GAR Guide to Energy Arbitrations - Economic evidence at the liability stage: risk allocation, foreseeability and regulatory change

Ruxandra Ciupagea, Iria Camba Flórez de Losada and Despina Doneva authored a chapter in Global Arbitration Review’s Guide to Energy Arbitrations. The chapter examines the role of economic evidence in assessing risk allocation, regulatory change, and liability in energy arbitration disputes.

The views expressed in this article are the sole responsibility of the authors and cannot be attributed to Compass Lexecon or any other parties.

Abstract

States engage with private investors through legal and regulatory frameworks and contractual commitments designed to achieve public policy objectives. These objectives include ensuring the reliable supply of essential goods (eg, electricity and gas), promoting environmental sustainability and attracting private investment in infrastructure and services. These frameworks and commitments shape the allocation of risks and returns in ways intended to support the achievement of these objectives.

In investor–state disputes, economic experts are most often engaged to quantify damages (and are therefore commonly referred to as “quantum experts”). However, economic analysis can also assist tribunals at the liability stage of disputes, by addressing a broader range of areas stemming from these regulatory–contractual frameworks. This chapter discusses two of these areas:

• assessing the foreseeability of regulatory changes in regulated infrastructure sectors; and
• analysing the allocation of risk under the regulatory–contractual frameworks in place at the time of the investment and evaluating whether subsequent state measures altered that allocation.

The views expressed in this chapter are offered from an economic perspective and do not address legal questions.