Industry focus Self-published
Costs allocation after Enka v Chubb
An arbitration clause is the one part of an energy contract that is only read when the relationship has already broken down. Drafted well, it sets the seat, the rules and the tribunal in an afternoon. Drafted badly, it adds a year of jurisdictional skirmishing before anyone discusses the price of gas.
Why the clause matters more than the contract
Cross-border energy projects combine long durations, state-owned counterparties and assets that cannot be moved. Every one of those features pushes a dispute towards arbitration, and every one of them punishes an ambiguous clause.
The clause should answer four questions without a lawyer in the room: where, under which rules, how many arbitrators, and in what language.
Five elements every energy clause needs
The list below is deliberately short. Each item is a decision the parties must take at signing.
- Seat of arbitration. A neutral seat with a modern arbitration statute.
- Institutional rules. Name the institution and the edition of the rules.
- Number of arbitrators. Three above the expedited threshold, one below it.
- Language. One language for the proceedings and a rule for documents.
- Governing law of the clause. Distinct from the governing law of the contract.
When ad hoc arbitration still makes sense
Ad hoc clauses survive in two situations: a state party that will not accept an institution, and a counterparty with a long record of paying awards voluntarily.
Seat, rules and language
The seat determines which courts can set the award aside and which arbitration law fills the gaps in the rules. London, Paris, Geneva and Singapore remain the defaults for good reason.
Choosing a seat with a state party
Where the counterparty is a state or a state-owned enterprise, add sovereign immunity to the checklist: the seat should recognise a waiver of immunity from execution, and the clause should contain one.
None of this is novel. It is simply the part of the contract that is skipped at two in the morning on signing day. Give it an afternoon instead.
