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International arbitration report Issue 16 | June 2021 Q&A with LCIA Registrar, Eliana Tornese Supply chain disputes Renewable energy project disputes Resolving joint venture disputes between investors and states Top 10 tips for drafting arbitration agreements Insta-fail – waiving goodbye to arbitration Recovering costs of enforcement and interest Arbitrator conduct in international arbitration Revised ICDR and ACICA Rules Revised ICC Arbitration Rules Recent key U.S. decisions Recent Key UK decisions Group, class and collective arbitration What are climate change and sustainability disputes?
International arbitration report — Issue 16 Norton Rose Fulbright Norton Rose Fulbright is a global law firm. We provide the world’s preeminent corporations and financial institutions with a full business law service. We have more than 4,000 lawyers and other legal staff based in Europe, the United States, Canada, Latin America, Asia, Australia, the Middle East and Africa. Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare. Through our global risk advisory group, we leverage our industry experience with our knowledge of legal, regulatory, compliance and governance issues to provide our clients with practical solutions to the legal and regulatory risks facing their businesses. Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact. Norton Rose Fulbright Verein, a Swiss verein, helps coordinate the activities of Norton Rose Fulbright members but does not itself provide legal services to clients. Norton Rose Fulbright has offices in more than 50 cities worldwide, including London, Houston, New York, Toronto, Mexico City, Hong Kong, Sydney and Johannesburg. For more information, see nortonrosefulbright.com/legal-notices. The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specific legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright. International arbitration report Published by Norton Rose Fulbright – Issue 16 – June 2021 Editors-in-chief – C. Mark Baker, US; Pierre Bienvenu Ad. E., Canada Editors – James Rogers, London; Cara Dowling, Vancouver © Norton Rose Fulbright LLP GLO_32499 06/21 Extracts may be copied provided their source is acknowledged. 02
Contents
tion question whether the more widespread International arbitration report — Issue 16
obal uptake of digital technology in international 04 Arbitrators’ corner
D-19 arbitration as a result of COVID-19 will Doing justice in the face of a global pandemic
outlast the pandemic.
C. Mark Baker, global co-head of 06 Institutional responses to the COVID-19
orted international arbitration at Norton Rose pandemic
Fulbright, concludes his Arbitrator’s Corner Cooperation, collaboration and going virtual
lls opinion piece with the hope that the
nd “continued acceptance of technological 10 Insolvency and international arbitration
rticle Editorial
and procedural innovations will be our new Tension between competingContents
public policy
It did normal, and that even after the restrictions of interests
he Welcome
the pandemicto issue
are16lifted,
of Norton
we willRose this International Arbitration Report.
Fulbright’s
continue 04 Q&A with LCIA Registrar, Eliana Tornese
price path of progress.” A day in the life of a Registrar”
In this issue, we cover a broad spectrum of ‘hot button issues’ 14 Disputes funding
for boards and in the06 COVID-19
ch Supply chain disputes
With an expected
companies operating increase in insolvencies
internationally. pandemic
e Avoidance, mitigation and resolution
as global economies teeter on the edge of
exas
(or tip
With theover into) recession,
COVID-19 pandemic wecontinuing
consider the 17 Investor-state
to shine a spotlight claims in09
on supply chains, the era of the
Navigating the dark side of the energy transition
ark, fell Renewable energy project disputes
weinherent
look attension
how to between the consensual,
avoid, mitigate COVID-19
and resolve supply chain disputes. We pandemic
also
ning
private nature of international arbitration
offer practical “Top 10 tips” for drafting arbitration agreements and explain how 12 Resolving joint venture disputes between investors
excess
nted aand the publicclause
well-drafted policywill
interests
mitigateof the
national
risk of cross-border20disputes. and
Doing business (but not business as states
insolvency laws. There is little doubt that Important protections provided by investment treaties
event usual) in a global pandemic
these
The areasTransition
Energy of law willremains
clash inathe
topcoming
priority for companies across all 14 Top 10 tips for drafting arbitration agreements
pply
weeks and
industries, months asboth
presenting potential arbitration
opportunities and risks. We continue our series A well-drafted clause will mitigate disputes risk
s 24 The energy market in a global pandemic
that ofparties
articlesfind themselves
exploring theseinsolvent or pursuing
issues, with a new analysis of renewable energy 17 Insta-fail – waiving goodbye to arbitration
claimsdisputes
project against insolvent
and a new counterparts.
article offering insights into the nature of climate
actual 27 The impact of COVID-19 on Beltfrom
Lessons anda recent Australian court decision on an
n, change and sustainability disputes and examples of such disputes that have online arbitration clause
On a related topic, we look again at third Road Initiative infrastructure and
ies been referred to arbitration.
party funding. The financial constraints of the construction projects 21 Recovering costs of enforcement and interest
e to COVID-19 pandemic has brought a renewed You won the arbitration, but can you also win interest
d one On a related topic, and continuing our series on Investor-State Dispute and costs of confirming?
focus on third party funding, as claimants
Settlement (ISDS), we look at joint venture disputes between 29 Preliminary
investors andtrends in arbitration in the
seek alternative means of funding their
states and how to mitigate the risks when transacting with states
claims. We explore the full range of funding sector in light23
and state-
transport ofArbitrator
COVID-19 conduct in international arbitration
Lessons learned from the Sun Yang case
owned entities.
options available.
31 Arbitrating disputes in the
25 Revised ICDR and ACICA Rules
ion WeWealso
alsocover
look atthethehot topic of
potential forgroup, class and collective arbitration, exploring
investor/state Increasing the efficiency and effectiveness of international
pharmaceutical, life sciences and
arbitration and modernising the institutional response
ain recent
treaty developments
claims that might in arise
the U.S.
as acommercial
result of arbitration and investor-state
en arbitration contexts. healthcare sector in the era of the
the pandemic. States have taken urgent and 29 Revised ICC Arbitration Rules
ns as extraordinary steps to prevent the spread of COVID-19 pandemic What changed when the revised ICC Rules came into
ies Inthe
ourCoronavirus
practice section,
and to we are delighted
address the publicto be joined by by LCIA Registrar force on January 1, 2021?
nd Eliana
healthTornese,
and economicwho shares her the
crisis that insights on what it is like35
virus has Climate
to work as a change
Registrarand sustainability
32 Recent key U.S. decisions
n atcaused.
a majorInevitably,
arbitral institution
some of these day in thewill
in “Ameasures Lessons
life of a Registrar” learned
. We offer an from COVID-19 and resolving
Update on international arbitration law in the U.S.
opinion piece on
affect foreign arbitrator
investors and conduct in international arbitration,
their investments, as wellbyasarbitration
disputes
succinct updates on recently revised rules of arbitration including the ICC, 34 Recent key UK decisions
triggering investor-state disputes. Update on international arbitration law in the UK
nd ICDR and ACICA Rules; all of which have revisions aimed at increasing the
se Last but certainly not least, we look at the
efficiency and effectiveness of arbitration and modernising the institutional 37 Group, class and collective arbitration
consequencesto newofand thedeveloping
crisis from an industry
a response
perspective, considering the
issues
impact
being experienced
across
About the
by arbitral cover Recent developments in the U.S. commercial arbitration
and investor-state arbitration contexts
ays participants.
he the energy, climate change and sustainability, The front cover for this issue 40 What are climate change and sustainability disputes?
transport
Last but notand life in
least, sciences
our case andlawhealthcare
updates, we cover recent features one of three
jurisprudence on11-foot Key arbitration examples (Part 1 contractual disputes)
ns sectors,
how as wellcosts
to recover as theof impact on Beltand
enforcement andinterest when confirming
high “Sistersarbitral
of Mercy” statues
ith Road infrastructure
awards in the U.S., and andprovide
construction projects.
a succinct round-up of a depicting
number of nurses
otherof World War 1
use recent UK and U.S. arbitration-related court decisions. in uniform, designed by Joseph
l Francis Watson. The statues are
o now found at Cathedral Place,
and Vancouver B.C., which stands About the cover
tors where the Medical-Dental 1920sThe front cover for this issue features a
art-deco skyscraper once stood. statue of Mary Seacole on the grounds
Original architects McCarter andofNairne
St Thomas’ Hospital,
served London. It is the
in WW1.
C.Mark
C. Mark Baker
Baker Pierre
PierreBienvenu
Bienvenu, Ad.
Ad.E. E UK’s first statue in honour of a named
y of McCarter credited WW1 nurses with saving his life and
black woman. Mary Seacole was a
We Co-heads, International arbitration commissioned the statues in their honour.
British-Jamaican nurse known for her
nd Norton Rose
Co-heads, Fulbright arbitration
International work in the Crimean war. Mary was a
contemporary of (and as well-known in
Norton Rose Fulbright
Britain as) Florence Nightingale.
03 03International arbitration report — Issue 16
Q&A with LCIA Registrar, Eliana Tornese
Q&A with LCIA Registrar, Eliana Tornese
“A day in the life of a Registrar”
Interview by James Rogers
James Rogers spoke with Eliana Tornese, newly appointed Registrar of the London Court of
International Arbitration (LCIA), about her role.
Please tell us about the key daily to-do-list is to review the inbox. Team meetings are an opportunity for
The 2020 Rules provide for electronic counsel and casework administrators to
elements of your role communication with the LCIA in the share developments on their cases. The
arbitration. Accordingly, and in order to 2020 Rules introduced an explicit reference
As Registrar of the LCIA, I am head of the to the possibility of early determination;
promote environmentally friendly best
Secretariat and am responsible for the broadened the power of the LCIA Court
practice, the LCIA encourages users and
day-to-day administration of over 1,000 and the Tribunal to order consolidation
arbitrators to send soft copies only of
matters currently registered with the and concurrent conduct of arbitrations and
correspondence, submissions and other
LCIA, allocated between all the members included an explicit consideration of data
documents during the course of the
of the Secretariat, which is composed of protection. Each member of the Secretariat
arbitration.
counsel and casework administrators. The reports on these issues and other matters
majority of these cases (more than 80%) As Registrar, I review all the new arising to the broader team in order
are arbitrations under the LCIA Arbitration Requests for Arbitration. On busy days, that everyone is aware of the extent of
Rules, with the remaining caseload we can receive over 20 new Requests for application and interpretation of the LCIA
being divided between UNCITRAL Arbitration, and usually fewer, on a regular Rules on these aspects and is able to guide
arbitrations administered by the LCIA, day. My review involves checking that the users and arbitrators when similar issues
mediations under the LCIA Mediation Request complies with the requirements arise on ongoing cases.
Rules, arbitrations where the LCIA is the of Article 1 of the Rules in order to approve
appointing authority only and cases where registration. Occasionally, I liaise with the
the LCIA is acting as a fund-holder only. Acting as Registrar is both a
President or a Vice President of the LCIA
dynamic and exciting role
Court before registering new Requests
Acting as Registrar is both a dynamic
for Arbitration to obtain the Court’s input.
and exciting role. It involves, on the one In the daily individual meetings, counsel
For example, since the entering into
hand, interfacing directly with users and and casework administrators identify and
force of the 2020 Rules, the LCIA has
arbitrators to help them navigate through raise with me any potentially problematic
received a number of composite Requests
the different stages of LCIA arbitral issues that arise on cases (including, for
for Arbitration pursuant to Article 1.2 of
proceedings, and, on the other hand, example, proposed procedure that is not in
the Rules. Following consultation with
supervising the Secretariat’s members in accordance with the Rules and challenges
the LCIA Court, we have clarified with
order to ensure the LCIA standards are to arbitrators). However, more generally,
claimants filing composite Requests for
applied consistently across all cases. in these meetings, I review with each
Arbitration that each arbitration requires a
separate registration fee. counsel and casework administrator key
What does your day look In the event the inbox only includes regular
draft correspondence and documents.
This includes, for example, the first letter
like? correspondence and once this has been to parties which is sent after a Request
addressed, the second item of my daily for Arbitration is received, requests for
No two days are identical. However, like to do list is to have regular meetings with advance payment for the costs of the
for anyone else, especially in this time counsel and casework administrators, arbitration, disclosures submitted by
of remote working, the first item on my either in a team meeting or individually. arbitrators prior and post appointment, the
04International arbitration report — Issue 16
Q&A with LCIA Registrar, Eliana Tornese
form of appointment officially appointing James Rogers
a tribunal and the notice of appointment Partner
informing the parties of such appointment, Tel +44 20 7444 3350
as well as awards. This allows me to james.rogers@nortonrosefulbright.com
supervise and monitor cases at key stages
of the proceedings.
What role do you play in
the arbitrator appointment
process?
It should come as no surprise that one of
the regular daily tasks of the Secretariat
is to assist the LCIA Court with the
appointment of the Tribunal, where we
consider issues such as disclosures in
parallel cases, repeat appointments and
advance waivers.
As part of the appointment process where
parties have agreed that the LCIA Court
select arbitrators, I review shortlists of
candidates prepared by Counsel, before
they are submitted to the LCIA Court.
Counsel’s search starts with the LCIA’s
internal database and then other available
resources, in order to identify lists of
potential arbitrators suitable for the case,
taking into account all relevant aspects. In
practice, in recent years, more than 60%
of all arbitrators appointed by the LCIA
are selected by the parties or nominees,
leaving 40% of arbitrators being selected
by the LCIA Court. Reviewing and fine-
tuning the lists of candidate arbitrators
before they are sent to the President
or Vice Presidents of the LCIA Court
remains one of my favourite parts of
the day. In particular, the LCIA strives to
maintain diversity in experience, cultural/
legal background, age and gender, which
includes considering candidates who have
not previously been appointed in LCIA
proceedings.
05International arbitration report — Issue 16
Supply chain disputes
Supply chain disputes
Avoidance, mitigation and resolution
By C. Mark Baker, Cara Dowling and Carmel Proudfoot
Supply chains are increasingly complex. Globalisation of markets has led to supply chains which
extend across multiple borders and consist of an ever growing number of links. As the pandemic has
highlighted, businesses of all types need to take a cold, hard look at risks to their supply chain and to
ensure that mechanisms are in place to initially assess and mitigate disputes risk, and then to later
manage disputes that do arise. Careful management of supply chain disputes risk is critical given
disruption can reverberate throughout the supply chain with significant time, cost, operational and
liability implications for all involved.
Role of ADR and before it escalates and the parties become This can assist parties to avoid disputes
entrenched in their positions. Although or resolve them quickly in circumstances
arbitration in resolving ADR is sometimes seen as less hostile where a speedy resolution may be the
supply chain disputes than traditional litigation, any dispute most important outcome.
creates tension. Parties need to be realistic:
International arbitration is a tried and disputes will arise and must be resolved If the dispute cannot be resolved by ADR,
tested method for resolving supply chain practically. If the parties have sufficient then parties generally turn to either litigation
disputes efficiently and effectively. It offers personnel, it can be helpful to have or arbitration. The popularity of international
a neutral forum that can be adapted to separate staff dealing with the dispute arbitration in supply chain disputes is driven
the needs of the parties and results in to those responsible for the day-to-day by several key factors, including:
a binding award enforceable in most management of the supply chain.
jurisdictions. • Enforceability: Unlike the enforcement
Parties should also consider steps to of foreign court judgments, there is
Arbitration also works well as part of a preserve the supply chain if the other party a near global and well-established
tailored mechanism that incorporates other refuses to cooperate. This could range from regime for enforcing arbitral awards.
alternative dispute resolution procedures seeking provisional measures to compel Most countries have signed up to
(ADR). Such bespoke options can be performance of the contract through to the New York Convention which
especially important where time is of the securing alternative supply to mitigate provides straightforward rules for
essence or the supply chains are essential. losses. the enforcement of awards which,
It can be very important that the supply importantly, limit the scope for
chain continues to operate during the Disputes boards are another increasingly challenge. The ease and clarity of
dispute to minimise loss. popular choice for supply chain disputes. enforcement is a critical consideration
A dispute board is a pre-established in cross-border disputes, where
Parties should also consider steps committee setup at the outset to help disputing parties and assets may be
to preserve the supply chain if the parties resolve disputes. The board may spread across multiple jurisdictions.
consider issues and provide guidance
other party refuses to cooperate • Neutrality: By choosing international
to the parties to prevent disputes from
arbitration, parties are choosing a
arising, or be limited to resolving formal
neutral forum that is convenient to both
Many parties will initially seek to resolve disputes that are referred to it. The board
parties to resolve the dispute, before
disputes through negotiation, mediation can be directed to make binding decisions
independent, impartial arbitrators under
or conciliation. These each provide an or to simply provide recommendations
transparent rules. In contrast, parties
early opportunity to resolve the dispute, for the parties to consider and act upon.
06International arbitration report — Issue 16
Supply chain disputes
can be reluctant to have disputes complex and protracted dispute. To be the potential need for, and availability
heard before local courts as it can most effective, the groundwork for the of, this type of relief when drafting their
be seen as giving one party a “home dispute resolution procedure should dispute resolution clause.
court” advantage (whether actual be laid at the outset, when drafting the
• Pre-arbitral steps: Given the long
or perceived). In some jurisdictions, contract. In addition, companies that have
term relationships and cooperation
there may also be concerns over the undertaken a proper assessment of supply
needed for an effective supply chain,
neutrality, corruption, or skill set of chain risk and implemented appropriate
it may benefit parties to attempt
domestic judiciaries. mechanisms, are better placed to prevent
amicable settlement before resorting to
disputes from arising (by, for example,
• Expertise: Related to the neutrality arbitration. This can be provided for in
identifying key triggers), negotiate a
point, parties to arbitration choose a multi-tiered dispute resolution clause,
resolution, or ultimately succeed in dispute
their arbitrators. They are able to agree but it should be carefully developed to
resolution proceedings.
in advance or after a dispute arises avoid imposing additional disruption
the particular skill set and expertise of or delay, or grounds for jurisdictional
their tribunal. There are no jury trials Another key element of disputes- challenges.
in arbitration. This can be extremely risk mitigation is a disputes-risk
• Method of dispute resolution: There
important when dealing with complex, legal audit are many ADR options and some will
technical disputes.
suit better than others. Parties should
• Confidentiality: Arbitration is a It is not possible to predict all the disputes seek legal advice on the best options
private process that is generally also that might arise during a complex long- for their particular supply chain. Further
subject to confidentiality obligations. term contract. Parties’ should therefore tips on drafting an effective arbitration
This can be particularly important focus on developing a robust and flexible agreement are available here.
for disputes that involve sensitive procedure. In particular, parties to the
• Disputes-Risk Legal Audits: Another
information or trade secrets, such as contracts underpinning a supply chain
key element of disputes-risk mitigation
seen in the pharmaceutical industry. should consider:
is a disputes-risk legal audit. This
Confidentiality of process and outcome
audit involves both proactive and
is easier to secure in arbitration than • Consistency: It is unlikely that the
retrospective elements.
in proceedings before domestic courts entire supply chain will be governed
where in general the starting principle by a single contract. There are — The proactive element is an audit
is that proceedings and decisions are usually several contracts involving to profile the range of disputes
open to the public. different parties and regions. The then develop, adapt and adopt
most appropriate option will need to internal protocols to support the
• Flexibility of process: Another great
be chosen taking into account all the dispute resolution policies put in
advantage of arbitration is that it offers
circumstances. To minimise the risk of place. It may also involve training
significant flexibility. Unlike in litigation,
parallel proceedings and inconsistent for in-house personnel in dealing
parties have a large degree of control
decisions, parties will often benefit from with each stage of the supply chain
over the applicable rules, procedure
a dispute resolution procedure that dispute under the internal protocols.
and scope of the arbitration, including
is consistent across the supply chain.
the rules over costs allocation. — The retrospective element is an audit
Consideration should also be given
of where, how and why disputes
to whether parties wish to be able to
Preparing for a supply consolidate disputes and join key third
are arising. It involves a strategic
analysis of factual circumstances
chain dispute before it parties to an arbitration.
and contractual arrangements in
happens • Expedited relief: Parties often need to which disputes have arisen. It can
obtain emergency relief quickly such be holistic or focused, such as a
Time and time again, where dispute as an injunction or declaration. Many particular suite of transactions,
resolution is an afterthought left for arbitral rules provide for emergency time period or region. Commonly,
eleventh hour negotiation (or, worse, relief or expedited arbitration that allow patterns can be observed which
until a dispute has arisen), the outcome parties to seek rapid relief on an interim allow for identification of underlying
is invariably a costly, unnecessarily or final basis. Parties should consider issues and early commercial or
07International arbitration report — Issue 16
Supply chain disputes
strategic intervention that may Conclusion
avoid similar disputes in the future.
This retrospective analysis provides Supply chain disputes are complex and
an important data-point for the often require fast cross-border solutions.
proactive aspect of the audit. International arbitration provides a flexible,
— Such audits are critical because efficient and effective framework to resolve
too often in the heat of battle or these disputes, especially if combined with
in the relief of the aftermath, the other ADR options. It is critical, however,
underlying issues that caused a that parties consider dispute resolution at
major dispute are forgotten. Similarly, the outset of a transaction, to develop an
a spate of lower value or less appropriate bespoke dispute resolution
commercially important disputes process that effectively manages their
can slip individually beneath the disputes. Conducting disputes risk
radar despite amounting collectively audits of supply chains, particularly for
to a significant drain on financial companies operating in essential sectors
and management resources. The or across multiple borders, and setting in
opportunity to identify a common place bespoke protocols for dealing with
cause underlying those disputes can disputes are other important tools in a
be missed. In the case of smaller company’s risk management tool-kit. If
skirmishes, it can also mean missing done well, these can save significant time,
a red flag that the conditions for a costs and commercial relationships.
major dispute are forming.
C. Mark Baker
• Disputes protocols: Related to this is Global Co-Head of
the importance of having appropriate International Arbitration
dispute resolution systems and Tel +1 713 651 7708
protocols to record disputes and mark.baker@nortonrosefulbright.com
preserve evidence from the earliest
stages of a dispute. Such systems Cara Dowling
lead to more efficient and effective Director, Global Disputes
dispute resolution proceedings. Tel +1 604 641 4874
Importantly, they also allow earlier cara.dowling@nortonrosefulbright.com
and more informed decisions as to the
appropriate strategy for resolving the
Carmel Proudfoot
dispute and avoiding future disputes.
Senior Associate
Tel +61 8 6212 3299
Investing in the assessment of disputes-risk carmel.proudfoot@nortonrosefulbright.com
and implementing both bespoke dispute
resolution contractual mechanisms and
company protocols for managing disputes
can prove invaluable. In the long run it can
save significant management time and
money – and crucially, preserve important
counterparty relationships. With operations
and finance under pressure and disputes-
risk on the rise in the face of global volatility,
this is an important component of any risk
management protocol.
08International arbitration report — Issue 16
Navigating the dark side of the energy transition
Navigating the dark side of the energy transition
Renewable energy project disputes
By Tamlyn Mills and Phoebe Miley-Dyer
The substantial growth forecast for renewable energy capacity, and therefore renewable energy
projects, carries with it a significant risk of related disputes arising. This article explores the features of
renewable energy projects, the types of disputes that may arise throughout a renewable energy project
life-cycle, and the role of arbitration in resolving such disputes, particularly where projects have a cross-
border dimension.
Forecast growth for GW of renewable energy will become 2. A heightened degree of regulatory
operational in 2021. This substantial growth and political risk – related to the
renewable energy projects in renewable capacity will necessitate above, renewable energy projects
substantial investment in new renewable have a high exposure to regulatory
Pressure on governments and businesses
energy projects and existing infrastructure, and political risk. Consistent with
to pursue meaningful action on climate
which carries with it a significant clean energy policy objectives, many
change continues to grow with global
commensurate risk of disputes arising in countries have introduced favourable
attention increasingly focussed on the
relation to those projects. regulatory frameworks designed to
threats posed by global warming. While
encourage investment in renewable
the shift toward renewable energy is by
energy. If these regulatory regimes
no means new, with more governments Features of renewable are subsequently unwound or
committing to net-zero emission targets,
these ambitious clean energy goals are
energy projects fundamentally altered, it can result in
a significant diminution in the value
accelerating the energy transition and
Renewable energy projects can take of renewable energy projects. In
increasing investment in renewable energy
a variety of forms, from greenfield some countries, the politics around
projects.
investment in new projects to hybrid climate change policy have increased
projects which aim to integrate renewable regulatory uncertainty and instability.
This substantial growth carries energy technology into existing projects. 3. Adoption of new or developing
with it a significant commensurate Further, renewable energy encompasses technologies – renewable energy
risk of disputes arising in relation a range of technologies such as solar, projects, to varying degrees, seek
to those projects wind (offshore and onshore), hydropower, to operationalise new or developing
waste to energy, geothermal and hydrogen. technologies sometimes on an untested
However, renewable energy projects scale. This increases the risk profile of
In a report titled ‘Renewables 2020
broadly share one or more characteristics such projects as unforeseen technical
Analysis and forecast to 2025’ published
which can impact on the disputes risk issues can arise during both the
by the International Energy Agency (IEA),
profile of renewable energy projects: construction and operational phase of
renewable energy capacity was forecast to
expand by almost 10% in 2021. In addition, the project.
1. Long term investments with high
the report forecast that 95% of the net
upfront capital costs – renewable 4. Grid integration issues – in some
increase in global power capacity in the
energy projects typically require countries, the successful execution
period 2021 to 2025 would be generated by
significant up-front capital investment of renewable energy projects is
renewables. It also noted that 13 countries
which is recouped as the project hampered by issues associated with
awarded almost 50 GW of new renewable
generates returns over its (generally the integration of intermittent power
capacity to become operational in the
long) operational life. supply into electricity systems designed
period 2021-24. The IEA forecast that 218
09International arbitration report — Issue 16
Navigating the dark side of the energy transition
for traditional concentrated baseload The wave of investor claims against Another important advantage of arbitration
dispatch. The requirement to upgrade states such as Spain and Italy under is that it provides parties with the
or modify grid infrastructure to cope the Energy Charter Treaty following opportunity to have a say in the selection
with the influx of renewable energy changes to those states’ renewable of arbitrators. In highly technical disputes,
capacity can add cost and complexity energy regulatory frameworks is an the ability to select arbitrators with
to renewable energy projects and cause example of these types of disputes. specialised technical expertise or specific
delay. industry knowledge can be of great value
• Joint venture and other contractual
to all parties.
disputes between stakeholders, where
multiple parties are involved in the
It is impossible to exhaustively development and financing of large
Another attractive feature of arbitration
catalogue the variety of disputes renewable energy projects.
is confidentiality. Arbitral proceedings
that might arise during the and awards are private and generally
life-cycle of a renewable energy • Claims arising out of delay in the confidential, unlike litigation. This can
commencement of supply from be very important where, for example,
project
renewable energy projects, including trade or commercial secrets in emerging
where grid integration issues delay technologies risk being exposed as part
projects. of a dispute. This privacy – along with the
Types of disputes perception that arbitration can be less
• Regulatory enforcement action where
hostile – can also assist in preserving
Navigating the dark side of the energy renewable energy is dispatched and
on-going commercial relationships,
transition requires an understanding of the sold in highly regulated markets.
something that is important in renewable
particular features of renewable energy
Identification of the types of disputes that energy projects which involve long-term
projects and how they might lead to
may arise in relation to renewable energy relationships.
disputes. It is impossible to exhaustively
catalogue the variety of disputes that might projects highlights the key areas of risk
arise during the life-cycle of a renewable that stakeholders need to focus on in order Given the cross-border nature of
energy project, particularly where projects to successfully navigate the dark side of
many renewable energy projects,
are complex, high value and taking place the energy transition.
arbitration offers an impartial
across a multiplicity of jurisdictions.
forum for the resolution of
However, it is possible to identify some
of the main areas where disputes may Use of arbitration to disputes
arise in connection with renewable energy resolve renewable energy
projects. These include: project disputes Finally, there is generally no right of appeal
from an arbitral award and, save for limited
• Claims arising where new technologies Arbitration is already the dispute resolution recourse to have an award set aside
fail to perform to expectations, such mechanism of choice for many participants or enforcement denied, the outcome is
as misrepresentation, negligence or in the energy industry and it offers considered final. This finality can reduce the
breach of contract (see, for example, important advantages in the context of cost and time involved in resolving disputes.
MT Højgaard A/S v E.ON Climate & renewable energy project disputes.
Renewables UK Robin Rigg East Ltd and
another [2017] UKSC 59). Large scale renewable energy projects are
Key takeaways
• Construction disputes, such as claims likely to involve investors, contractors and
As the world moves toward a net zero
relating to delay, scope changes, breach sub-contractors from multiple jurisdictions.
emissions future, investment in renewable
of contract or defects. Given the cross-border nature of many
energy projects will continue to grow. The
renewable energy projects, arbitration
• Investor-state claims under multilateral energy transition offers great opportunities
offers an impartial forum for the resolution
or bilateral investment treaties brought and environmental benefits but also
of disputes. The relative ease of enforcing
by foreign investors for breach of presents challenges and risks, including
arbitral awards globally under the New
investment protections such as the the risk of disputes.
York Convention is also a key advantage of
fair and equitable treatment standard. arbitration.
10International arbitration report — Issue 16
Navigating the dark side of the energy transition
In order to successfully navigate those
risks, stakeholders in renewable energy
projects are well advised to:
• carefully consider the allocation of
risk in contracts relating to renewable
energy projects, including warranties,
exclusions and indemnities;
• if investing in a renewable energy
project in another country, consider
at an early stage whether the project
could be covered by an investment
treaty and how the project can be
structured to take advantage of
available treaty protections;
• apply best practice project
management principals to the design
and construction phase of a renewable
energy project;
• consider how to price the risk of
unforeseen technical issues where
projects are based on new and
emerging technologies;
• consider the benefits of an arbitration
clause, particularly for cross-border
renewable energy projects; and
• apply best practice dispute
management and resolution protocols
during the life of the project.
Tamlyn Mills
Partner
Tel +61 2 9330 8906
tamlyn.mills@nortonrosefulbright.com
Phoebe Miley-Dyer
Associate
Tel +61 2 9330 8184
phoebe.miley-dyer@nortonrosefulbright.com
11International arbitration report — Issue 16
Resolving joint venture disputes between investors and states
Resolving joint venture disputes between investors
and states
Important protections provided by investment treaties
By Matthew Buckle and Phillippa Hook
Since the first bilateral investment treaty was agreed over 60 years ago to support foreign direct
investment, there are now over 2,500 similar treaties involving over 150 countries. Over that period, a
significant body of investment law has emerged to provide qualifying investors with substantive extra-
contractual protections over their qualifying investments. This includes, in the event of breach, the
safety net for foreign investors of the availability of direct recourse to international arbitration against
the host state. This article considers these advantages, particularly in the context of a joint venture.
Relevance of investment made between two countries containing Investment treaty-based
reciprocal undertakings for the promotion
treaties to joint ventures and protection of private investments protections
made by investors from one of those states
Joint ventures or investment agreements Investment treaty-based protections
into the territory of the other state. A multi-
with host states (or state entities) are operate in a different and distinct legal
lateral investment treaty (MIT), such as the
common in certain sectors, in particular sphere from contracts or investment
Energy Charter Treaty, involves more than
natural resources and infrastructure agreements, which means they can provide
one state party.
projects. These agreements typically recourse to investors where there may be
involve long-term commitments with none under the contractual documents.
significant investment from the foreign An investor might then seek
investor into the host country. to structure its investment to In order to benefit from treaty protection,
benefit from treaty protections the investor must be a qualifying “investor”
However, on occasion, the host state making a qualifying “investment” as
may later seek to re-open for negotiation defined in the treaty. The definition of
The protections afforded under BITs
the agreed terms once resources are “Investor” usually includes nationals of
and MITs will depend on the individual
committed by the investor, under the and certain entities incorporated in the
treaty, though many do contain similar
threat of expropriation or withdrawal contracting states respectively. It can, but
protections. Those protections “have
of local licences or rights to operate, or does not always, cover subsidiaries of
teeth” because the treaty often also
threaten other measures having equivalent those entities. As for investments, many
includes Investor-State Dispute Settlement
effect. This can particularly be the case treaties simply protect “any assets, directly
(ISDS) provisions, generally international
where there has been a regime change or indirectly controlled by the investor”, so
arbitration.
in the host country or a shift in political specific advice should be taken in particular
priorities. Investment treaties can offer The availability of substantive protections cases to ensure that a proposed investment
important protections against such afforded under applicable treaties (if any) has the necessary qualifying characteristics
conduct. should be considered at the outset when to be protected under the relevant treaty.
making an investment into a foreign host
Investor protections can be found in In industries focused around natural
state. An investor might then seek to
many bilateral and multilateral investment resources and infrastructure, host states
structure its investment to benefit from
treaties, as well as some other trade increasingly require a joint venture
treaty protections.
agreements. A bilateral investment treaty company to be incorporated within their
(BIT) is an international agreement own jurisdiction. Shares typically qualify as
12International arbitration report — Issue 16
Resolving joint venture disputes between investors and states
an “investment” so it is sensible to consider procedural protection. These provide an As a result, it is common to see challenges
the use of an appropriate investment aggrieved foreign investor with the right to to the tribunal’s jurisdiction by the host
vehicle incorporated in a jurisdiction that commence international arbitration against state. This may be even more likely where
has a favourable treaty with the host the host state in the event that the state the claimant is a party to a joint venture,
state, even if the ultimate investment is a breaches its treaty obligations. or otherwise holds its interest in the
shareholding in the joint venture company. “investment” indirectly.
Attention will need to be paid to the whole Claims will be governed by the terms of the
corporate structure as some treaties do not relevant treaty and international law, and
cover indirect shareholdings. not necessarily by the law specified in any Winners and losers
contracts related to the investment
BITs commonly provide the following Generally the statistics show ISDS outcomes
substantive rights and protections: This allows investors a private right of are largely even and do not tend to favour
action against a host state that is outside either states or investors. There are however
• Prompt and adequate compensation local courts and allows them to seek an some exceptions – the US has famously
for expropriation, sometimes including award of damages from an independent never lost one of the 17 claims brought
‘indirect’ expropriation (i.e. where there and international tribunal. If the state does under NAFTA, although four were settled.
has not been physical acquisition but not comply with an award, the award can
there has been substantial deprivation be enforced against the state in most Over the last two years there have been six
of the investment’s economic value). jurisdictions. concluded ISDS claims concerning joint
ventures, of which one was decided in
• No less favourable treatment than local favour of the investor, and three in favour of
Most BITs provide that the investor has the
domestic competitors and investors the state. The other two were settled.
option of the rules which will apply to the
under other BITs (known as national
arbitration. This choice may significantly affect
treatment and most favoured nation Notwithstanding the costs and risks of
whether or not a prospective claimant has
protections). pursuing a claim, ISDS is a powerful tool in
standing to bring claims under the particular
• Fair and equitable treatment. BIT in question. In International Centre for the addition to any rights under the contracts
Settlement of Investment Disputes (ICSID) with the host state. The ISDS provisions
• An “umbrella clause” recognising the may be triggered alongside any contractual
cases, for example, the rules provide that the
host state will comply with private dispute resolution or subsequently if the
investor must additionally demonstrate:
contractual obligations, elevating contractual route is unsuccessful. Most
breach of contract claims to a BIT claim. importantly, treaty-based protections may
• A contribution or commitment by the
• Preferential investment terms, such as investor; fill a gap where there is no other available
tax exemptions (although these are not domestic recourse for host state conduct.
• Performance of the investment / project The availability of remedies in investment
always actionable claims under BITs).
for a certain duration; arbitration can also serve to avoid disputes
Generally the remedy is monetary • Existence of a risk for the investor; and and facilitate negotiation, including for
damages, though in some circumstances example where a local state joint venture
• A significant contribution to the
declaratory relief and restitution may be partner seeks to later renegotiate the
economic development of the host state.
available. Interim relief to protect the status agreed terms.
quo while proceedings are ongoing may
The application and interpretation of
also be available.
these features by tribunals in the context Matthew Buckle
of different BITs is not uniform. There is Counsel
Investor-State Dispute no formal binding system of precedent Tel +44 20 7444 5054
in investment arbitration, but awards matthew.buckle@nortonrosefulbright.com
Settlement (ISDS) are typically published and in the public
domain. This means that non-binding (and Phillippa Hook
The key advantage of structuring an sometimes contradictory) jurisprudence Senior Associate
investment to fall under an investment exists in relation to many different Tel +44 20 7444 2366
treaty regime is that most contain ISDS jurisdictional and substantive issues. phillippa.hook@nortonrosefulbright.com
provisions, which are an important
13International arbitration report — Issue 16
Top 10 tips for drafting arbitration agreements
Top 10 tips for drafting arbitration agreements
A well-drafted clause will mitigate disputes risk
By Dylan McKimmie, Holly Stebbing, Katie McDougall, Carmel Proudfoot, Simon Goodall, India Furse, Nimoy Kher and Giulia Barbone
Arbitration agreements are often treated as “one-size-fits-all” precedents which are included in
commercial contracts without much thought. This approach can be counterproductive and can result
in increased time, cost and complexity to resolve disputes. A well-drafted arbitration agreement, taking
into account the issues identified by this article, may serve to mitigate those risks.
Scope of the arbitration of interim remedies and rights relating to are located in others; the governing law of
the enforcement of the award. The seat of the contract may be that of one jurisdiction
agreement arbitration may be different to the venue while the seat of the arbitration may be
of arbitration (where the arbitration will another jurisdiction still. The absence of an
The scope sets out the types of disputes
physically take place), and the governing express governing law for the arbitration
that can be referred to arbitration. A poorly
law of the arbitration agreement. agreement can lead to lengthy disputes.
drafted scope is a common source of
disputes and may deprive the tribunal of Most parties opt for a ‘neutral’ jurisdiction Despite this, arbitration agreements
jurisdiction over all or part of the dispute. as the seat but this should not be the often fail to specify the governing law of
only consideration. Arbitral laws differ the arbitration agreement. We strongly
Three critical aspects to consider are:
between countries and have important recommend doing so.
consequences on the efficiency of the
• Language: Common phrases such
arbitration and enforceability of an award.
as arising “out of”, “under” or “in
Recognising this, CIArb has developed Choice of rules
connection with” all have different
the London Principles, to assist parties in
meanings, some broader than others; One of the most important decisions
choosing a ‘safe seat’ for arbitrations.
• Carve outs: Trying to carve out certain when drafting an arbitration agreement
is whether to adopt the rules of an
types of disputes often results in Most parties opt for a ‘neutral’
unforeseen consequences and should established arbitral institution, such as
jurisdiction as the seat but the ICC or LCIA, to govern the arbitration
be avoided wherever possible; and this should not be the only procedure. The main benefits of doing so is
• Parties: The right parties need to be consideration that the institution, in return for a fee, plays
party to the arbitration agreement. This a key role in administering the dispute and
can be a problem where the contractual their rules offer a well-established and
counterparty is a newly incorporated Governing law of the predictable procedure.
joint venture without assets or a state arbitration agreement
owned entity. The arbitration agreement If the parties wish to refer their disputes
should include the party against whom The arbitration agreement is a contract to ad hoc (un-administered) arbitration,
any award will be enforced. in its own right. Consequently, the law they should consider either setting out a
governing the arbitration agreement (which bespoke process, adopting existing ad hoc
determines the validity and scope of the procedural rules (such as the UNCITRAL
Seat of the arbitration arbitration agreement) can differ from the rules) or incorporating the rules of an
governing law of the substantive contract. institution but making clear that those
The seat of arbitration determines the
provisions in which the institution plays an
procedural law of the arbitration. Its In international contracts, performance administrative role and receives fees for
importance cannot be overstated: amongst may be in one jurisdiction while the parties doing so will not apply. If this is not agreed
other things, it determines the availability
14International arbitration report — Issue 16
Top 10 tips for drafting arbitration agreements
prior to entry into the transaction between Generally, being non-specific gives Multi-tiered clauses
the parties, such options will need to be parties the flexibility to nominate the
agreed between the parties. Parties should most appropriate arbitrators at the time Multi-tiered clauses provide gateways
also consider using an institution as an the dispute arises. But if parties wish to for attempts at a negotiated resolution,
appointing authority. stipulate qualifying criteria (for instance, allowing disputes to be gradually
particular industry-sector experience or escalated from negotiation to mediation or
nationality), there are a few drafting tips: conciliation and finally to arbitration.
Language
• The class of potential arbitrators should Despite many commercial parties seeing
The arbitration clause should identify the not be unduly narrow, as it potentially great benefit in ADR, multi-tiered clauses
language of the arbitration, especially might render the arbitration agreement should be drafted with a recalcitrant party
where parties are from countries with inoperable (for the same reason, in mind. Often by the time the dispute
different first languages. parties should avoid naming specific resolution process is invoked, the parties
individuals); and have already tried to informally resolve the
This is an important choice as all
• The chosen criteria do not dispute without success. The disaffected
submissions and evidence will be
unintentionally include or exclude a party, often the putative respondent, may
presented in the agreed language during
class of potential arbitrators. seek to frustrate the process by various
the proceedings. Selecting the language
means. The clause should be drafted to
that the parties most commonly use in their
It is good practice for the selected ensure that there is a clear timetable and
communications could save significant
arbitrator to obtain written confirmation trigger points which can be progressed
translation and interpretation costs.
upon appointment that the contractual without the active participation of both
criteria (where specified) are considered parties.
Number and appointment fulfilled, in order to avoid any later
Arbitration allows parties to
of arbitrators enforcement issues.
agree upon the characteristics
and experience that arbitrators
As a general rule, where disputes are likely
Consolidation and joinder are to have
to be high value and complex, it is usually
advisable to specify that the tribunal will Parties bound by multi-contract
consist of three arbitrators. Whereas if
the dispute is likely to be low value and
arrangements face the risk that, when Don’t overcomplicate it!
disputes arise, different tribunals may be
uncomplicated it may be more appropriate appointed to deal with multiple arbitrations
and cost effective to provide for a sole With so much to consider, it can be
in relation to the same or similar set of tempting to set out a detailed clause
arbitrator. facts. This can lead to conflicting decisions covering every conceivable possibility,
and add costs and delays. but this can be counterproductive. It is
In multi-party disputes, where it is
unworkable for each party to select an impossible to predict every dispute that
The key to dealing with multi-contract might arise. A proscriptive clause may not
arbitrator, parties should agree on an disputes effectively is to ensure that the
appointment procedure. For example, suit the dispute that actually eventuates or
arbitration agreement in each interrelated be so complicated that the parties cannot
parties can agree that appointments will contract is consistent and that it expressly
be made by an appointing authority. sensibly comply with it.
allows for consolidation (i.e. the merger of
separate arbitrations arising out of the same Instead, parties should focus on
Specifying arbitrator or interrelated contracts into a single set of
proceedings) and joinder (i.e. the addition of
completing a thorough risk assessment
of the arbitration agreement and broader
characteristics a third party to an existing arbitration). dispute resolution clause at an early stage.
Based on this assessment, the parties can
Arbitration allows parties to agree upon Parties should bear in mind that focus on drafting an arbitration agreement
the characteristics and experience that institutional rules may contain specific that is most suited to those risks, and
arbitrators are to have. requirements in relation to consolidation that is effective for any dispute that might
and joinder.
15International arbitration report — Issue 16
Top 10 tips for drafting arbitration agreements
arise. A simpler approach to drafting helps
Dylan McKimmie
mitigate the risk of the unexpected.
Partner
Tel +61 7 3414 2247
Key takeaways dylan.mcKimmie@nortonrosefulbright.com
Ultimately, every arbitration agreement is Holly Stebbing
bespoke. Parties should seek legal advice Partner
to ensure that their arbitration agreement is Tel +44 20 7444 5143
effective and fit for purpose. However, the holly.stebbing@nortonrosefulbright.com
guidance set out above may help to ensure
that your arbitration agreement does not Katie McDougall
create more disputes than it resolves. Partner
Tel +44 20 7444 3344
katie.mcdougall@nortonrosefulbright.com
With thanks to Giulia Barbone, London
trainee, for her contribution to this article
Carmel Proudfoot
Senior Associate
Tel +61 8 6212 3299
carmel.proudfoot@nortonrosefulbright.com
Simon Goodall
Associate
Tel +44 20 7444 5743
simon.goodall@nortonrosefulbright.com
India Furse
Associate
Tel +44 20 7444 3617
india.furse@nortonrosefulbright.com
Nimoy Kher
Associate
Tel +44 20 7444 5741
nimoy.kher@nortonrosefulbright.com
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