By Rodrigo Carè
According to the thirteenth survey released by Queen Mary University of London (‘QMUL’), focusing on arbitration in the energy sector (the ‘Survey’), Dubai is one of the top seven seats for international arbitration along with London, Singapore, Paris, Geneva, Stockholm, and New York.
This is the best result ever achieved by Dubai in QMUL’s yearly survey. In the much-discussed ranking of arbitration seats from last year’s survey, which saw Singapore and London sharing the first place, Dubai was ranked 10thpreferred arbitration seat globally. The most evident change between last year and this year’s survey is probably the decline of Hong Kong, shifting from the 3rd to the 8th place, and Beijing and Hong Kong not making even the top 10.
It is worth noting that as the survey respondents were predominantly based in Asia and Europe, Dubai's score may have been even higher if there had been more respondents from the Middle East and Africa.
East-West disputes – will Dubai replace Stockholm and Switzerland as the forum of choice?
One of the recurring themes in the Survey is the impact of Sanctions against Russia on the energy markets, with 67% of respondents expecting that the impact of international sanctions on the ability to perform pre-existing contracts may cause a rise in force majeure and hardship claims.
Not surprisingly, in terms of the regions that will see the greatest increase in energy-related disputes, 73% of the respondents selected Europe due to the Russia/Ukraine conflict.
Historically, the forum of choice for east-west disputes (particularly those involving European or American companies and Soviet counterparties) was Stockholm. During the Cold War, Stockholm was a popular destination for arbitration between Western companies and Soviet companies. One of the reasons that Stockholm was a popular destination for arbitration between Western and Soviet companies during the Cold War was that it was a neutral location. The city was not a part of any military alliance, and it was not involved in the Cold War tensions between the United States and the Soviet Union. This made it an ideal location for resolving disputes between companies from the two countries.
However, the Survey notes that Stockholm scored “surprisingly low” in the ranking of arbitral seats in the Survey. This development has likely been influenced by the current perception of Russian parties of Stockholm as an arbitral seat, no longer seen as providing sufficient guarantees of neutrality and independence, at least in disputes involving state entities. In addition, (as noted by the Survey), restrictions on Russians traveling into the EU will result in Russian-related disputes being referred elsewhere.
Switzerland, another favorite forum for east-west disputes, has traditionally been a neutral country, staying out of conflicts and disputes between other nations. However, recent events have led to a shift in Switzerland's position, with the country now adopting sanctions against Russia. This move by Switzerland is significant because it marks a departure from the country's traditional policy of neutrality.
As tensions rise between Russia and Europe, the UAE has emerged as a neutral destination for resolving disputes involving Russian entities. With the ongoing war between Russia and Europe, disputes that would typically be heard in European jurisdictions such as Stockholm, Switzerland, and England are now being redirected to Dubai.
The UAE's reputation as a neutral and stable destination for dispute resolution has been solidified in recent years through its establishment of specialized courts and arbitration centers, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These institutions have attracted a large number of international businesses and investors, making the UAE an attractive destination for resolving disputes involving Russian entities.
In addition to its reputation as a neutral destination, the UAE also offers many advantages for resolving disputes involving Russian entities. The country now has a world-class arbitration law and a well-established arbitration infrastructure, with foreign arbitral institutions such as the ICC and the SCCA with a stable presence in the country. The leading local arbitral institution, the Dubai International Arbitration Center, has also recently issued a brand-new set of Rules inspired by international standards and renovated its leadership team.
Overall, the UAE's neutrality, its well-established legal system, and fast-paced business environment make it an attractive destination for resolving disputes involving Russian entities. As the war between Russia and Europe continues, it is expected that more disputes will make their way to the UAE, solidifying its position as a key destination for dispute resolution.
Changes in the European demand for fossil fuels: the perfect storm
As the COVID-19 pandemic and the ongoing conflict in Ukraine continue to disrupt the global energy market, European nations are increasingly looking to the Middle East and North Africa (MENA) region for their fossil fuel needs. With traditional suppliers like Russia facing uncertainty, European countries are turning to countries in the Gulf and North and West Africa to secure a stable supply of oil and gas.
According to the Survey, another effect of the Russia / Ukraine crisis is that it would likely further set back the timeframe for the global energy transition, and lead to a return to previously shuttered fossil fuel projects. Indeed, it has been announced that the EU will soon impose a ban on imports of Russian diesel, jet fuel and other oil products, while the G7 also plans to implement price caps on those products, though exact levels are still being hashed out. In the meantime, European and G7 countries have secured alternative fuel supplies and can draw on their strategic oil reserves to mitigate the impacts of the upcoming sanctions and price cap on Russian refined products.
One respondent to the Survey speculated that Africa may see a major increase in disputes as political and economic tension with Russia will lead to a search for fossil fuels elsewhere, especially in Algeria and Nigeria. It was thought that this would precipitate the revival of fossil fuel field developments that were previously slated for decommissioning, which in turn would lead to disputes in respect of decommissioning activities.
The Middle East seems also to be the response to Germany’s energy crisis. New projects have been announced also involving gulf countries. Only in November 2022 QatarEnergy and ConocoPhillips signed two sales and purchase agreements for exports covering at least a 15-year period. ADNOC and Saudi Aramco, and other Middle East state giants are also stepping up gas and hydrogen investments in wake of the European energy crisis.
This increased reliance on the MENA region comes with its own set of challenges. The region is known for its political instability, and energy disputes between countries are not uncommon. This, combined with the rush to sign new deals and partnerships, increases the risk of instability in prices and logistics problems.
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