Inflation and supply chain issues will lead to renewed energy arbitration

  • Market Insight 13 December 2023 13 December 2023
  • Global

  • Predictions 2024 - Geopolitical Risk

Another wave of lawsuits involving the energy sector is expected in 2024, driven by the impact of geopolitical tensions and economic inflation on supply chains

Arbitration for disputes concerned with energy supplies will again come to the fore in 2024. These will likely be driven by ongoing geopolitical tensions from the Russia-Ukraine war, continuing global inflation and difficulties in fulfilling energy supply contracts.

As of October 2023, disputes over oil, gas and mining contracts represented 27% of the cases heard at the International Centre for Settlement of Investment Disputes in Washington. An additional 15% of cases related to matters of "electricity and other energy sources".

These waves of energy litigation are being fueled by continuing conflict around the Energy Charter Treaty (which Russia is still bound by) and the decarbonisation agenda in the United States.

The ongoing tension between continuing demand for fossil fuel production and the evolution towards renewable energy is likely to spur further litigation in this space over the next few years, and possibly for the next few decades.

Disputes centre on two main sources of conflict: inflation and supply failures. In particular, sellers of liquefied natural gas have experienced problems with meeting delivery targets for the past year.

A report by Queen Mary University of London, published at the beginning of 2023, suggested that fluctuations in the prices of raw materials and energy will be the major focus for private energy disputes in the next five years. That was according to 28% of the 900+ arbitration experts surveyed. Around three quarters of those surveyed (73%) said they expected Europe would see the biggest increase in energy-related disputes.


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