Energy Arbitration: The View from Korea & NE Asia Benjamin Hughes Associate Professor Seoul National University Law School

Energy Market in NE Asia China is world’s largest oil importer, second largest consumer. China, Korea and Japan together import more than half of global LNG Korea and Japan import 95% of their energy needs Decreased reliance on nuclear power after Fukushima disaster and safety scandals in Korea. Heavy reliance on LNG and high demand in region leads to high prices despite buying power (KOGAS) Increasing reliance on coal in Korea, causing untenable environmental and political problems. LNG power plant operators suffering from competition.

Competition and Cooperation Intense competition for resources, including South China Sea See E&P disputes between China and Vietnam, Philippines, Japan Could also adversely affect energy transport (see maps) Increased demand in other regional markets However, China, Korea and Japan exploring LNG buyer’s alliance between CNOOC, KOGAS and JERA (MOU) Other factors leading to potential price review include increased production from US shale gas (Henry Hub prices), Australian LNG projects, Russia, Canada, Indonesia, etc.

Types of Disputes Long-term LNG SPAs Take-or-pay clauses Price review Price formula indexed to oil prices, with periodic and/or trigger review Difficult to predict outcome (see Gas Natural v. Atlantic LNG) Baseball Arbitration Hardship clauses Seldom go all the way to arbitration (tiered clauses) Korean (Chinese and Japanese) principle of good faith Construction (LNG Terminals, drilling rigs, refineries, power plants) Termination Post-completion claims Shareholder and JV disputes

Arbitration in Korea Korean parties are among most active users of arbitration in Asia, including ICC, SIAC, HKIAC and UNCITRAL. Also investment arbitrations on the rise. Korea adopted UNCITRAL Model Law (1985) in 1999, in wake of IMF Crisis, wholly revising its previous Arbitration Act. Revised and updated in 2016 to incorporate UML 2006 amendments. Includes appeals of negative jurisdictional decisions by tribunal. Allows designation of KCAB as appointing authority. Simplified procedures for recognition and enforcement. KCAB International Arbitration Rules (2016) Emergency Arbitrator, Expedited procedures, Joinder and Consolidation Korean Supreme Court faithfully applies New York Convention.

South China Sea Territorial Disputes