CRISIS SPARKS MORE LEGAL DISPUTES CMS Cameron McKenna Pleads For Mediation In Energy Conflicts

The international financial crisis is causing an increase in the number of litigations in the energy sector because of various divergences that may occur in energy trading business. Gabriel Sidere, a Partner with CMS Cameron McKenna told "Bursa" that Romania, too, would have its share of litigations and mediation should be promoted as the best way of settling conflicts between companies or between companies and authorities. In his opinion, mediation saves both time and money without blocking the execution of contracts or investments. In two or three years, Romania"s energy market regulator ANRE is planning to give up regulated prices. "ANRE is planning to limit their activity to monitoring the energy market and act only when the consumers" rights are violated. This means that energy market players will no longer be able to turn to ANRE for mediation as they do now. They will have to solve their own problems, either by negotiation and mediation, or in court or through arbitration. The experience of the past two years has proven that mediation is the best option for companies, especially since we are going through a difficult period for the economy," Sidere added. On short term, the legal disputes that may appear in the energy business, including in Romania, will concern the renegotiation of contracts as a result of reduced consumption, or payment delays. Huge pressure will be laid on consumer prices, as suppliers will have to remain competitive on a market with high financing costs and high volatility of the prices of products coming from energy-intensive industries. As an example, the price of aluminium and steel has fluctuated greatly in the last year. The low predictability of energy process and difficulties to complete investments because of lack of financing could trigger many conflicts among energy players, Sidere believes. The State will have its share of problems related to ongoing energy projects. According to CMS Cameron McKenna, the State is a good customer, but has difficulties in managing projects. "My experience in various privatization cases or public-private partnerships tells me that there are many problems of communication between the State and the private investor because of bureaucracy. The State cannot engage budget as it pleases and cannot change various contractual provisions and therefore prefers to go to court. The project will be blocked for years, additional costs appear and investors may claim damages. That"s why I believe that authorities need to consider mediation as a legal way of settling problems with whatever contracts they are executing," Sidere added. The Romanian authorities may soon have difficulties in financing energy projects, even if such projects are joint ventures with private investors. According to Gabriel Sidere, the State will have to contribute more money and become more flexible in managing energy projects. Consequently, it will be easier to find investors and avoid the loss of investment to Western Europe, where more guarantees are available.