MANAGING AND RESOLVING CROSS-BORDER DISPUTES IN THE ENERGY SECTOR
CD: Could you provide a brief overview of the main reasons why energy companies may become involved in a cross-border dispute? To what extent is today’s energy market volatility driving disputes in the sector?
Palmer: Energy companies operate in an environment where projects generally involve a variety of public and private stakeholders, significant investment and programmes that span years, if not decades. In addition, these projects often involve the use of cutting-edge technology, have touch points with geographically and politically challenging jurisdictions, and form part of complex global supply chains. It is therefore unsurprising that energy companies become involved in cross-border disputes. Of course, today’s energy market is being impacted by a combination of factors that have produced price volatility, particularly, but not exclusively, in the gas sector. That volatility creates fertile ground for disputes. Often these disputes relate directly to pricing, but we are also seeing attempts by sellers to reduce gas and energy volumes and potentially to avoid contractual supply obligations altogether. That is particularly so where there is a disconnect between available spot prices and prices being received under long-term supply contracts that may have been set months or years in advance.
Ashley: The energy industry is, by its nature, and at all levels of the value chain, international. For example, many upstream oil and gas companies invest in a global portfolio of assets. The exploration, development and production from such assets commonly occurs through joint ventures between international participants. Furthermore, the supply chain often involves suppliers and contractors based in a number of jurisdictions, and the hydrocarbons ‘won’ are regularly exported and sold on an international basis.
Jan-Mar 2023 issue
Ashurst LLP
CMS Cameron McKenna Nabarro Olswang LLP
Quinn Emanuel Urquhart and Sullivan, LLP