Looking ahead in 2023, there are several intriguing trends that may emerge in international arbitration, from a greater focus on diversity in tribunal appointments to an increase in claims being filed in the aftermath of Russia’s illegal invasion of Ukraine.
Environmental, social or governance (ESG) norms will also form an important part of newer investment treaties, and arbitration claims from infrastructure projects will potentially increase.
Finally, the implications of Energy Charter Treaty (ECT) developments will remain the subject of ongoing tussles between the EU and energy investors seeking protection for their investments under international law.
● The importance of greater diversity in arbitration panels, namely a higher proportion of women and ethnic minorities
Initiatives to increase the pool of arbitrator candidates continue to grow in the international arbitration community. Historically, a lack of diversity on arbitration panels has contributed to criticisms around legitimacy in international arbitration. Whilst the Equal Representation in Arbitration (ERA) Pledge has catalysed more appointments of women as arbitrators, arbitral institutions are increasingly adopting initiatives to increase diversity of nationality and ethnicity, in parallel to the wide-spread introduction of corporate diversity requirements. More recently, the Belgian Centre for Arbitration and Mediation (CEPANI), the Scottish Arbitration Centre and JAMS (USA) incorporated arbitrator diversity requirements in their arbitration rules. Similarly, some newer Model BITs now require a consideration of diversity of geography and different legal systems, in addition to gender, in tribunal appointments.
● A wave of Russia and CIS arbitration
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2/22/23, 11:07 AM International Arbitration Themes to Watch For in 2023 | Law.com International
Russia’s illegal invasion of Ukraine will potentially spawn a deluge of claims in the coming years. Both investor-state and commercial arbitration claims can be expected, including by Russian businesses against foreign counterparts and by foreign companies against Russia or Russian state entities. Yet more claims will be triggered by the volume of sanctions imposed by other States on Russia and conversely, counter-sanctions by Russia.
One of the immediate spill-over effects of Russia’s invasion was the disruption of energy supply chains around the world. In particular, this led to several arbitrations against Russian-owned entity Gazprom, initiated by Ukraine’s Naftogaz, Germany’s Uniper and RWE, and Finland’s Gasum. These disputes concern, among other things, Gazprom’s demands to pay for gas in Russian roubles and the reduction of gas supplies due to purported force majeure, and its fee liability for gas transportation.
Further claims stemming from the war are expected in the latter half of 2023, arising from the termination of production sharing agreements and from expropriation of the assets of foreign and Ukrainian investors in Russia (and of Russian interests abroad). Russian entities cancelling long-term contracts to free up shipments to sell into more lucrative spot markets may also trigger a host of new disputes.
● Developments, trends and disputes expected in international arbitration vis-à-vis infrastructure projects
The amplifying role of ESG issues in assessing infrastructure and construction projects has been touted as the “future battleground for disputes” in the coming years.
States are now including ESG provisions in their investment treaties as a means of advancing sustainability objectives, and the number of investment disputes (many of which will relate to the infrastructure sector) will undoubtedly increase. An interesting trend is the rising importance of climate change as a ‘community interest’, and the potential of investment-treaty arbitration in addressing community interests through novel interpretative tools and increased third party (amicus curiae) participation.
Moreover, claims may also increase in relation to strain on global supply chains. Rising costs and inflation have led to many projects being delayed and/or cancelled and thus new contractual and treaty claims. Moreover, the after-effects of COVID-19 on infrastructure projects are now becoming more noticeable. Insolvency and bankruptcy measures on cash strapped infrastructure companies by States can also occasion possible contractual and treaty claims. It will be interesting to see how States continue to raise arguments of treaty exceptions or customary law for measures invoked during COVID-19.
● Recent implications originating from the Energy Charter Treaty (ECT)
The recent turmoil surrounding the modernisation of the ECT and the subsequent chain of withdrawal announcements by a slew of EU members, has effectively placed the future of intra-EU energy-related investments on hold.
This uncertainty is worsened by the non-applicability of the ISDS provisions in the ECT under EU law, following the Achmea and Komstroy judgments. Recently, the Swedish courts annulled intra-EU awards seated in Stockholm on the grounds that intra-EU investment disputes were precluded under EU law. These decisions paint a damning assessment of the EU’s status in the international legal order (and investors will now likely avoid arbitral seats in EU states altogether) and risk undermining existing arbitral claims and awards, while increasing the attractiveness of non-EU States such as the UK and Switzerland as safer harbours. Future intra-EU claims under the ECT will continue to face headwinds from the EU and its member states, making arbitral awards and their enforcement increasingly difficult.
Tomas Vail is an arbitration specialist and founder of London-based Vail Dispute Resolution
Author: Tomas Vail
Originally Published: https://www.law.com/international-edition/2023/02/21/international-arbitration-themes-to-watch-for-in-2023/
Publish Date: February 21, 2023