The internal online meeting for European-Ukrainian Energy Agency members took place on June 5, 2020. Meetup was dedicated to upcoming changes in state support regime for renewable energy producers and the consequences they entail.
Max Lebedev, Partner at GOLAW, Vice Chairman of EUEA and partners at Allen & Overy from London and Paris offices – James Freeman and Marie Stoyanov – have discussed the opportunities for protection of investor’s interests under Energy Charter Treaty in international arbitral institutions against Ukraine that forces cut of feed-in tariff.
The top points of the discussion were:
- The award of international arbitration in favour of the investor may include damages, future losses, legal and arbitration costs, interest. However, it shall be clearly noted that outcome of the particular arbitration claim can be assessed only on the case-by-case basis.
- The most probable cause for the investor’s claim is the breach by Ukraine of fair and equitable treatment standard under Energy Charter Treaty (ECT).
- International arbitration is the opportunity for both operational plants and projects under development as long as they qualify for investment under ECT, e.g. investor has at least leasehold over land for energy projects. Operational facilities of investors in RES are more likely to succeed. As Marie Stoyanov put it, ‘The farther is your connection to the grid, the more difficult will be the case.’
- Ukrainian projects with ownership structured through countries-signatories of ECT will be eligible claimants to international arbitral institutions. That means Ukrainian ultimate beneficial owners of holding companies located in majority of European countries can submit their claims for damage done to Ukrainian companies.
- Tribunals usually pay attention to the market entry analysis conducted by the investor before launch of a particular project. Preparatory documentation should include feasibility studies, financial assessments and projections, legal due diligence, regulatory planning, etc. The more reliant was the project in its analysis and motivated by stable state guarantees that made investor decide to launch the project, the better chances for success will be.
- Collective (multi-party) claims may increase the chance for success in arbitration. However, the more claimants are in a case the more complicated the case will be. On practice in collective arbitrations it is advised to delegate to one of the claimants the authority to communicate with single legal advisor.
- There are opportunities for third party funding of the international arbitration cases. Although the success fees may vary, they are usually quite substantial constituting approximately 20 % of the award.
- Arbitral awards can be taxable. Projects with ownership structured through different ECT countries should consider carefully which company should bring the claim, in order to relieve the tax burden in case of success.
- Depending on the choice of international arbitral tribunal, the investors may enjoy more expedient enforcement of an award and confidentiality of documentation disclosed within the case.
The discussion made it clear that investors do actually consider an international arbitration as the option of reaction to the actions of the Parliament and the Government of Ukraine to change the incentive regime for producers of electricity from renewable sources.