Chapter 23. Resolving Risk and Facilitating Investment in Cross-Border Energy Construction Contracts: A Common-Law Perspective

International energy agreements are a decisive factor shaping the parameters of international construction contracts in the energy sector. Their influence is felt at normative, institutional, and economic levels: by imposing public-law obligations on market participants, by structuring transparent regimes for transit and investment, and by setting price and technology benchmarks that project sponsors must internalise. Within today’s architecture of multilateral regulation, the 1994 Energy Charter Treaty (ECT) occupies a central position. As noted in Russian and foreign scholarship, it was the first multilateral instrument to protect energy investments and to establish a legal regime for cross-border energy transit; it also conferred on investors a right of direct recourse to international arbitration against host States (Golovanova & Kuklina, 2020; Konoplyanik & Walde, 2006). For EPC/EPCM contracts on energy infrastructure, this translates into the need to incorporate investment-protection clauses and to align dispute-resolution provisions with the availability of ICSID proceedings, while preserving appropriate commercial arbitration fora for purely contractual disputes.

Against the backdrop of an accelerating energy transition and a shifting balance of power, the European Union’s regulatory initiatives—chiefly the Third Energy Package—exert an extraordinary impact on the negotiation and performance of construction contracts connected with electricity and gas markets. EU rules on liberalisation, non-discriminatory third-party access and unbundling cascade into techno-legal obligations for employers and contractors, including interoperability requirements, environmental permitting, and competition-law compliance (Chugunov, 2022; Gudkov, 2016). In contractual terms this prompts Particular Conditions addressing third-party access commitments, ring-fenced accounting, and more granular risk matrices for delay and cost arising from regulatory change, together with conditions precedent, time-bar and notice regimes that dovetail with change-in-law mechanisms under FIDIC.

Commodity associations such as OPEC and intergovernmental platforms like the Gas Exporting Countries Forum (GECF) influence construction contracts indirectly through pricing dynamics and sanctions exposure. The OPEC Statute codifies coordination of members’ export policies, affecting long-term price benchmarks and demand forecasts and, through them, financial models, indexation, and price-adjustment clauses embedded in EPC/EPCM agreements (OPEC, 2021). Questions of sanctions compatibility for payments, equipment, and services have become part of routine drafting in the gas sector; these risks are reflected in current reports on licensing particular energy transactions involving Russian counterparties (Interfax, 2023). Contractually this necessitates robust force-majeure, change-in-law, and sanctions clauses, as well as expanded representations and warranties from suppliers, issuing banks for on-demand bonds, and insurers.

The doctrine of energy security provides a public-law framework that constrains private autonomy. Understood as a State’s capacity to guarantee stable supply and protect critical infrastructure, energy security constitutes an autonomous legal interest that limits the parties’ freedom of contract: routing choices, physical-security standards, reliability of supply and import-substitution policies become regulated matters (Shestopalov, 2012). For construction forms this implies tighter licensing and permitting filters, contractual Business Continuity Plans, stress-testing protocols, and express duties to disclose to competent authorities.

Nuclear-energy agreements—specifically the Paris Convention of 1960 and the Vienna Convention of 1963 on civil liability for nuclear damage—form a distinct layer. These treaties set imperative frameworks for liability allocation, caps and insurance coverage, directly shaping contractual undertakings during NPP construction: they require broadened insurance obligations, periodic safety audits, nuclear-materials management, and emergency-response protocols. Legally, part of the risk is shifted beyond party autonomy into the realm of States’ international obligations, thereby delimiting the permissible scope of FIDIC Particular Conditions and calibrating the content of performance securities.

Research on cross-border resource development in the Arctic shows how inter-State agreements on delimitation, unitisation and joint development are transformed into private-law obligations via equity-split formulas, coordination committees and joint operators; Russian–Norwegian practice is instructive (Vylegzhanin, Salygin, & Krymskaya, 2020). For contractors this entails stringent supply-chain compliance, common standards of technical documentation, and acceptance of applicable law and forum clauses anchored in intergovernmental agreements—which take priority over otherwise dispositive contract provisions.

Geopolitical shocks and unilateral restrictive measures affect timelines and costs of energy construction projects, requiring perimeter planning for legal protection at the pre-contract stage. The slowdown and ensuing developments around Nord Stream 2, analysed in the legal literature in connection with sanctions regimes, are illustrative (Kritskiy, 2017). Following the September 2022 sabotage that physically destroyed strings of Nord Stream and Nord Stream 2, questions arose over force-majeure allocation, insurance coverage, evidentiary standards and subrogation among contractors, operators and insurers. Drafting responses include enhanced survey and monitoring duties, cyber- and physical-security obligations, stratification of risks by insurability, and clear triggers for time and price adjustment in events of international tension.

Agreements within the EAEU and other regional frameworks embed specialised dispute-resolution procedures applicable to cross-border grids and trunk infrastructure; their effectiveness is echoed in analyses of the Russian–Norwegian unitisation model (Fodchenko, 2018). A general trend favours tiered mechanisms—negotiation, independent expert determination, Dispute Avoidance/Adjudication Board (DAAB), then arbitration. In energy construction contracts this is reflected in mandatory DAAB provisions under FIDIC and good-faith performance of pre-arbitral steps.

International energy agreements reshape national law by prompting States to adopt acts that raise safety and sustainability standards for energy facilities. Russian doctrine underscores the need to align such domestic novelties with international commitments as a component of reinforcing energy security (Lisitsyn-Svetlanov, 2021). This recalibrates project and construction regulations and creates normative anchors for contracts: mandatory standards lists (GOST, SP, ISO), expanded Employer’s Requirements, and independent technical supervision and compliance audits.

The economic dimension of these agreements manifests through price and investment incentives. Long-term gas arrangements between Russia and EU States and support regimes for renewables—subsidies and tax preferences grounded in intergovernmental deals—are embedded in contract financial models, defining EPC price parameters, payment schedules, KPIs, and bonus-malus schemes (Gudkov, 2016; Romanova, 2015, 2016).

A systemic doctrinal assessment confirms multi-level norm-creation. Studies of international energy relations emphasise the complex constellation of actors and the need for clear allocation of rights and duties and effective dispute-resolution mechanisms (Bogonenko, 2017). For international construction contract law three operational conclusions follow. First, investors should enjoy access to investment-protection fora in addition to commercial arbitration. Second, sanctions, environmental and technology regimes must be embedded in the risk matrix as autonomous grounds for time and cost adjustments. Third, performance security—on-demand bonds, CAR/EAR and business-interruption covers, and political-risk insurance—must be aligned with applicable public-law constraints.

Future development of international energy law—and its projection onto construction contracts—will be shaped by the unification of “green” construction standards and renewables, as well as full-lifecycle digitalisation. Scholarship confirms that politico-legal factors in the Russia–EU energy dialogue continue to affect joint projects (Gudkov, 2014), and hence contract structures, permitting, and risk allocation. Strategically, it is advisable to promote unified infrastructure standard forms under BRICS or the UN, building on the successful practice of FIDIC forms while adapting to regional public-law requirements. The core should include an ICSID path where a dispute features investment elements (with reference to the “investment” criteria applied in Salini), while preserving ICC (or equivalent) arbitration for purely commercial disagreements (Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco [I], 2001).

In aggregate, international energy agreements delineate the boundaries and vectors of contractual autonomy in energy construction. They codify access, transit, liability and dispute-resolution rules; shape price and technology frames; and channel public support and insurance solutions. FIDIC-based forms, localised to reflect public regimes—from nuclear liability to sanctions clauses—provide the needed predictability. Further progress will depend on intergovernmental unification, digital standards for information management, and reinforced multi-layer mechanisms to protect the rights of participants in energy projects.