Gas and LNG Price Arbitrations
A Practical Handbook, Second Edition
This practical new edition contains contributions from leading international arbitration practitioners and arbitrators in the field, in-house counsel and industry experts and covers the various stages of a gas pricing dispute, from drafting the clause to triggering a review, all the way through the various stages of the arbitral process.
This practical second edition will cover the various aspects of international gas pricing disputes. It contains contributions from leading international arbitration practitioners and arbitrators in the field, in-house counsel and industry experts. It covers the various stages of a gas pricing dispute, from drafting the clause to triggering a review, all the way through the various stages of the arbitral process. It also builds on the first edition by containing insights into more substantive topics such as hub indexation, the impact on pricing of non-price terms like destination flexibility, and the differences between gas and LNG price reviews.
Despite the large number of high-value disputes in this area, this is one of the very few publications to draw together the various strands of gas pricing disputes into one book. It is therefore an invaluable guide for practitioners, in-house counsel and anyone else with an interest in this area.
Table of Contents
|Table of Contents||3|
|Drafting an effective price review clause||5|
|The trigger phase||19|
|Changes of circumstances as a price modifier||37|
|Procedural issues in gas price review arbitrations||75|
|Evidence in gas pricing arbitration||87|
|Confidentiality in gas price reviews||103|
|The arbitrator’s role||121|
|The client’s perspective||133|
|Expert evidence in price reviews and disputes||147|
|The adjustment phase in gas price reviews under long-term gas supply contracts||169|
|Natural gas price review arbitrations: issues in adopting hub indexation||181|
|The potential for price disputes in hub-indexed gas contracts||197|
|Gas price reviews in Asia-Pacific||213|
|Current and future trends for price reviews||225|
|About the authors||241|
|About Globe Law and Business||261|
Vice president, Compass Lexecon
Luis Agosti is vice president in the International Arbitration Energy Practice of Compass Lexecon. He is an economist specialising in gas, LNG and power and has provided expert advice and written and oral testimony before antitrust, regulatory authorities and tribunals. Over the past few years, Mr Agosti has been involved in over 30 gas and LNG disputes in Italy, France, Spain, Germany, Turkey, Belgium, Poland, Czech Republic, India, Qatar, Israel, China, Korea, Mexico and Peru, on issues related to price reviews, estimation of damages following alleged under-deliveries and undue force majeure declarations, interruption of supplies, and changes in delivery points, amongst others.
He started his career in Spain, working as a competition economist in energy cases where he advised companies on the assessment of the competitive impact of major energy mergers in Europe, on the impact of regulation on market functioning and the analysis of alleged abusive conducts such as excessive pricing and price fixing.
He is also co-author of several articles related to the liberalisation of the Spanish energy market, competition in the Spanish power market and the role of renewable energy in the Spanish power market.
Augustin Barrier is an associate in LALIVE’s international arbitration team, specialising in commercial and investment treaty arbitration in the energy sector, in particular in the electricity, oil and natural gas markets. He has also been involved in litigation and arbitration proceedings in the commodity trading and shipping industry.
He has acted as counsel in numerous international arbitration proceedings, ad hoc or under the major arbitration rules, governed by a range of substantive and procedural laws, both common and civil law, in Europe, Africa and the Middle East. He has in particular assisted clients, buyers and sellers in gas pricing negotiations and arbitrations under supply agreements of natural gas and LNG. He is a member of several professional associations, including the Young Arbitrators Forum of the ICC (YAF), the Young International Arbitration Group of the LCIA (YIAG), CFA-40, Young ICCA and ASA below 40.
Michelle Glassman Bock
Counsel, Wilmer Cutler Pickering Hale and Dorr LLP
Michelle Glassman Bock is a counsel at Wilmer Cutler Pickering Hale and Dorr LLP in Brussels. Her practice focuses on high-stakes arbitrations governed by both civil and common laws, sited in both civil law and common law jurisdictions. She has acted for clients in arbitration proceedings conducted under the auspices of the major arbitral institutions, as well as in ad hoc proceedings. Ms Bock representations cover a wide range of industries, with a particular focus on energy disputes. She has acted as counsel in numerous gas price review arbitrations under long-term supply contracts. Ms Bock is recognised as a leader in arbitration in the Global Arbitration Review’s Who’s Who in International Arbitration Future Leaders and in the ExpertGuides.
Senior gas analyst, S&P Global Platts
Prior to joining S&P Global Platts in 2019, Valentina Bonetti was a senior associate in the London office of The Brattle Group. She has over eleven years of experience in litigation and regulation projects, particularly in the natural gas and LNG industry. She has a master’s degree in Economics from Bocconi University.
She has worked on several commercial arbitrations, which have included analyses of long-term natural gas contracts, energy regulation and valuation of energy infrastructure.
Partner, Latham & Watkins
Oliver Browne is a partner in the London office of Latham & Watkins. He is chair of the London Litigation & Trial Department and a solicitor-advocate. Mr Browne has been an international arbitration specialist for almost 20 years, and has represented companies and states in proceedings conducted under all the major rules as well as on an ad hoc basis. Mr Browne also has considerable experience with complex commercial litigation around the world, and arbitration-related litigation in all levels of the English courts.
Mr Browne was named as one of the “next generation of partners setting the disputes agenda” by Legal Business in 2015, listed as one of Legal Week’s litigation rising stars 2016 and named a “future leader” in Who’s Who Legal in 2017, 2018 and 2019. He is ranked in Chambers & Partners UK 2019 for international arbitration and was named as a leading individual for commercial litigation in The Legal 500 UK 2019.
Philip Clifford QC
Partner, Latham & Watkins
Philip Clifford QC is one of London’s leading international arbitration Queen’s Counsel. He has served as global co-chair of Latham & Watkins’ International Arbitration Practice and chair of the London Litigation & Trial Department. He is a United Kingdom representative on the ICC Commission on Arbitration and co-author of a leading book on the LCIA Arbitration Rules. A Fellow of the Chartered Institute of Arbitrators, he also sits as arbitrator, giving him a valuable dual perspective on resolving disputes. He is a member of The Legal 500 Hall of Fame, having been a leading practitioner for over a decade, and is described as “one of the best in the profession” and “renowned for energy cases”. Chambers also recognises him as a key figure in international arbitration, with clients describing him as “a pleasure to work with and extremely adept at resolving cross-border disputes”.
Counsel, Lévy Kaufmann-Kohler
A “rising star” (Legal 500, 2020) and “future leader” (Who’s Who Legal, 2020) in international arbitration, Rahul Donde specialises in international commercial and investment arbitration. He has acted as arbitrator, counsel, secretary and assistant of the arbitral tribunal in over 30 international arbitration proceedings under both ad hoc and institutional arbitration rules.
Mr Donde has specific experience in disputes relating to natural resources (water, oil, gas, renewable energy), commercial and corporate laws in different jurisdictions. Having worked in Switzerland and India for several years, he has expertise in complex commercial and investment disputes in both common law and civil law jurisdictions. Mr Donde is empanelled as an arbitrator with all major international arbitral institutions. He sits on the boards of arbitration think tanks and holds managerial positions in several international arbitration organisations. He is regularly invited to speak and write on topics of current interest in energy law and international arbitration.
Partner, Wilmer Cutler Pickering Hale and Dorr LLP
Steven Finizio is a partner at Wilmer Cutler Pickering Hale and Dorr LLP. His practice focuses on international arbitration. Mr Finizio has particular experience with oil and gas, financial services, shareholder, joint venture and M&A issues. He has advised clients regarding disputes under the rules of most leading international arbitration institutions and in ad hoc proceedings, and governed by the laws of jurisdictions in Europe, Asia, Africa and the US, as well as under investment treaties. He also serves as an arbitrator.
Mr Finizio’s publications include A Practical Guide to International Commercial Arbitration: Assessment, Planning and Strategy and ‘International Commercial Arbitration’ in The Law of Transnational Business Transactions, as well as chapters in leading treatises on gas supply and LNG disputes.
Mr Finizio is recognised as a leading international arbitration lawyer by various publications, including Chambers, Legal 500 and Global Arbitration Review’s Who’s Who in International Arbitration.
Partner, Allen & Overy LLP
James Freeman is a partner in the International Arbitration Group in Allen & Overy’s London office. He is also a member of the firm’s Energy Group. He has conducted arbitrations under all the major sets of arbitral rules and at various seats, with particular experience of the energy sector. Mr Freeman has substantial expertise in gas and LNG price review arbitrations, in Europe and Asia, having acted for both buyers and sellers over the past decade in numerous cases. He is a solicitor-advocate and routinely appears as an advocate in his cases. He has a Diploma in International Arbitration with distinction from Queen Mary University of London, sits on the Steering Committee of CPR Y-ADR, and is a former cochair of the Young International Arbitration Group (YIAG) of the LCIA.
Christopher J Goncalves
Chair and managing director of the global energy practice, Berkeley Research Group LLC
Christopher Goncalves is chair and managing director of BRG Energy’s global energy practice. He has 28 years of experience in the energy advisory and financial industries, with a substantial focus on LNG, natural gas, electric generation, and renewable energy. He provides expert analysis and testimony for international energy arbitration and litigation matters, and business advisory services for commercial strategy, contract negotiation, economic and market analysis, regulation, project development and financing, and acquisitions and divestitures. His clients have included law firms, independent and national energy companies, regulators, utilities, developers, investors and banks. His relevant experience spans over 50 countries throughout the Americas, EMEA and Asia.
In recent years, Mr Goncalves has provided LNG commercial strategy for short- and longterm sales pricing, target markets and priority customers for leading NOCs and US LNG exporters.
Mr Goncalves has provided expert services on investment and commercial disputes under ICSID, UNCITRAL, the ICC, ICDR/AAA, the RCJ and the Milan Chamber of Commerce. Over recent years, he has served as the lead LNG and natural gas market and industry expert to energy companies and their legal counsel for over a dozen LNG and natural gas price reviews and/or price review arbitrations in Europe and Asia, as well as many other energy-related commercial and investment arbitration matters. For the last several years, Who’s Who Legal has recognised Mr Goncalves as a leading energy industry and damages expert.
A native English speaker, Mr Goncalves is also fluent or proficient in Spanish, German and Italian, and has intermediate capabilities in Portuguese and Turkish. He received his MA in international affairs and economics from the Johns Hopkins University School of Advanced International Studies and a BA in international relations from Brown University.
Principal, The Brattle Group
Dan Harris is a principal in the Rome office of The Brattle Group and has over 20 years of experience in the economics of gas and electricity markets. Prior to joining The Brattle Group in 2002, Mr Harris worked for Shell’s upstream oil and gas business in the Netherlands for five years in a variety of roles, including the development of economic models for new oil and gas field developments. He holds degrees in engineering and economics from Imperial College and LSE respectively. He regularly provides advice in gas contract disputes during both the negotiation and arbitration phases, and major law firms and their clients have retained Mr Harris to act as an expert witness on multiple occasions. He is listed as one of the world’s leading experts in Who’s Who Legal: Arbitration 2019, is a regular speaker at gas and electricity conferences, and lectures at the Florence School of Regulation.
Senior vice president, general law & litigation, Uniper Global Commodities SE
Nikolas Hübschen joined E.ON in 2007 after working with an international law firm. He held various positions in the E.ON Group, including in the legal departments of E.ON Ruhrgas and E.ON Italia. At E.ON Ruhrgas he dealt with a wide variety of gas-related matters. In 2013 he became Head of Gas Purchase Law of E.ON Global Commodities SE, in which position he in particular managed E.ON’s gas price arbitrations. Following the spin-off of Uniper from E.ON in 2016, he is now senior vice president, general law & litigation, of Uniper’s Legal & Compliance Department, responsible inter alia for the legal aspects of Uniper’s gas purchase, gas storage and energy wholesale businesses, as well as the Group’s arbitration and litigation proceedings. Mr Hübschen speaks regularly at dispute resolution and energy conferences.
Mr Hübschen holds a diploma and a doctoral degree in law from the University of Münster (Germany) and a Master of Laws from Boston University (USA).
Partner, Allen & Overy
David Jenaway is a partner in the Perth office of Allen & Overy. He has extensive experience in a wide range of high profile commercial disputes, with a particular emphasis on matters arising in relation to the construction and energy and resources sectors. He regularly represents large corporations in high value superior court litigation and international commercial arbitration.
Mr Jenaway has experience on a number of LNG price reviews that have been resolved by formal dispute resolution in the Asia-Pacific region, as well as arbitrations that have been conducted as an adjunct to, or in support of, those reviews. He also has extensive experience with price reviews for domestic gas contracts and other similar commodities within Australia. Mr Jenaway is valued by clients and has been recognised in Legal 500 and Chambers Global and Asia-Pacific. He is listed in the Best Lawyer List for international arbitration and litigation in Australia.
Principal, The Brattle Group
Carlos Lapuerta is a principal and director of London office of The Brattle Group and has been an expert in the energy sector for 30 years. He holds degrees in economics and law from Harvard University.
He has experience in the analysis of investments and contracts in the energy sector, and has provided testimony in several arbitration proceedings concerning the prices in long-term energy contracts, including gas and LNG contracts. He also offers extensive expertise in financial valuation, which he frequently applies to estimate damages in international arbitration proceedings, and in the analysis of competition.
He speaks regularly at energy and arbitration conferences, and lectures at the Florence School of Regulation. Who’s Who Legal: Arbitration 2019 lists Mr Lapuerta as a Global Thought Leader.
Partner, De Brauw Blackstone Westbroek NV
Marnix Leijten is a noted international arbitration specialist. His experience includes a wide variety of high stakes international disputes, commercial and investor state arbitrations, as well as complex enforcement and setting aside disputes.
Mr Leijten handles international arbitrations in a wide variety of industry sectors. He has particular experience in advising large corporates in the energy industry and is widely recognised as a leading expert on disputes regarding natural gas and LNG (including supply, transport, trading and construction). He has represented clients on dozens of gas price review disputes over the last 18 years, for a variety of leading gas suppliers and buyers. He also frequently acts as arbitrator, including on gas and LNG pricing disputes. Mr Leijten was the Dutch member of the ICC International Court of Arbitration from 2006–15, and has been vice president of the Court since 2015. He co-chairs the ICC Commission’s Task Force on Emergency Arbitration and is an active member of the ICC Institute of World Business Law, the ICC Commission on Arbitration, ICCA and the IBA Arbitration Committee.
Founding partner, Lévy Kaufmann-Kohler
Laurent Lévy is a partner and co-founder of Lévy Kaufmann-Kohler in Geneva. He has extensive experience in corporate disputes, including in the areas of oil and gas, air and space and finance industries.
Mr Lévy is a Council member of the ICC Institute of World Business Law, a member of the Association Suisse de l’Arbitrage (ASA) and of the Milan Club of Arbitrators. He is also a former vice president of the ICC Court of International Arbitration and a former member and vice president of the LCIA. He is president of the Casablanca Court of Arbitration. Mr Lévy has published extensively on international arbitration and is, since 2007, a visiting professor at the School of Law, Queen Mary University of London.
He has handled more than 250 arbitration proceedings, mostly as an arbitrator, under various rules such as the ICC, ICSID and LCIA rules.
Mark Levy QC
Partner, Allen & Overy LLP
Mark Levy QC is co-head of Allen & Overy’s international arbitration group. He is based in the London office. He has a degree in English Literature from Oxford University and has worked exclusively on international arbitration matters for over 10 years. Mr Levy specialises in energy and commodity disputes. He has extensive experience of acting as counsel in both commercial and investment treaty arbitrations, often as lead counsel. His recent experience has been focused on the oil and gas sector, and in particular liquefied natural gas disputes. He has acted in some of the largest recent gas price review disputes in the world, involving various markets in Europe as well as markets in Asia and the Middle East. He has also acted in pricing disputes involving commodities such as alumina.
Anthony J Melling
Director, Berkeley Research Group LLC
Focusing on natural gas, LNG and associated liquids, Anthony Melling has over 20 years of hydrocarbons industry commercial experience with leading international E&P and energy companies, and 18 years of international consultancy experience. As a gas industry professional, Mr Melling offers extensive knowledge of the international gas chain, including upstream, midstream and downstream experience. His experience spans Europe, the Americas, Eurasia, Africa and Asia. Mr Melling specialises in international natural gas, LNG and liquids pricing, market dynamics and industry economics. In recent years, he has applied these skills in a variety of international energy dispute matters and business advisory engagements. Mr Melling is accomplished in providing these services to law firms, global energy companies and utilities, national energy companies, state energy agencies, independent developers, equity investors and banks. He has advised clients on large-scale energy infrastructure and commerce, including LNG, natural gas, LPGs, oil, conventional power generation and renewable energy.
In late 2010 his book Natural Gas Pricing and its Future – Europe as the Battleground was published by the Carnegie Endowment for International Peace.
Executive vice president, Compass Lexecon
Boaz Moselle is an executive vice president at Compass Lexecon based in London. He is an economist who has worked in academia, consulting and government. His areas of expertise include oil and gas, electricity, renewable energy, regulated infrastructure, gas pricing, valuation and the assessment of damages, and regulatory and antitrust issues in the energy industry.
Dr Moselle has provided expert witness testimony in approximately 50 international arbitrations, in the context of both commercial and investment treaty disputes. Who’s Who Legal 2017 notes that Dr Moselle “draws praise for his ‘exceptional genius’ and prowess in gaspricing disputes” and that “one client describes him as ‘the best expert I have ever seen under cross-examination’”.
He holds a PhD in Economics from Harvard and an MA and PhD in Mathematics from the universities of Cambridge and London. Previously a managing director of the UK energy regulator Ofgem, Dr Moselle teaches in the Brussels School of Competition on competition and regulation. He was most recently the Agmon Rosenberg Hacohen & Co Visiting Chair in Business Law at Tel Aviv University, where he taught on issues related to valuation, excessive pricing and the assessment of damages.
Partner, Quinn Emanuel Urquhart & Sullivan LLP
Philippe Pinsolle is the head of international arbitration for continental Europe. He has acted as counsel in more than 250 international arbitrations, with a particular focus on investor–state arbitrations and commercial disputes involving the energy, power, oil and gas, construction and defence industries. He has been involved in arbitrations under the auspices of virtually all major arbitration institutions including the ICC, LCIA, ICSID, SCC, AAA, ICDR, the Swiss Chambers of Commerce and the AFA, as well as in ad hoc cases under the UNCITRAL rules or otherwise. Mr Pinsolle has also served as arbitrator in more than 50 cases, as well as expert witness on arbitration and French law issues.
In 2019, he was appointed as a member of the SIAC Court of Arbitration. In 2020, he will co-chair the IBA arbitration committee.
Partner, White & Case LLP
Michael Polkinghorne is a dual-qualified (civil and common law) lawyer who heads the White & Case LLP Paris office’s arbitration, energy and pro bono groups; he is also joint head of the firm’s oil and gas practice. He has served as counsel in arbitrations conducted under most major institutional rules, and has been involved in a number of mediations, notably in the industrial gas sector. He has served in over two dozen cases as arbitrator under, among others, the ICC, LCIA and UNCITRAL rules. Mr Polkinghorne is the former Australian member of the International Court of Arbitration of the ICC, and a current member of the Legal Advisory Task Force of the European Energy Charter Secretariat. Having written extensively on energy dispute resolution and foreign investment, he also provides courses on long-term energy contracts and dispute resolution. He is a graduate of Adelaide (LLB Hons: Stow medalist) and Cambridge (LLM: Commonwealth Scholar) universities.
Noradèle Radjai is a partner in LALIVE’S international arbitration team, specialising in commercial and investment arbitration. Ms Radjai has acted as counsel and arbitrator in various international arbitration proceedings, both ad hoc and institutional, governed by a variety of procedural and substantive laws, both common and civil law. She focuses on energy matters, including oil and gas. She has acted as counsel and advocate in numerous gas pricing arbitrations, since 2005, for both buyers and sellers, covering the European, Middle Eastern and Asian markets. She has also spoken at several conferences on the topic, including the C5 conference on Long-Term Gas Supply Contracts.
She is a member of the IBA Arbitration Committee, as well as a member of the ASA Board and CPR European Advisory Board. She is also a member of the ICCA, LCIA, ABA and Arbitral Women. Ms Radjai is a solicitoradvocate of the Senior Courts of England and Wales and is fluent in English, French and Arabic.
Martje Verhoeven-de Vries Lentsch
Partner, De Brauw Blackstone Westbroek NV
Martje Verhoeven-de Vries Lentsch is a partner in the litigation and arbitration department of De Brauw Blackstone Westbroek in Amsterdam. She specialises in commercial arbitration and complex cross-border litigation.
Ms Verhoeven-de Vries Lentsch’s particular expertise is in the field of energy, where she advises clients and litigates on a wide variety of energy-related topics. In particular, she has handled and advised on over ten gas price review arbitrations related to long-term, highvalue natural gas supply agreements governed by a variety of legal systems, representing both buyers and sellers. This experience combined with her secondment to Shell’s litigation department in Houston and her role as litigator at the Houston office of Haynes & Boone enables her to advise clients on both legal and economic issues related to price reviews.
She also regularly advises clients on post- M&A disputes and issues related to recognition and enforcement of foreign judgments and related attachment proceedings.