is threatened by an increasingly dynamic geopolitical landscape, which has seen countries and regions increasingly question the value and legitimacy of the role of the Association of Southeast Asian Nations ("ASEAN") as a whole, and the Five Power Defence Arrangements ("FPDA") in particular. The increased tensions in the South China Sea, the rise of China as a world power (together with its increasingly vocal and assertive attitude), the US’s "America First – Strategic Competition" foreign policy, and the fallout from Brexit, are all examples of the extent to which the current global landscape continues to shift.
This dynamism will inevitably impact the degree of comfort that States have in binding themselves to protecting power agreements. Those that are sceptical as to the effectiveness of these agreements might increasingly choose to operate on an ad hoc (rather than contractual) basis, preferring instead to simply seek protection from fellow State Parties to treaties, alliances or other international agreements . For example, in 1997, Cambodia and Thailand accepted Malaysia’s offer to act as their protecting power only after the Cambodian-Khmer Rouge conflict spiralled into a diplomatic crisis at the United Nations.
By contrast, those that view protecting power agreements as an effective way to demarcate obligations amongst themselves might view the increased dynamism as a challenge and a call to action. They might seek to enter into more formal protecting power agreements, the terms of which would not only hold the parties to a given set of obligations but also classify the conditions under which these obligations can be suspended. This could provide greater clarity in circumstances where States may wish to respond to an external threat from a third State, and would ensure that the obligations of the parties are clear.
The extent to which State Parties enter into protecting power agreements will therefore vary depending on their own views on global dynamics and whether they feel greater certainty is required in order to effectively meet their obligations or their own interests. In this regard, while much will depend on shifting geopolitics, we expect that protecting power agreements will continue to be relevant and effective, requiring only a few tweaks to address modern needs.