38 Asian Legal Business | September 2024 Renewable roadblocks In recent years, the combination of trade conflicts, the pandemic, and regional tensions have resulted in increased volatility for businesses in the energy, transportation, and commodities sectors. In Southeast Asia, where the transition to green energy is one of the primary focuses for governments, lawyers examine critical areas susceptible to disputes and identify best practices to avoid them. By Sarah Wong Southeast Asia is determined to go green, but its ongoing endeavour to transition towards clean energy has been fraught with challenges from supply chain disruptions, energy security, to compliance hurdles. The clean energy transition in Southeast Asia has led to a shift in the types of projects that market participants are investing in, and the types of products that they are selling and purchasing. This has partly changed the nature of disputes arising from these sectors. Nick Moon, partner at Reed Smith in Singapore, notes that the last few years—with COVID snarling supply chains—has marked a period of price volatility in the energy, transport and commodities sectors. Then Russia invaded Ukraine and conflicts broke out in the Middle East, pushing the prospects of price stability even further down the road. “As lockdowns began to ease, increased demand, combined with Western sanctions on certain Russian energy companies and Russian origin goods, caused substantial price rises on commodities ranging from natural gas and coal to metals and wheat,” says Moon. Breaking contracts The combined impact of the pandemic’s repercussions, far-off wars constricting fuel supplies, and sanctions against major oil producers has caused market dislocation. Consequently, some market participants have met difficulties in fulfilling their contractual obligations. “We have seen a sharp increase in the number of disputes arising between parties in these sectors,” says Moon. “According to their annual reports, in 2018, 27 percent of new claims filed at the Singapore International Arbitration Centre (SIAC) were in the trade sector, whereas in 2023, 47 percent of new claims were in the trade sector.” It’s not just a volume game either as there was a significant increase in the value of the disputes too. Lawyers believe this upward trend largely reflects the volatility in commodity prices seen during this period. In accordance with English law and other common law jurisdictions, the initial principle is that damages resulting from the non-delivery of goods are determined by the disparity between the contract price and the market price at the designated time and location of delivery. “Therefore, the greater the difference between the price of a commodity when the contract was agreed and when it was due to be delivered, the higher the value of the claim,” explains Moon.
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