International Arbitration in the Energy Sector

Edited by Maxi Scherer (Professor of law, Queen Mary University of London)

Contributors: Catherine Amirfar, Anton Asokov, Samantha Bakstad, George A. Bermann, Jess Connors, Graham Coop, Steven Finizio, Norah Gallagher, Raphael J. Heffron, Kaj Hobér, Michael Howe, Annette Magnusson, Simon Manner, Makane Moïse Mbengue, Wendy Miles QC, Loukas Mistelis, Tilman Niedermaier, Peter Rees QC, David W. Rivkin, Eduardo Silva Romero, Samarth Sagar, Isabella Seif, Koh Swee Yen, Craig Tevendale.

ISBN 978-0-19-880578-6

528 pages

Oxford University Press, 2018

That energy is a key economic sector when it comes to international arbitration disputes is undisputed. Energy projects normally involve complex, long-term, risky investments that are frequently located in challenging jurisdictions. These projects are sensitive to changes in commodity prices and other volatile variables, making the energy sector particularly prone to high-stakes disputes. In turn, arbitration (both commercial and investment) is perceived as perhaps the most suitable dispute-resolution mechanism for energy disputes. Arbitration affords parties the possibility of selecting decision-makers who are experienced in the sector and who are generally better positioned to resolve the dispute in an efficient, results-driven manner. In addition, because energy disputes frequently involve states and state entities as parties (or as interested parties), arbitration offers a significant advantage over local courts in certain jurisdictions, in which courts may be perceived as more susceptible to being influenced by elements unrelated to the dispute itself, such as political considerations.¹

As the title suggests, the book contains a thorough review of past, existing, and potential future energy disputes that have led to, or may lead to, international arbitration proceedings. The editor, Queen Mary University Professor Maxi Scherer, who is also special counsel at the law firm of WilmerHale, provides a thoughtful introduction to the book.² Professor Scherer identifies some of the critical elements and data points of which practitioners in this area of the law should be mindful. In particular, she notes that while the world’s primary energy demand continues to grow at a fast pace, this demand appears to be in tension with the pressure on states to reduce fossil fuel usage due to climate change considerations. In addition, Professor Scherer highlights that, in recent years and for the first time in history, developing economies reportedly invested more in renewable energy projects than developed countries.

The book ‘International Arbitration in the Energy Sector’ is divided into three parts, each addressing issues related to commercial arbitration (Part I), investment arbitration (Part II), and public international law issues (Part III).

Part I covers three specific subsectors: energy, construction, and mining. The chapter on upstream oil and gas disputes mainly focuses on disputes under joint operating agreements (JOAs) and involving limitation clauses, pre-emption rights, default, and forfeiture.³ The following chapter addresses gas-supply disputes, including those related to gas price reviews, supply failures, transportation, storage, and construction.⁴ The chapter on renewable energy disputes provides a thorough description of the contractual structure generally used in those projects, as well as the disputes that may arise at their development, construction, and operational phases.⁵ Part I also contains an insightful chapter on energy construction and infrastructure disputes, which includes a discussion on English law issues related to contract interpretation, changes or variations to the contract work, time and delay, and termination.⁶ Finally, Part I includes a chapter on mining disputes that explores the similarities and differences with energy disputes, as well as disputes involving environmental impact assessments and social licenses to operate that tend to arise in the mining sector.⁷

Part II of the book on investment arbitration, a category in which energy disputes are particularly pervasive. The first chapter analyzes the main types of mechanisms that purport to ensure a certain degree of stability in energy contracts, as well as the different approaches that arbitral tribunals have taken in interpreting and applying those mechanisms.⁸ Part II also includes four chapters on the Energy Charter Treaty (ECT). The first chapter provides a helpful overview of disputes under the ECT;⁹ the second chapter deals with topical issues related to the interplay between the ECT and European Union law;¹⁰ the third chapter explores the interplay between the ECT’s standards and states’ rights to regulate.¹¹ The fourth chapter dissects the various ECT cases involving renewable energy projects and the tension between climate change concerns and targets on the one hand, and the respect for the investors’ rights to, for example, fair and equitable treatment, on the other.¹² Part II also includes four chapters addressing investment disputes in specific regions, including Russia, Latin America, Asia, and Africa.¹³ Although this parts lacks a chapter dealing with the Middle East, certain chapters in the book do allude to some of the first leading cases involving energy disputes against states and state entities in that region.

Part III deals with public international law issues relating to state-to-state disputes and is divided into three chapters. The first chapter includes a helpful overview of various instances in which boundary disputes have involved natural resources and offers some thought-provoking observations on the impact of climate change considerations.¹⁴ The second chapter explores the topical issue of climate disputes and sustainable development and analyzes the issue of enforcement. It notes in particular that despite a global consensus regarding the need for investment to meet sustainability development targets, no international legal instrument exists that incentivizes green foreign direct investment or that specifically protects cross-border green projects.¹⁵ The last chapter proposes the creation of a set of specialized environmental rules that would facilitate the enforcement of environmental obligations in the context of international arbitration proceedings.¹⁶

While energy-related arbitration is certainly not a new topic of interest and other publications have addressed various aspects of international arbitration involving the energy sector, ‘International Arbitration in the Energy Sector’ provides a comprehensive and practical overview of specific topics, such as construction, environment issues, renewable energy, and ECT cases related to different subsectors and regions. Overall, this book is a highly informative publication that weaves in international and national law elements and that offers a valuable toolkit for international arbitration practitioners and anyone with an interest in energy disputes.

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