SCC report on Green Technology Disputes highlights growing role for commercial arbitration in the green transition

By Dean Ehrlich, 9 December 2022

30 November 2022, STOCKHOLM. The SCC Arbitration Institute has published its second report about Green Technology Disputes at the launch of its ‘SCC Digital Week 2022’. According to the report, the number of green technology disputes forming part of the SCC’s commercial arbitration caseload “is only expected to increase.”

As with the first report, commercial and investment disputes involving green technologies are the focus – except this time it looked at disputes registered with the SCC between 1 January 2019 and 1 October 2022.

The report [accessible here], defines ‘green technology’ as “any process, product or service that reduces negative environmental impacts in support of the Paris Agreement on Climate Change,” and all the cases examined in the report “involve disputes where one or both parties used a type of green technology as part of its main business activity.”

Investment treaty disputes may well be the first kind of disputes that come to mind when discussing arbitration and climate change. However, the report reveals that “commercial arbitration certainly has a role to play in the green transition” and that “commercial disputes in relation to climate change can arise from a wide range of contractual relationships” (most commonly construction agreements and delivery agreements).

According to the report, the SCC “has experienced [an] increase in the number of Green Technology Commercial Disputes” since 2019 – in line with global climate change litigation trends. In this regard, the SCC cites UNEP’s Global Climate Litigation Report: 2020 Status Review to show that the number of climate change litigation cases has nearly doubled since March 2017.

Many of the Green Technology Commercial Disputes identified in the report involve contracts entered into “expressly in response to international climate agreements or policies” (such as contracts entered into to adapt to the green transition) or “concern commercial obligations regarding projects, investments, or other activities which indirectly support climate action” (such as requirements impacting specific sectors, such as the energy or construction sectors).

However, the report says that “the vast majority of the parties involved in the Green Technology Commercial Disputes pursued activities aimed at climate change mitigation rather than adaption” with parties “innovating and developing technologies” to meet increased regulatory demands ­ particularly “in more traditional sectors, such as construction and energy, which are undergoing significant transformation.”

According to the report, “parties from 20 different countries appeared in the Green Technology Commercial Disputes” administered by the SCC between 1 January 2019 and 1 October 2022, with “with 56% of parties pursuing their main business activity” within the renewable energy sector.

While Swedish parties continue to be the most frequent participants in commercial arbitrations administered by the SCC, almost half of the SCC’s Green Technology Commercial Disputes now come from outside Sweden – with the report identifying 48% of disputes as ‘international’ (involving non-Swedish parties). This is a significant change when compared to the first report – which classified only 38% of the Green Technology Commercial Disputes administered by the SCC before 2019 as ‘international.’

Interestingly, the amounts in dispute in Swedish cases are “generally lower than in international cases.” According to the report, the average amount in dispute in a Swedish case was EUR 5.8 million (with amounts ranging from EUR 10 000 to EUR 58.3 million). In international cases, however, the average amount in dispute was EUR 14.5 million (with amounts ranging from EUR 30 349 to EUR 95.5 million).

The SCC says that the variance in the amounts “effectively demonstrates the multi-faceted nature of climate related disputes” with Green Technology Disputes involving “both disputes arising out of smaller contracts, such as agreements entered into by companies developing green innovations, and large contracts, such as construction agreements for renewable power plants.”

Founded in 1917, the SCC’s mission is to facilitate trade and business “the Swedish way” by providing a neutral, independent and impartial venue for dispute resolution.

In addition to administering commercial arbitrations, the SCC is one of the leading international arbitral institutions administering disputes between investors and states. In fact, the SCC is one of the preferred international forums for the resolution of investment treaty disputes, and is second only to the International Centre for Settlement of Investment Disputes (“ICSID”) in terms of the size of its investment treaty arbitration caseload.

Sweden and the SCC are listed as a forum for investment treaty arbitration in 121 BITs, as well as in the ECT. Of these 121 BITs, 61 agreements provide that the Arbitration Rules are to apply to disputes arising from the agreement. The remaining 60 BITs nominate the SCC as an Appointing Authority under the UNCITRAL Arbitration Rules or Sweden as the seat of arbitration.

To date, the SCC has registered 119 investment treaty disputes – with the majority being based on bilateral investment treaties (“BITs”) or the Energy Charter Treaty (the “ECT”). The SCC’s own Arbitration Rules were applied in 76% of those cases.

In light of the SCC’s strong presence in the field of investment treaty arbitration, the SCC introduced specific provisions applicable to investment treaty disputes to the 2017 version of its Arbitration Rules. The provisions address inter alia the number of arbitrators and the filing of written submissions by third persons and non-disputing parties.

In November 2022, the SCC changed its name from the Arbitration Institute of the Stockholm Chamber of Commerce to the SCC Arbitration Institute.