The US is about to be transformed from a net importer to a net exporter of energy. OPEC’s and Russia’s dominance in oil and gas is being challenged. Germany is in the process of closing its nuclear power plants. At the same time, bioenergy – along with solar, wind and hydropower – is on the rise. All of these factors are contributing to the transformation of the international energy market. In its wake, energy disputes have flared up and Stockholm has solidified its position as a venue for the settlement of these disputes.
The Swedish capital has become a centre for resolving energy disputes because of the long history of dispute resolution here, and because Sweden and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) are seen as neutral platforms where disputing parties can meet and be guaranteed due process. The SCC was established nearly 100 years ago with the goal of improving the conditions for international trade by establishing predictable rules.
An increasing number of the world’s disputes that end up in Stockholm for arbitration are about energy. One of the most important factors changing energy market conditions is that the US, which has previously been a major oil and gas importer, has managed to access large amounts of fossil fuels as gas through a process known as fracking – the hydraulic fracturing of shale deep underground. The result of this is that the US is not only expected to become self-sufficient, but also to become a net exporter of energy in the next few years.
In its annual five-year forecast of the oil market, the International Energy Agency (the OECD’s energy organisation) predicts that the emergence of the US as a major producer of oil, the OPEC countries’ fall from their role as rulers of the world’s oil supply, and declining global demand will have major consequences.
“We see a lot of changes; for example, natural gas is no longer being transported exclusively through pipelines, but is being turned into liquid form and shipped on tankers,” says Kristoffer Löf, who works in Mannheimer Swartling’s dispute resolution group, with particular focus on infrastructure and energy. “The US has also become self-sufficient in terms of gas, and gas that was earmarked for the US market is now being shipped to Europe. At the same time, gas is having more difficulty competing with other alternatives such as coal, which has suddenly and unexpectedly become very inexpensive. Add to this China’s emergence as a major gas consumer. Overall, we have an energy market in a state of transformation with unpredictable developments.”
“Everything in the energy market is topsy-turvy at the moment,” confirms his colleague Jakob Ragnwaldh, who specialises in investment disputes, often related to the energy sector. “Nuclear power is facing waning profitability, and – not least – there are political challenges: bioenergy is gaining traction and wind power is becoming more prominent. On the European continent, solar energy is already a contender and wave power technology is perhaps just around the corner. And no matter what happens, we can be confident that the energy market will be even more volatile, and requires entirely new solutions and models in the future.”
This new landscape is rife with conflict and Mannheimer Swartling has found itself in the midst of the energy market transformation. In one notable case, for example, Swedish power company Vattenfall is suing the German state under the auspices of the Energy Charter Treaty. Another example is BP, which owns nearly 20 per cent of the Russian state oil company Rosneft and is thus the largest foreign investor in Russia. BP has landed in several disputes and Mannheimer Swartling has acted as counsel in some of its most important cases. The Hungarian state also turned to Mannheimer Swartling in an energy dispute with the French energy company EDF. Mannheimer Swartling also represents a large number of European and Asian importers of natural gas in price revision disputes with their suppliers.
Tradition and growth
There are many reasons why Mannheimer Swartling is at the forefront of dispute resolution.
“The firm has maintained a strong position in the market for many years. We have also worked continuously to develop and improve our dispute resolution group, which has produced results,” says Ragnwaldh.
For a long time, Sweden has also been a major international centre for the settlement of commercial disputes, often ones where there is an 'East-West' dimension.
“For a long time, Sweden has also been a major international centre for the settlement of commercial disputes, often ones where there is an ‘East-West’ dimension and where the parties have no connection to Sweden aside from their selection of Stockholm as the place of arbitration. The view of Sweden as a neutral country with high legal certainty and a low level of corruption means that Sweden’s position will remain strong in the future.”
Mannheimer Swartling has extensive experience in commercial disputes within a number of industrial and legal fields, as well in state investment and regulatory disputes. Energy is one important area of expertise, but others include telecom, IT, automotive, real estate, media and entertainment, and shipping and transportation. The group’s members represent clients before arbitration panels all over the world, and assist clients in mediation and other forms of dispute resolution.