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April 2013: Major Arbitration Victory for Leading European Energy Company

April 2013

Quinn Emanuel obtained a first major victory for our client, a major European energy company, in winning the jurisdictional phase of a price review arbitration and securing the suspension of a parallel expert determination proceedings pending the outcome of the arbitration.

In April 2011, another major European energy company had initiated the price review mechanism of a gas purchase agreement entered into with our client in 2004, claiming a EUR 400 million price reduction (USD 530 million). Following unsuccessful negotiations, it triggered expert determination in March 2012, pursuant to the price review clause of the gas purchase agreement.

An arbitration was immediately initiated on behalf of our client, seeking an interpretation of the price review clause, in particular in relation to the reference market. In parallel, an emergency arbitrator was appointed to obtain the suspension of the expert determination proceedings. By an award dated July 29, 2012, the emergency arbitrator suspended the expert determination proceedings.

The counterparty then challenged the jurisdiction of the Arbitral Tribunal, claiming that the issues submitted to the Arbitral Tribunal should have been submitted to the panel of experts and requesting that the suspension of the expert determination proceedings be lifted. Our client’s position was that the objection raised by the counterparty could not be a jurisdictional objection as (i) the arbitration agreement was not limited in scope and (ii) given that the mission of the experts was contractual in nature, they did not perform any judiciary function. At best, it could be an admissibility issue.

Following a hearing on jurisdiction, a very senior Arbitral Tribunal ruled in favor of our client in an award rendered on January 29, 2013, holding that the counterparty’s objections were admissibility objections—not jurisdictional objections—and dismissing them by the same token.

Quinn Emanuel is now proceeding to the merits phase of the arbitration.