INTRODUCTION
In the present world, the evolving in many areas dispute resolution is also one of the areas that are evolving areas, arbitration a new method of dispute is helping now in the settlement of many high-profile cases like Azienda Elettrica Ticinese v. Germany in which the arbitrational tribunal of ICSID given orders which helped in speedily maintaining transparency and confidentiality and Towra v. Slovenia by following through the arbitration process has maintained the secrecy, time and reputation by case not going to the public. These disputes are rising in the energy sector due to many factors geopolitical reasons like many conflicts can play playing important role in leading to new disputes related to every we can take example Ukraine Russian war has led to many energy-related disputes making it difficult for the energy companies to operate[1] or we could see use of renewable energy investments is important for long and short term benefits[2]. One more reason that is the reason for disputes is competition between companies for hydrocarbons due to sudden disturbances in the energy market and simultaneously for acquiring more green technological leadership[3]. Presently use of renewable energy is a form of cleaner and renewable source of many disputes. This could lead to a global energy system impacting whole economies and changing political dynamics between countries[4]. The conflict between the relationship between renewable energy and adverse geopolitical events encourages high-income nations to switch toward low-carbon energy sources[5] geopolitical risks can have negative impacts on the energy transition process.[6]
Arbitration reduces any negative impact or time saving especially in international projects and cases with huge investments and it is a flexible, confidential, and expert-driven process for resolving complex energy disputes.[7]
THE COMPLEX LANDSCAPE OF ENERGY DISPUTES
When working on energy projects many things are important making it complex and also involving many parties the contracts are very complex too and there is a lot of financial risk making disputes challenging while approaching these types of disputes the level of contract detail affects the dispute resolution and the relationship between the parties there also a requirement of huge coordination between parties as many stakeholders are involved in the working of such projects[8]. Some of the common reasons why disputes happen are cost overruns, delays, design, changes and quality, and performance-related issues due to the technology, licensing, permissions, connecting grids etc[9]. But the cost and time are the most common reasons in which most disputes happen these factors also depend on the success of the dispute resolution[10]. In energy disputes, ADR methods like arbitration and mediation and dispute review boards are used.[11]
ADVANTAGES OF ARBITRATION IN ENERGY DISPUTES
- Efficiency:
Arbitrations are much better dispute resolution methods and even their management of cases in institutes and practitioners can improve case management and efficient resolution and involvement of enhancement like AI and innovation models can help in settlement of energy disputes.[12] Arbitrational institutes are moving forward with the application of digital case management systems and virtual hearing platforms and data analytics will help in speedy dispute resolution and also help in better decision making ADRs are well suited to this area and negotiations can be done in an online environment.[13] Combining all these will help in international commercial dispute resolution, offering cost-effective and quick resolution while ensuring binding and enforceable decisions.[14].
- Expertise:
Using party-appointed arbitrators and practitioners in the arbitration helps the parties present the evidence of their claims in a better way which is very important and considered valuable in dispute resolution, especially regarding technical aspects[15] cross-examination helps in guarding against biases and maintains fairness[16]
The disadvantage is there is a lack of stricter regulatory guidelines which can weaken evidence. Sometimes tribunals don’t trust party-appointed arbitrators due to a lack of trust in their competence, potential and also leads to parties’ efforts being made useless
- Enforceability:
Now there is the thing that plays an important role in Energy Charter Treaty(ECT) plays an important role in investor and state arbitration in the energy sector which can form a base for compensation in the cases of fossil fies by companies by using this as a tool against the states which are implementing climate policy measures but revised legal interpretation given in case Justice in Moldova v. Komstroy (C-741/19) which is in following with the 2018 Achmea judgment of that this treaty in that it is not compatible with general EU law so claims under ECT by companies under ECT cannot be enforced and the only exception is direct exploration.[17] The modernized treaty should aim to focus on investor protection also balance with the state’s right to regulate the public interest.[18] Though the treaty was formed for peace now it is used to serve other purposes.[19]
- Neutrality:
While doing arbitration neutrality is one of the most important factors which helps the parties in resolution method and parties from different jurisdictions to resolve disputes in a neutral way free from any form of biases of national courts[20].
- ADDRESSING CHALLENGES AND CRITICISMS OF ENERGY ARBITRATION
- One of the challenges to the arbitration consolidation of parallel proceedings especially in international arbitration managing multiple related proceedings is a complex matter for arbitrators which would apply to the energy sector too[21].
There are many challenges to the arbitration in energy disputes:-
- Complex technical institute:- Energy disputes many times involve many technical aspects and scientific things which require specialized knowledge to understand these terms[22]
- Cost and time concerns: – Though the ADR method is more efficient than litigations they are still considered costs and duration involved in it[23].
- Transparency: – The confidential nature of arbitration may conflict with the need for transparency in energy-related disputes, especially those involving public interests or environmental concerns
THE FUTURE OF ENERGY ARBITRATION
International energy arbitration is evolving in the energy sector and must adapt to the evolving landscape as countries are evolving towards cleaner energy sources. The arbitration process should consider the unique aspects of renewable energy projects which can have an environmental impact.[24]
CONCLUSION
As the global energy landscape continues to evolve, with an increasing focus on renewable sources and complex geopolitical factors, effective dispute resolution will play a critical role in ensuring stability and growth in the sector. Arbitration, with its adaptability and expertise-driven approach, is well-positioned to address the unique challenges of energy disputes, fostering a more secure and sustainable energy future.
Author(s) Name: Lakshay Sharma (University of Petroleum and Energy Studies)
Refences:
[1] Aymeric Bricout et al., ‘From the Geopolitics of Oil and Gas to the Geopolitics of the Energy Transition: Is There a Role for European Supermajors?’ (2022) 88 Energy Research & Social Science <https://discovery.researcher.life/article/from-the-geopolitics-of-oil-and-gas-to-the-geopolitics-of-the-energy-transition-is-there-a-role-for-european-supermajors/26028dab1f32303fb92d9c24cc258857> accessed 16 February 2025.
[2] Floros Flouros et al., ‘Geopolitical Risk as a Determinant of Renewable Energy Investments’ (2022) 15 Energies <https://discovery.researcher.life/article/geopolitical-risk-as-a-determinant-of-renewable-energy-investments/0ed1ae8b5b5c3ab7aa93467d4910ad19> accessed 16 February 2025.
[3] Tomasz Jerzyniak and Anna Herranz-Surrallés, ‘EU Geoeconomic Power in the Clean Energy Transition’ (2024) 62 JCMS: Journal of Common Market Studies 1028 <https://discovery.researcher.life/article/eu-geoeconomic-power-in-the-clean-energy-transition/a1b08fe069893ee3978eb304e519caa3> accessed 16 February 2025.
[4] Manfred Hafner and Simone Tagliapietra (eds), ‘The Geopolitics of the Global Energy Transition’ (2020) 73 <https://discovery.researcher.life/article/the-geopolitics-of-the-global-energy-transition/aed0b217e974325b93abf156679960a0> accessed 16 February 2025.
[5] Nidhaleddine Ben Cheikh and Younes Ben Zaied, ‘Renewable Energy Deployment and Geopolitical Conflicts’ (2023) 344 Journal of Environmental Management <https://discovery.researcher.life/article/renewable-energy-deployment-and-geopolitical-conflicts/baf28999bfe0325280c7407a92e80796> accessed 16 February 2025.
[6] Muhammad Zubair Chishti et al., ‘Exploring the Dynamic Connectedness among Energy Transition and Its Drivers: Understanding the Moderating Role of Global Geopolitical Risk’ (2023) 119 Energy Economics <https://discovery.researcher.life/article/exploring-the-dynamic-connectedness-among-energy-transition-and-its-drivers-understanding-the-moderating-role-of-global-geopolitical-risk/4553b917f00b3409ae0c046ae52cfb2d> accessed 16 February 2025.
[7] Amaliyah Noor Indahwati et al., ‘Arbitration in Resolving Construction Cost Claim Disputes Due to Time Extensions: A Study of Contract Law in Indonesia’ (2025) 6 SIGn Jurnal Hukum 263 <https://discovery.researcher.life/article/arbitration-in-resolving-construction-cost-claim-disputes-due-to-time-extensions-a-study-of-contract-law-in-indonesia/11216113d17d37b298c8d4523a8aa2f0> accessed 16 February 2025.
[8] Fabrice Lumineau and Deepak Malhotra, ‘Shadow of the Contract: How Contract Structure Shapes Interfirm Dispute Resolution’ (2010) 32 Strategic Management Journal 532 <https://discovery.researcher.life/article/shadow-of-the-contract-how-contract-structure-shapes-interfirm-dispute-resolution/31fd3fed6e5f33889c02250e51663d10> accessed 17 February 2025.
[9] Khalid K Naji et al., ‘Methods for Modeling and Evaluating Construction Disputes: A Critical Review’ (2020) 8 IEEE Access 45641 <https://discovery.researcher.life/article/methods-for-modeling-and-evaluating-construction-disputes-a-critical-review/ee125ae12ba635e7889fd3dd5a239fbc> accessed 17 February 2025; James E Diekmann and Matthew J Girard, ‘Are Contract Disputes Predictable?’ (1995) 121 Journal of Construction Engineering and Management 355 <https://discovery.researcher.life/article/are-contract-disputes-predictable/537cd210e30137be89b9b4ac148b642f> accessed 17 February 2025.
[10] Naji (n 9).
[11] Wesam S Alaloul et al., ‘A Comprehensive Review of Disputes Prevention and Resolution in Construction Projects’ (2019) 270 MATEC Web of Conferences 05012 <https://discovery.researcher.life/article/a-comprehensive-review-of-disputes-prevention-and-resolution-in-construction-projects/c27b59c8fccc3902a5b9f952a806129d> accessed 17 February 2025.
[12] Shumin Wang et al., ‘Innovation Helps with Sustainable Business, Law, and Digital Technologies: Economic Development and Dispute Resolution’ (2024) 16 Sustainability <https://discovery.researcher.life/article/innovation-helps-with-sustainable-business-law-and-digital-technologies-economic-development-and-dispute-resolution/bb8212369eed3a7b87989016238dbb5f> accessed 17 February 2025.
[13] Bhupinder Singh, ‘Unleashing Alternative Dispute Resolution (ADR) in Resolving Complex Legal- Technical Issues Arising in Cyberspace Lensing E-Commerce and Intellectual Property: Proliferation of E-Commerce Digital Economy’ (2023) 5 Revista Brasileira de Alternative Dispute Resolution 81 <https://discovery.researcher.life/article/unleashing-alternative-dispute-resolution-adr-in-resolving-complex-legal-technical-issues-arising-in-cyberspace-lensing-e-commerce-and-intellectual-property-proliferation-of-e-commerce-digital-economy/dd08a158333135acb73b7911f19a69d7> accessed 17 February 2025.
[14] Dilyara Nigmatullina, ‘The Combined Use of Mediation and Arbitration in Commercial Dispute Resolution: Results from an International Study’ (2016) 33 Journal of International Arbitration 37 <https://discovery.researcher.life/article/the-combined-use-of-mediation-and-arbitration-in-commercial-dispute-resolution-results-from-an-international-study/bfb6bfad0f05394484cc80de74711848> accessed 17 February 2025.
[15] ‘Party-Appointed Experts vs Tribunal-Appointed Experts in International Arbitration – ExpertsDirect’ <https://expertsdirect.com/party-appointed-experts-v-tribunal-appointed-experts-in-international-arbitration/> accessed 17 February 2025.
[16] Ibid.
[17] Felix Ekardt et al., ‘Energy Charter Treaty: Towards a New Interpretation in the Light of Paris Agreement and Human Rights’ (2023) 15 Sustainability <https://discovery.researcher.life/article/energy-charter-treaty-towards-a-new-interpretation-in-the-light-of-paris-agreement-and-human-rights/c19091d4b1223f129adbe101aeea06c9> accessed 17 February 2025.
[18] Ibid.
[19] Taylor St John, ‘The Rise of Investor-State Arbitration’ [2018] The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences 1 <https://discovery.researcher.life/article/the-rise-of-investor-state-arbitration/76d1fd1640b23886a10d814dddaf2f1a> accessed 17 February 2025.
[20] Ibid.
[21] Gary B Born, ‘International Commercial Arbitration’ 117 <https://discovery.researcher.life/article/international-commercial-arbitration/59d289fbc5913f62842057c53cf0a8dd> accessed 17 February 2025.
[22] David H Sohn and B Sonny Bal, ‘Medical Malpractice Reform: The Role of Alternative Dispute Resolution’ (2011) 470 Clinical Orthopaedics & Related Research 1370 <https://discovery.researcher.life/article/medical-malpractice-reform-the-role-of-alternative-dispute-resolution/766eb51dacdb39abbbf654968291518b> accessed 17 February 2025; Thomas J Stipanowich, ‘ADR and the “Vanishing Trial”: The Growth and Impact of “Alternative Dispute Resolution”’ (2004) 1 Journal of Empirical Legal Studies 843 <https://discovery.researcher.life/article/adr-and-the-vanishing-trial-the-growth-and-impact-of-alternative-dispute-resolution/401d2efb974e39b79b86d5a83d79b3ed> accessed 17 February 2025
[23] Ibid
[24] Goodluck Msigwa et al., ‘Considerations on Environmental, Economic, and Energy Impacts of Wind Energy Generation: Projections towards Sustainability Initiatives’ (2022) 849 Science of the Total Environment <https://discovery.researcher.life/article/considerations-on-environmental-economic-and-energy-impacts-of-wind-energy-generation-projections-towards-sustainability-initiatives/9ab005c543803964abd539ce51eebbdf> accessed 17 February 2025.
