International Arbitration: 5 global trends in testing times

2024 was another year of 'testing times', with disputes risk at a peak due to a number of factors including geopolitical tensions, volatile energy prices and dependencies, supply chain disruption and delays, inflation and variable interest rates, as well as climate change, decarbonisation pressures and the continued development of emerging technologies.

The resulting challenges have also found their way into disputes with a particular focus on international arbitration. In this article we highlight five trends that were a key focus of our global practice in 2024 and which we consider will continue to play a prominent role in international arbitration in 2025 and beyond. 

1. Renewable energy disputes 

Renewable energy projects are at the forefront of efforts to combat climate change and are ever increasing in number. At the same time, they are not immune to the disruptions caused by global crises and geopolitical events. Indeed, renewable energy projects share many of the same characteristics as projects in the conventional energy space and, in addition, their complex and relatively untested nature as well as the scale and speed at which they are developed give rise to a distinct set of challenges that are a source for a wide range of disputes. This is further aggravated by the constantly changing and unpredictable nature of government policies and incentives, which have a significant role to play in respect of the investment in renewables and create a fertile environment for disputes. Going forward, we expect to see a continued rise in both commercial and public international law disputes in the renewables sphere. 

In December 2024, our Special Report on 'International Arbitration of Renewable Energy Disputes' was published by Globe Law and Business Ltd. Written for both legal and non-legal audiences, the Report is relevant to those interested in learning about the scope for disputes in the renewables sector, how they can be avoided, and how arbitration can best be deployed to prevent delay, resolve disputes and help push the energy transition forward. The Report was complimented by our earlier Lexis Nexis Webinar on 'The Role of Arbitration in Renewable Energy Disputes', and our participation in numerous panel discussions on the topic throughout the year, culminating in a session on 'Construction disputes within the renewable energy sector' as part of our involvement as official venue partner of GAR Live: Sydney 2024.

2. Investment protection and sovereign disputes 

Foreign investments are inherently exposed to political risks, which can vary significantly depending on the host state and the nature of the investment. Unforeseen legislative or regulatory actions have the potential to destroy the entire value of the investment. The likelihood for States to adopt such actions is currently at a peak. The hot pot of climate change and the energy transition, supply chain disruption, digitalisation and artificial intelligence, inflation as well as military conflicts serves as a catalyst for political and regulatory change that is prone to adversely impact investors across industries and jurisdictions.  In 2025, we therefore expect to see a continued increase in investor-State disputes.

Earlier in the year, in our article 'The UK and others exit the Energy Charter Treaty – what does this mean for energy sector investors' we reminded energy sector investors what steps they should be taking to protect their investments against political risks in light of the wave of withdrawals of signatory states from the Energy Charter Treaty. We also explored in depth the future investment treaty landscape in the European Union (EU) in 'The Future of Investor-State Dispute Settlement: Reforming Law, Practice and Perspectives for a Fast-Changing World'. The availability of third party funding continues to be a relevant concern in the investor-State disputes space, and is one of the main topics we explored in a panel discussion at the Seoul ADR Festival 2024.

As the demand for critical minerals keeps growing, the dominance of mining-related disputes is also set to continue. Australian mining investors around the globe featured heavily in the list of claimants initiating claims in relation to the treatment of their foreign investments by host States in 2024 and we expect to see a similar picture going forward. 

More generally in the sovereign disputes sphere, we expect to see a continued uptick in disputes arising around ESG related themes, such as human rights compliance and supply chain due diligence. Geopolitical tensions are also resulting in increasing trade defence measures by States and REIOs such as the EU as well as regulations governing foreign investments. These measures create various new challenges for businesses with international operations. In 2024, we led the way in guiding our clients through this newly emerging, complex regulatory environment and representing them in related disputes. For example, Chinese companies operating in the EU have found themselves under intense scrutiny under the EU Foreign Subsidies Regulation (FSR) (read our article here), and we are one of the few international law firms representing clients in in-depth investigations bringing together a team of disputes, public international law, and regulatory experts. 

3. Bribery and corruption 

Whilst bribery and corruption has always been an issue in industries which often give rise to arbitrations (for example, oil and gas, mining and natural resources), in recent years there has been an increased focus on the interplay between allegations of bribery and corruption and arbitration proceedings, not least because of the highly publicised English High Court case of Federal Republic of Nigeria v Process and Industrial Developments Limited.  In line with this trend, we hosted a panel event on 'Navigating Allegations of Bribery and Corruption in International Arbitration' during Dubai Arbitration Week 2024, in which we shared insights on allegations of bribery and corruption arising in the context of contractual disputes. For example, we considered the impact of allegations that evidence relied upon in the arbitration has been obtained illegally as well as allegations in relation to the arbitration itself (e.g. abuse of the arbitral process, arbitrator corruption or, in some instances, sham arbitrations). 

We expect this trend to continue in 2025. We also anticipate a continued focus from global enforcement authorities on bribery and corruption – with significant US enforcement actions in 2024 against international companies for breaches of the Foreign Corrupt Practices Act, the appointment of a new 'Anti-Corruption Champion' in the UK and accompanying pledges to increase funding to prevent international corruption, and the implementation of a new corporate 'failure to prevent' law targeted at foreign bribery in Australia. This reinforces the need for clients to ensure they have robust anti-corruption policies and compliance programs in place to mitigate against this risk. In cases where allegations of bribery and corruption arise, it is essential to conduct a thorough investigation and seek legal advice to navigate the implications for the arbitral process effectively. Together with our global Corporate Crime and Investigations and Risk Advisory practices, we are well placed to advise clients fully on these issues.

4. Sanctions against Russia

The ever-evolving sanctions landscape and its interplay with international arbitration was a key focal point for our global practice in 2024, and will continue to be of great significance in 2025. Sanctions are one of the most challenging and problematic areas in terms of issues that impede contractual performance of recent years. We will continue to advise clients on the strategic adjustments required in response to this complex, and unpredictable legal landscape. 

In our article 'Russian sanctions: arbitration agreements and the Russian "home advantage", we examined the impact of sanctions against Russia on arbitration agreements, highlighting the ability of Russian entities to gain a "home advantage" by taking their disputes to the Russian courts in circumvention of an arbitration agreement; and in 'EU aims to "protect" EU companies in the wake of Russia's response to sanctions' we provided an overview of measures introduced by the EU to protect EU operators from negative impacts of the ongoing sanctions regime against Russia. 

Companies with remaining assets in Russia increasingly find themselves in the crosshairs of (staggering) claims brought by Russian entities before domestic Russian courts in breach of arbitration agreements in the underlying contracts. We expect this to continue in 2025. We have a wealth of experience dealing with these situations both in the context of arbitration under the proper forum as well as related measures to defend against the Russian proceedings and prepare  for resisting enforcement. For example, this includes seeking anti-suit injunctions, declaratory relief and preparing for the intense legal and political battle that will go hand-in-hand with efforts to enforce Russian judgments in friendly jurisdictions. 

5. Arbitral reform and capacity building 

2024 was a big year for arbitral reform, with major arbitral institutions including HKIAC and SIAC publishing new rules, as well as a number of jurisdictions undertaking arbitration related legislative reform. The international arbitration community is continuously seeking to improve the efficiency, transparency, and accessibility of arbitration, whilst also adapting to global trends, i.e. digitalisation and artificial intelligence.

Reform and capacity building in the Pacific has been a focus topic for our Australian practice, and it will remain a priority as we continue to represent a number of clients in their disputes across the region. Earlier in the year, our Australian and Papua New Guinea (PNG) offices considered the enactment of PNG's new arbitration laws and the implications for international investors eying opportunities in PNG in our article 'Papua New Guinea's New Arbitration Act: A Boost for Economic Growth and Investor Confidence'. In October, as part of our involvement in Australian Arbitration Week, we hosted a distinguished panel of experts to discuss the current status and future prospects of international arbitration in the Pacific. The discussion underscored the critical need for ongoing reform and capacity building in the region, while also highlighting the importance of cultural sensitivity and local engagement, from foreign investors, legal practitioners, arbitral institutions and arbitrators alike (read our article here).

We look forward to a number of key developments in 2025 in terms of legislative reform. The UK continues to await the modernisation of its arbitration act following a change in government in July 2024 (read our article here). There are also significant changes proposed to both the German Arbitration Act (read our article on the draft bill here) and the PRC Arbitration Law (read our article on the draft legislation here).  

Clients should stay informed about institutional and legislative reforms and consider their impact on arbitration strategies, including in particular the choice of the seat.

Want to know more?

• Watch our webinar 'Testing times: Revisiting contractual obligations in light of global crises and geopolitical events' in which we spoke about the complexities of dealing with contractual performance obligations that have become radically different in light of recent events. We gave a detailed overview of the use of contractual 'release valves', as well as non-contractual mechanisms, which may be available to parties faced with non-performance.
• Read our 'Insights' series on Renewable Energy Disputes, which includes key reasons why those involved in the renewables sector should be thinking about international arbitration as the dispute mechanism of choice (here), as well as investment protection (here); and top tips on 'How commercial parties can protect themselves' and 'Effective and efficient dispute management'.
• 2024 was an important year as regards the recognition and enforcement of arbitral awards against states and state entities, with developments in the United Kingdom, Australia and elsewhere. Read our article 'English Court of Appeal Aligns with Australian High Court on Denying Sovereign Immunity in ICSID Awards'.
• Visit our Russia Sanctions Tracker-EU for a high-level summary of the measures imposed by the EU following Russia's invasion of Ukraine in February 2022. Read our articles on English and Hong Kong court decisions regarding anti-suits, arbitration agreements and sanctions against Russia.
• Visit here to find out more about our global team, the work we do and key contacts.