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December 2016: Arbitration Victory for Major European Energy Company

December 2016

The firm recently won a complete victory in arbitration on behalf of a major European energy company. The dispute arose from the termination by the firm’s client of a medium-term take-or-pay gas supply agreement entered into with a major European gas supplier. The agreement was governed by New York law and subject to ICC arbitration with a seat in Geneva. Because this was a medium-term contract, it did not contain a price-review clause, as is commonly the case in long- term take-or-pay contracts. Rather, it contained a hardship provision entitling the buyer to terminate the agreement in the event of a change of circumstances resulting in losses on average over a certain time period.

The buyer triggered the hardship provision of the agreement and terminated the contract one year ahead of the end of its term. The seller almost immediately commenced arbitration proceedings against the buyer requesting compensation, claiming that the termination was in breach of the agreement, that the termination notice did not comply with the agreement, and that the buyer’s conduct constituted willful misconduct. The seller claims totaled USD 100 million.

In a recent award, an arbitral tribunal of three arbitrators sided with the firm’s client on every issue, rejected all of the seller’s claims and thus confirmed the validity of the termination.