Jurisdictional difficulties of international arbitration tribunals when addressing price review disputes concerning gas supply agreements
| Autor | Diego Alexandre-García Fernández |
| Cargo | Is an LLM Candidate at Harvard Law School and an LLM candidate in Comparative and International Dispute Resolution from Queen Mary University of London |
| Páginas | 26-45 |
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VII Edición, II semestre 2017
JURISDICTIONAL DIFFICULTIES OF
INTERNATIONAL ARBITRATION
TRIBUNALS WHEN ADDRESSING PRICE
REVIEW DISPUTES CONCERNING GAS
SUPPLY AGREEMENTS
Diego Alexandre-García Fernández*
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Resumen:
Las disputas sobre revisión del precio del gas, debido a su complejidad, presentan complicaciones de diferente
naturaleza en cada una de las etapas del proceso arbitral. Este artículo examina los principales problemas de índole jurisdic-
cional que enfrenta el tribunal arbitral, con el propósito de demostrar que una de las mayores áreas de controversia en este tipo
de disputas, sino la mayor, es la de si el tribunal tiene jurisdicción para conocer del asunto. En este sentido, se sugerirá que la
verificación de la existencia del (i) factor desencadenante, (ii) la activación del mecanismo de revisión de precio, (iii) el compo-
nente procesal de la cláusula de resolución de controversias, (iv) y las limitaciones en cuanto a la frecuencia en que se puede
solicitar una revisión de precio; involucran en la generalidad, problemas de naturaleza jurisdiccional. Este artículo también
argumenta que los anteriores problemas jurisdiccionales son, en el mayor de los casos, el resultado de defectos en la redacción
de la cláusula de revisión de precio. Por lo tanto, se establece que los problemas descritos pueden reducirse en la medida en que
la cláusula de revisión de precios esté redactada de una manera clara y precisa.
Palabras clave:
disputas de revisión de precio – precio del gas – contrato de suministro de gas – factor desencadenante
Abstract:
Due to the complexity of gas price review provisions, controversies of different nature could arise at every stage of
an arbitration proceeding. This article addresses the main difficulties faced by a tribunal at the jurisdictional level, with the
purpose of evidencing that one of the major areas of dispute in a gas price review case, if not the main, is whether the tribunal
has jurisdiction to hear the claim. In this vein, it is suggested that the assessment of (i) the trigger, (ii) the commencement
mechanism for price revision, (iii) the procedural-side of dispute resolution provision, (iv) and the restriction on the frequency
of applications for revision of price; involve generally issues of jurisdictional nature. Furthermore, the article argues that such
issues usually result from defects in the drafting of the price review clause. In this sense, it is stated that they are likely to be
reduced insofar as the language used by the parties within the clause is clear and plain.
Key words:
price review disputes – gas pricing – gas supply agreements – trigger
* Diego Alexandre -García is an LLM Candidate at Harvard Law School and an LLM candidate in Comparative and International
Dispute Resolution from Queen Mary University of London. He further holds a Juris Doctor from the University of Costa Rica,
and has been a Profe ssor of Civil Procedural Law in the Hispano-American University of Costa Rica. Additionally, Mr. Alexan-
dre-García worked for nearly eight years in the legal prof ession, and currently works as an a ssociate attorney of the Dispute Reso-
lution Pr actice Gro up at BLP Law F irm. Contact information: dalexandregarc@llm18.law.harvard.edu
Fecha de postulación del artículo: 10 de julio de 2017. Fecha de aprobación del artículo: 10 de diciembre de 2017
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VII Edición, II semestre 2017
Introduction
In the past, prior market conditions helped craft a
common practice where the price set within a con-
tract for the sale and purchase of gas (Gas Supply
Agreements, hereinafter “GSAs”) was fixed by ref-
erence to competing oil and fuel products. In this
scenario, however, when the circumstances sur-
rounding GSAs changed significantly, the price
could be affected to the point that not only did it
not match the initial agreement of the parties, but it
further no longer reflected that at which it could be
sold in the market. Under that given situation, a
price review clause was crucial in assisting to re-
establish the original conditions, by resetting the
price provision.
A gas price review provision is a tool to secure the
stability and viability of GSAs over time. It is a
mechanism through which the economic balance of
the contract is restored for the future, so that it cor-
responds with the terms negotiated by the parties in
the original agreement. Accordingly, the price at
which it is sold by the seller would enable the buyer
to obtain a reasonable profit margin, while allow-
ing him to economically re-sell the gas at a com-
petitive price in the given market.
Price review clauses usually involve different but
related stages (or features, as it will be seen below).
First, a trigger event should occur, then, the re-
questing party must deliver a trigger notice, next,
the parties have to engage in a negotiation period,
and finally, if no agreement is reached, the revision
can be submitted to arbitration.
Due to the complexity of gas price review provi-
sions, controversies of different nature could arise
at every stage of an arbitration proceeding. This ar-
ticle addresses the main difficulties faced by a tri-
bunal (hereinafter the “tribunal”) at the jurisdic-
tional level. In doing so, the scope and limitations
of the tribunal will be highlighted. The foregoing
has as purpose, on the one hand, to evidence that
one of the major areas of dispute in a gas price re-
view case, if not the main, is whether the tribunal
has jurisdiction to hear the claim, and, on the other,
to warn prospective parties of a gas price review
dispute about the possible jurisdictional complica-
tions that could be raised within an arbitration, so
that they can take precautions either to avoid them
or at least be prepared to deal with them. As the
framework for action of the tribunal is determined
by the parties, throughout the article it will be noted
that, if greater care is taken in the drafting of the
price review clause, many complications that arise
with respect to the jurisdiction of the tribunal could
be avoided.
1.!Understanding the big picture of gas
price review arbitration
GSAs are characterized for having a long-term du-
ration and for having a sales price which, instead
of being fixed and invariable throughout the life of
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