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5 J. World Investment & Trade 257 (2004)
Efficiency in Mediation - Solving a Complex Cross-Border Energy Infrastructure Dispute in the Shadow of Three Moving Regulatory Regimes

handle is hein.journals/jworldit5 and id is 257 raw text is: Efficiency in Mediation Solving a Complex Cross-border Energy Infrastructure Dispute in the Shadow of Three Moving Regulatory Regimes Michael CLANCY* and Thomas WALDE** This article discusses a recent case in which two energy companies used mediation to completely restructure a long-term contractual package for a large joint investment. The success of the mediation can be attributed to the applicability of appropriate mediation techniques to build a win-win solution to the dispute. The basis of the dispute was unforeseen changes in the economic, regulatory and political circumstances of a large cross-border power purchase agreement (PPA) governing the operation of a thermal power station.' This facility had been built in Eastern Europe with Western European finance, while the host company agreed to purchase the electricity on a long-tern, fixed-price contract for domestic distribution. Since the contract began, a decline in national demand and market liberalization had resulted in excess electricity supply. The joint facility's exclusive contractual use was thus seen as extremely onerous by the host country party while the financing party insisted on proper fulfilment of its twenty-year PPA in order to recover its initial investment and earn the planned return. The value of the dispute approached USS I billion. Prior to mediation, the parties had negotiated for three years without achieving a settlement. Arbitration seemed the most likely next step. The estimated cost of arbitration was US$ 3 million, with a timescale of perhaps three years. With enforcement proceedings and the public policy issues involved, this would have meant more than five years to achieve full resolution of the dispute. There were also several other companies involved-transporters, traders, suppliers-and the rapidly moving, disjointed regulatory regimes of the two countries and the EU to be taken into account. * B.Eng.; M.Sc.; LL.M. He is applying petroleum development risk assessment techniques to the economic analysis of dispute processes at CEPMLP/Dundee University, Scotland. He has worked for some 20 years in oilfield evaluation and development projects worldwide. He may be contacted at; <clancymj@aol.com>. ** Dr. iur. LL.M. (Harvard); Professor and Jean-Monnet Chair at CEPMLP/Dundee University, Scotland; <vww.cepmlp.org>. He was formerly the principal UN adviser on energy/investment law and has practised deal and dispute mediation throughout the world since 1980. He may be contacted at: <twwalde@aol.com>. For further information on this subject, see Special Issue of Mediation of OGEL (2-2003), at <www.gasandoil.com/ogeh; T_ Waelde, Pro-active Mediation of International Business and Investment Disputes involving Long-term Contracts: From Zero-sum Lit(ation to Efficient Dispute Management, 5 Business Law International 99-110 (2004). I For reasons of confidentiality, details of the parties and the contract are withheld.

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