The Government Memorandum should not be a significant obstacle for RES companies in arbitration

share

The Memorandum of Understanding clearly states that it cannot be construed as an amendment to any agreement or other legal document, or as a waiver of any right or obligation of the signatories of the Memorandum. Including in court or arbitration in order to protect their rights and interests.

Also, the document states that it does not put any obligations on the parties. But it is unclear what exactly "additional obligations" mean. Additional to those already existing in the contractual and legal frameworks? Or to the obligations arising from the Memorandum?

The Memorandum contains such phrases as "RES producers are obliged", "agree", "the government must provide", "public authorities must". Obviously, we are talking about some responsibilities. Does the Memorandum text imply that it does not create additional obligations to those already in it? Or that regardless of this binding language, the memorandum does not describe any responsibilities at all, and is it some kind of gentlemen agreement at the political level?

The Memorandum does not apply to energy cooperatives and private households for which a green tariff has been set as of the date of signing. On the one hand, this means that households with solar or wind stations are not subject to reducing the green tariff. On the other hand, it is unclear whether the government intends to reduce tariffs for them outside the scope of the Memorandum. That is, here we can expect surprises from the Government in the forthcoming bills. Alternatively, the Government can interpret this provision in such a way that households with renewable generation should not be affected in any way. 

Based on the provisions of the Memorandum, we understand that it is largely political, declarative and positional. It is not a legally binding document on the basis of which the parties could demand the fulfillment of these obligations in court from each other.

In fact, the Memorandum is a document that has a purely utilitarian function for the Government. With its signing, the mediation process under the auspices of the Energy Community came to an end. In the political field, the Government has demonstrated its ability to negotiate with the RES sector, and has laid the foundation for the legislation changes. 

At the same time, I would not underestimate the role of this document in potential arbitration disputes that may occur between the RES producers and the Government of Ukraine. The fact is that this document also captures certain circumstances. Its preamble part carries a kind of fact setting exercise, ie achieves the result of confirmation or establishment of the facts. And even declaring something can then be used in someone's interests in future lawsuits. 

For example, if an entity that has acceded to the Memorandum subsequently enters into an arbitration dispute with the Government of Ukraine, it will need to explain why, after agreeing to the specific preconditions and circumstances set out in the Memorandum, it has decided to change its mind and challenge its provisions. That is, the Memorandum may be one of the obstacles in substantiating certain arguments of the parties in arbitration proceedings. 

But after consulting with our arbitration experts, we believe that this will not be a significant obstacle. At the same time, this is a circumstance that the Government will most likely use to its advantage. Especially given that the text of the Memorandum is written in a more progovernmental style.