Arbitration's Important Role In The Rise Of Renewable Energy

The energy sector has undergone a major transformation in recent years, thanks to the rise of renewable energy sources that are rivaling the dominance of the major players of past decades, like coal, oil, and natural gas. Over time, arbitration has become an effective tool used to negotiate the outcomes of disputes within the ever-developing and -evolving renewable energy sector as new technologies come to the fore, and within recent years, third-party funding has played a very significant role in renewable energy arbitration matters.

In order to survive, renewable energy companies and projects often rely on large, upfront investments that cannot be recouped in the short term. To encourage such investment, many countries, particularly members of the European Union, have enacted regulatory schemes that offer investors incentives like special rates or tariffs. In fact, companies that invest in countries that have signed bilateral investment treaties (BITs) are not only more likely to secure larger loans on more favorable terms, but are also more likely to invest in those countries in the first place.

The most prominent BIT to impact the renewable energy industry is the Energy Charter Treaty (ECT), and international arbitration has long been used as the primary dispute resolution mechanism for large-scale energy disputes. The energy sector is one of the biggest players in the international arbitration arena, with some of the highest arbitral awards in history being handed down in energy-related arbitrations. In addition to the more traditional commercial arbitration scenarios, the energy sector has seen a significant rise in investor-state disputes arising under various BITs.

In particular, thanks to its incorporation of multiple dispute resolution mechanisms to address a variety of types of grievances that might arise if states fail to comply with their treaty obligations, arbitrations brought under the ECT are not expected to decline any time soon. Since 2001, 114 recorded investment arbitration cases having been commenced under the treaty. Most ECT arbitrations base their claims on two specific provisions of the treaty: its requirement that host states offer fair and equitable treatment to foreign investors and its prohibition on expropriation.

As international arbitration expands, costs increase, which, in turn, leads parties to seek out alternative ways to finance those costs. As of April 2018, the global market for the amount of third-party litigation and arbitration funding needed by claimants was estimated to exceed $10 billion, and was expected to continue growing at a rapid pace.

Renewable energy arbitration is a rapidly expanding platform, and as such, it is critical that all parties involved are aware of the possible benefits third-party funding can have on their claims. Above the Law has partnered with Lake Whillans to examine the boom in renewables that has sparked a new era of clean energy.

Our white paper looks closely at the following topics:

• Regulatory issues in renewable energy;
• International arbitration;
• Arbitration and renewable energy;
• The impact of climate change; and
• Litigation finance.

Download a free copy of our white paper to learn more about the transformation the energy sector has undergone in recent years with the help of international arbitration.