International Arbitration of Renewable Energy Disputes, Second Edition
Emma Johnson, Lucy McKenzie, Matthew Saunders
Published: 2024
Pages: 95
eBook: 9781837230549
This Special Report is relevant to those interested in learning about the scope for disputes in the renewables sector, how they can be avoided, and how arbitration can best be deployed to prevent delay, resolve disputes which might otherwise jeopardise project completion and operation and help push the energy transition forward.
The increase in renewable energy capacity globally, and its complexities, give rise to a wide range of potential disputes. International arbitration has long been the preferred dispute resolution forum for the energy sector and is well placed to be the preferred process for dispute resolution in renewables projects.
The second edition of this Special Report considers:
• the defining characteristics of renewables projects;
• the scope for disputes to arise in the implementation of these projects, including a discussion of the elements of renewable energy projects
that give rise to disputes between investors, states and commercial parties;
• the common contractual protections that can be used to address disputes risk;
• the suitability of arbitration to resolve disputes, the key considerations for parties negotiating arbitration agreements, and how arbitral
procedures might be adapted for effectiveness; and
• potential future renewable energy dispute trends, including as a consequence of the recent spate of EU member state withdrawals from the
energy Charter Treaty, and as the effects of various geopolitical events continue to be felt.
Written for both a legal and non-legal audience, this Special Report is relevant to those interested in learning about the scope for disputes in the renewables sector, how they can be avoided, and how arbitration can best be deployed to prevent delay, resolve disputes and help push the energy transition forward.
Table of Contents
Cover | Cover | |
---|---|---|
Title Page | 1 | |
Copyright | 2 | |
Contents | 3 | |
Introduction | 9 | |
I. An introduction to renewables projects | 15 | |
1. What is renewable energy? | 15 | |
2. The key players in renewables projects | 18 | |
2.1 The project company or consortium | 18 | |
2.2 The contractor(s) | 18 | |
2.3 Operation and maintenance (O&M) provider | 20 | |
2.4 The offtaker of energy produced | 20 | |
2.5 The state | 20 | |
2.6 Funders | 21 | |
2.7 Insurers | 21 | |
II. Renewables projects: international law protection | 23 | |
1. International investment protection | 24 | |
1.1 Bilateral and multilateral investment treaties | 24 | |
1.2 The Energy Charter Treaty | 25 | |
1.3 Substantive protections | 25 | |
1.4 Reference to arbitration | 28 | |
2. The renewables cases against Spain, Italy, Czechia, Romania and Germany | 29 | |
3. A word of warning: ECT withdrawals | 31 | |
III. Common areas of dispute and contractual protections | 35 | |
1. Unique characteristics of renewables projects and the scope for disputes | 36 | |
1.1 Multiple players and contracts | 36 | |
1.2 New and emerging technology | 37 | |
1.3 No standardised contracts and the lack of precedent | 38 | |
1.4 New industry players | 39 | |
1.5 Regulatory landscape in flux | 39 | |
1.6 Unpredictability of the weather | 39 | |
1.7 Vulnerability to supply chain disruption | 41 | |
1.8 Relevance of local law | 41 | |
2. Common disputes in the main phases of a renewables project | 41 | |
2.1 Disputes in the development phase | 41 | |
2.2 Disputes in the construction phase | 42 | |
2.3 Disputes in the operation phase | 45 | |
3. Other areas of dispute | 46 | |
3.1 Price adjustment disputes | 46 | |
3.2 Joint venture disputes | 47 | |
3.3 Bribery and corruption allegations | 47 | |
3.4 Greenwashing claims | 47 | |
3.5 Carbon credits and trading disputes | 48 | |
3.6 Financing disputes | 48 | |
4. Contractual protections to mitigate disputes risk | 48 | |
4.1 Stabilisation clauses | 48 | |
4.2 Performance guarantees and minimum standards of performance | 50 | |
4.3 Representations and warranties | 51 | |
4.4 Design life obligations | 51 | |
4.5 Liquidated damages | 51 | |
4.6 Price review clauses | 52 | |
4.7 Variations, extensions of time and extra cost | 53 | |
4.8 Force majeure clauses | 53 | |
4.9 Defect rectification clauses | 54 | |
4.10 Limitation of liability clauses | 55 | |
4.11 Dispute resolution provisions | 55 | |
IV. International arbitration | 57 | |
1. What is international arbitration? | 57 | |
2. A final and binding decision | 59 | |
3. A decision enforceable outside the parties’ home jurisdictions | 60 | |
4. Arbitration is perceived as a more neutral forum for disputes involving parties from multiple jurisdictions | 62 | |
5. Appointing arbitrators with relevant expertise | 62 | |
6. Flexibility of process | 63 | |
7. Privacy and confidentiality | 63 | |
8. The choice of forum is clear | 63 | |
9. Types of relief available in arbitration proceedings | 64 | |
V. Getting the basics right: drafting an effective arbitration agreement | 65 | |
1. The scope of the clause | 65 | |
2. Multi-tiered arbitration clauses | 67 | |
3. The seat of the arbitration | 68 | |
4. The procedural rules that will apply | 70 | |
4.1 Institutional arbitration | 70 | |
4.2 Ad hoc arbitration | 71 | |
5. The tribunal | 71 | |
6. The choice of law governing the contract | 72 | |
7. The law of the arbitration agreement | 73 | |
8. Civil law vs common law | 73 | |
9. Provision for joinder and consolidation | 74 | |
10. Provision for confidentiality | 75 | |
11. The need for a quick resolution | 76 | |
11.1 Emergency arbitration | 76 | |
11.2 Expedited proceedings | 77 | |
11.3 Summary disposal of unmeritorious claims | 78 | |
VI. Top tips for resolving renewables disputes through arbitration | 79 | |
1. Selecting the right arbitrator | 79 | |
2. Importance of the first procedural order | 80 | |
2.1 Document production | 80 | |
2.2 Confidentiality | 82 | |
2.3 Case management techniques | 82 | |
3. Educating the tribunal | 85 | |
3.1 Use of experts | 85 | |
3.2 Tribunal-appointed experts | 87 | |
3.3 Ring-fencing relevant documents and witness evidence | 88 | |
3.4 Electronic and demonstrative exhibits | 89 | |
3.5 Site visits | 89 | |
4. Quantification of losses | 89 | |
5. Identification of remedies and defects rectification | 90 | |
6. Third-party funding | 91 | |
7. ADR techniques | 91 | |
7.1 Mediation | 92 | |
7.2 Facilitation, conciliation and expert determination of key issues | 93 | |
8. Virtual hearings | 93 | |
VII. Looking over the horizon: the future of renewables arbitrations | 95 | |
1. Energy transition: more claims | 95 | |
1.1 Technology disputes | 95 | |
1.2 Regulatory change | 98 | |
1.3 Decommissioning disputes | 99 | |
2. Geopolitical factors | 100 | |
3. Intra-European investor–state arbitration | 101 | |
4. Changes to arbitration | 102 | |
Notes | 103 | |
About the authors | 113 | |
About Globe Law and Business | 115 |
Emma Johnson
Partner, Ashurst LLP
[email protected]
https://www.linkedin.com/in/emma-johnson-28b4452a/
Emma Johnson is an international arbitration practitioner and advocate, and a partner at Ashurst in London. She has been listed as a ‘Next Generation Partner’ in The Legal 500 since 2019. She is also listed as a ‘Rising Star’ in The Legal 500’s international arbitration power list, as ‘Up and Coming’ in Chambers & Partners’ UK Guide for International Arbitration and in Who’s Who Legal.
Emma is qualified in England and Wales. She has experience advising on arbitrations under all of the major arbitral rules, and has particular experience of advising on energy and renewables disputes, arbitrations seated in or subject to the laws of Scandinavia, and African disputes. She has regularly worked as co-counsel alongside counsel from other firms and has conducted advocacy before both civil and common law tribunals.
Emma also has public international law experience, having acted in proceedings for and against states, both under the ICSID Convention and before the International Court of Justice.
Emma is a member of the ICC’s UK Arbitration and ADR Committee. She is a member of the London Court of International Arbitration (LCIA), the Chartered Institute of Arbitrators (CIArb), the International Chamber of Commerce Young Arbitrators Forum (ICC YAF), the London Court of Arbitration Young International Arbitration Group (LCIA YIAG), the Arbitration Institute of the Stockholm Chamber of Commerce – Young Arbitrators Sweden (SCC YAS), the Swiss Arbitration Association – ASA below 40, Young ICSID, the Energy Arbitration Club and Arbitral Women.
Lucy McKenzie
Senior associate, Ashurst LLP
[email protected]
https://www.linkedin.com/in/lucy-mckenzie-6526321bb/
Lucy McKenzie is a senior associate in Ashurst’s dispute resolution practice in London. Lucy’s focus is the resolution of construction and infrastructure disputes for clients in the energy industry. In the renewable energy sector, her recent experience includes acting in disputes involving a CSP plant, onshore and offshore wind farms, biomass projects and energy-from-waste projects. She also works with clients in the oil and gas and natural gas industries. Lucy has acted in international and domestic arbitrations, litigations, adjudications and mediations. She has acted in international arbitrations conducted under the ICC, LCIA, UNCITRAL and ICSID Rules and performs her own advocacy.
Matthew Saunders
Partner, Ashurst LLP
[email protected]
https://www.linkedin.com/in/matthew-saunders/
Matthew Saunders is a partner in Ashurst’s global international arbitration practice, based in London. Matthew is qualified in England and Wales and specialises in arbitration relating to international projects in the energy and resources sectors, with a particular focus on the gas sector. He has extensive experience in arbitrating renewable energy disputes. He has advised a broad range of clients, including sovereign and federal governments, international energy businesses, multinational corporations and financial institutions. He is a member of the London Court of International Arbitration (LCIA), the Chartered Institute of Arbitrators (CIArb) and the Association of International Energy Negotiators (AIEN). He is vice chair of the City of London Law Society International Arbitration Committee.