Barbados: Arbitration Poised To Assist In Energy Transition

In response to these ever-present energy challenges, Barbados has developed the Barbados National Energy Policy 2019-2030 (BNEP), which seeks to transform Barbados “from a petroleum-based economy to the first green, 100 % renewable energy and carbon neutral island state in the world.”[2]

The BNEP is a comprehensive framework for transforming the island from a fossil fuel-based economy to one which is based on renewable energy. 

As a corollary to the BNEP, Barbados has drafted an implementation plan to accomplish the main goals set out in the policy, which include but are not limited to the following: 

• Provision of dependable, safe, affordable, sustainable modern and climate friendly energy services to all residents and visitors.
• Consumption of zero domestic fossil fuels economy wide. 
• Exportation of all hydrocarbons produced both on land and offshore. 
• Maximisation of local participation (individual and corporate) in distributed renewable energy (RE) generation and storage (democratisation of energy). 
• Minimisation of the outflow of foreign exchange. 
• Creation of a regional centre of excellence in RE research and development.

Barbados, like many other countries in the region, is making the transition to becoming net zero and achieving sustainable development goals recognised by the United Nations with the understanding that as a nation it is particularly vulnerable to the effects of climate change. 

The factors cited above, coupled with the inevitable novel arrangements in implementing such potential dispensations, will likely result in disputes. The most effective and cost-effective method of resolving such disputes is arbitration.

Arbitration is a recognised, private mechanism utilised to resolve contractual disputes across a variety of sectors. The benefits of arbitration are well-established, including providing an efficient, flexible, neutral forum, which is confidential and private. 

According to Arbitration Poised to Assist Barbados in Energy Transition arbitration has become the mechanism of choice.

As a consequence of the goals articulated by the Government of Barbados, as well as the policies already in motion and others earmarked, this is a prime opportunity for Barbados to adopt and utilise alternative dispute resolution methods - and in particular arbitration - as the method of choice to assist it in the effective transition from the use of fossil fuels to renewal energy sources.  

Currently Barbados follows the dualist system, having one piece of legislation for domestic arbitration and another for international arbitration. Domestic arbitrations are governed by the Barbados Arbitration Act Cap 110 and international arbitrations are governed by the Barbados International Arbitration Act 2007 of the Laws of Barbados. The International Arbitration Act 2007 is considered compliant with the UNCITRAL Model Law on International Arbitration 1985 (the Model Law). In addition, there is the Arbitration (Foreign Arbitral Awards) Act Cap 110A which ratifies the United Nations Convention on the Recognition and Enforcement of Arbitral Awards, 1958 (the New York Convention).

It should be noted that in June 2021, the Caricom Legal Affairs Committee endorsed the Canadian-funded Improved Access to Justice in the Caribbean (IMPACT Justice) project’s Model Arbitration Bill, which proposes to modernise arbitration law in the region. As Barbados intends to move to a net zero carbon state, this is an opportune time to consider the IMPACT Justice model so as to have a modern arbitration regime reflective of a forward-thinking state.

In 2007, the island launched the Barbados Offshore Petroleum Programme offering 24 of 26 offshore licences, and a subsequent round was launched in 2015.  Also in 2015, the government of Barbados and BHP signed a licence for Carlisle Bay and Bimshire sectors. Another round of licence bids was scheduled for 2022 but was suspended. As Barbados continues to issue exploitation licences, it should be prepared to address any disputes that inevitably arise.

Arbitration is utilised to resolve disputes at various stages of fossil fuel production, whether upstream, mid-stream or downstream. Disputes can arise upstream, such as in the exploration of reserves, drilling, and the recovery and production from fields. Other concomitant and integral potential disputes are likely to relate to concession agreements, production sharing agreements and joint venture and/or operating agreements, shareholder value relating issues, regulatory issues and construction agreements.

There are also potential issues which arise mid-stream, relating to the transportation and storage of petroleum productions.

Finally, issues can arise downstream, relating to refining of the petroleum products, processing, and distribution of the products and, when the projects are finished, the decommissioning of the plant.

With the view to obtaining net zero status and provide the Barbadian public with a stable source of affordable, environmentally friendly energy, the island is expanding its footprint in the renewable energy space, especially in solar energy, with some use of biomass and wind energy involving a number of local and international investors in the marketplace. 

The exciting features of arbitration are well-suited to deal with these cutting-edge technological developments and assist in the transition to net zero, the move toward full energy transition, and achieving sustainable development goals and climate change. 

The renewable energy sector tends to be capital intensive, the assets have long lives and performance can be challenged because of the impact of climate and the weather. Though these are intermittent production profiles, there is uncertainty in technological performance and the evolution of costs, as well as challenges in the volatility of supply and the pricing of key commodities.[3]

Many of these renewable energy projects that have a cross border element will be guided by a joint venture or joint operating agreement, which allocates the obligations and risks between the parties. In addition, with the presence of multinational investors in the sector, transfer pricing concerns may also become an issue to be resolved by arbitration.  

In addition, renewable energy projects require tremendous infrastructure which is costly and often utilises the FIDIC rainbow suite - in particular the red book - to resolve disputes in relation to cost over-runs, delays, and design and performance disputes.

There can be related issues where this cutting-edge technology fails to perform as promised, or fails to perform at all, as has occurred in other jurisdictions.

It is foreseeable that a consequence of the increased use of renewable energy to produce electricity will result in the increased use of power purchase agreements (PPAs), which allow for the sale of and purchase of electricity at a low price. Arbitration is often used to resolve such disputes should a claim arise.

Earlier in this article, reference was made to how Barbados is acutely sensitive to climate-related issues.  Barbados ratified the United National Framework Conventions on Climate Change (UNFCC) in 1994 and signed and ratified the Paris Agreement in April 2016.

There has been much publicity about The Bridgetown Initiative, which seeks to provide an action plan to provide finance to tackle several combined crises, including but not limited to, the climate crisis and climate-related disasters.[4]

Arbitration has heeded the call to address climate change with initiatives such as the ICC Task Force report on Resolving Climate Change Related Disputes through Arbitration and ADR[5]. The report identifies several categories of disputes which can give rise to climate change related disputes. They include, but are not limited to, challenges related to changes in climate policy, parties who seek financial redress for climate change damage, and contractual disputes resulting from the transitions within the sector.[6]

Although Barbados is not a signatory, there is also the Hague Rules on Business & Human Rights which draws on the Permanent Court of Arbitration (PCA) Optional Rules for the Arbitration of Disputes relating to the Environment and Natural Resources. It is understood that the Rules can also be interpreted to address climate change as it affects human rights and environmental issues.

There is no doubt that it is crucial for Barbados to embrace arbitration as the disputes resolution mechanism of choice as it pursues as it takes bold steps towards being net zero and providing low cost and sustainable energy to its people. It is also an opportune time to review the current arbitration legislative framework so that is it capable of effectively addressing the future needs to facilitate this transition.

[1] Alejandro Guerson, James Morsink, Sòñia Munoz, “Caribbean Climate Crisis Demands Urgent Actions by Government Investors”, The IMF Blog, (accessed 29 July 2023).

[2] Barbados, Ministry if Energy & Water Resources, Division of Energy, Barbados National Energy Policy 2019-2030, p.8.

[3] Jostein Kristensen, Mateusz Slomka and Sahad Shamsi, GAR Economic & Financial Issues in Renewable Energy Arbitration, 11 November 2022 (accessed 26 July 2023)

[4] Barbados Prime Minister’s Office Press Release, Urgent and Decisive Action Required for an Unprecedented Combination of Crises The 2022 Bridgetown Initiative for the Reform of the Global Financial Architecture, settled Saturday, July 30, 2022, released September 23, 2022. (accessed 26 July 2023)

[5] International Chamber of Commerce (ICC), Resolving Climate Change Related Disputes Through Arbitration and ADR.p.8

[6] Ibid, p8

Tanya R. Goddard
Tanya Goddard is Secretary General of the AMCC, as well as an Attorney-at-Law, qualified arbitrator and accredited mediator. Her expertise is alternative dispute resolution, particularly arbitration and commercial mediation, with a focus on investor-state disputes, energy disputes and international commercial disputes. Tanya is a Fellow of Chartered Institute of Arbitrators (FCIArb) and CEDR Accredited mediator. She is co-Chair of the Caribbean Sub-Committee for the Campaign for Greener Arbitrations and Vice Chair of Barbados Chapter Caribbean Branch of Ciarb.