This article was featured in our 2023 Energy Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the energy industry, encompassing information on electricity & renewables, based on data available on Jus Mundi and Jus Connect as of September 2023. Discover updated insights into energy arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on energy projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHORS:
Mouhamed Kebe, Managing Partner at Geni & Kebe LLP
Aissatou Ndong, Senior Associate at Geni & Kebe LLP
Mahamat Atteib, Associate at Geni & Kebe LLP
Overview of the Energy Market
The Senegalese energy market includes private companies producing electricity for rural zones according to the rural electrification policy in addition to companies producing electricity for the State-owned electricity company (Senelec) which is in charge of the distribution of electricity at the national level. At the regional level, Senegal is part of the West African Power Pool (WAPP), an institution set up under the auspices of the Economic Community of West African States (ECOWAS), to implement its energy policy in promoting and developing power generation and transmission infrastructures as well as coordinate power exchange among the ECOWAS member States.
The national market is so far characterized by the predominance of the State-owned electricity company (Senelec). Senelec handles production, transport, and distribution activities in Senegal. It has the exclusivity of bulk purchase of electricity and manages the transport and the electricity wholesale within the country until 2021. The adoption of the new electricity Code in 2021 has in principle ended this exclusivity regime. Senelec should assign each of its activities to a separate entity. The transport should continue to be a State monopoly and will be managed by a Senelec subsidiary or a specific new entity with third parties’ access to the grid and the liberalization of bulk purchase of electricity. This reform engaged in 2021 should be effective by 2025.
In addition to Senelec and its users, the Senegalese market includes Independent Power Producers (IPP) and with the new Code, distribution operators. The energy produced derives from both fossil and renewable sources. The country opted for an energy mix which includes energy produced from coal, gas, hydro, solar, and wind sources. The energy mix will be increased following the discovery of 17 trillion cubic feet of natural gas at the Grand Tortue Ahmeyim (GTA) gas field near the maritime border with Mauritania and the adoption by Senegal of the Strategy Policy called “Gas to Power” in 2018. Moreover, Senegal commonly holds hydroelectric energy resources with its neighboring countries managed through specialized organizations including Gambia River Basin Development Organization (OMVG) and the Senegal River Basin Development Authority (OMVS). Taiba Ndiaye Wind Park also contributes to the energy production in Senegal, as well as solar power plants.
The Senegalese national market is mainly regulated by the Energy Sector Regulation Council (CRSE) which covers downstream petroleum activities, midstream and downstream gas activities, and renewables and other sources of energy while the regional market is under WAPP supervision.
Energy disputes in Senegal include a collection of electricity distribution fees from users, breaching of Power Purchase Agreements (PPA), granting or revocation of licenses as well as energy efficiency-related disputes. In addition to disputes opposing State to private companies, there are disputes between Senelec and its users as well as disputes between operators. The “gas to power” policy and the liberalization of purchase of electricity should increase the scope of disputes with competition-related disputes and involvement of oil and gas companies. Energy disputes are subject to Senegalese Courts, International bodies including ECOWAS Community Court of Justice and ECOWAS Commission, CRSE Disputes settlement body (CRD), and arbitral tribunals. Disputes before CRD and arbitral tribunals will be analyzed below given the importance of those forums in the energy market. Arbitration is generally the choice of foreign and private parties and the CRD is set up to meet the energy market needs and specificities.
Energy Disputes Before CRD
The CRD is an independent body within the CRSE (Energy Sector Regulation Commission) in charge of disputes settlement of energy-related disputes. The CRD is also entitled to pronounce sanctions in case of breach of rules applicable in the energy sector. The CRD is composed of representatives of stakeholders of the energy market and dispute resolution system in Senegal and is chaired by a magistrate. Its members also include representatives of public administration, operators, users, and the Regulation Council. They are subject to confidentiality duties when acting in dispute settlement proceedings and should not receive any instruction from third parties including CRSE when exercising their attributions. Energy disputes before CRD may involve relations between operators, i.e., Senelec, IPPs, the transport operators, and distribution operators. CRD also has exclusive competence to address resources of candidates and bidders regarding disputes in relation to procedures of granting licenses to exercise energy activities. CRD can resolve disputes through conciliation or by exercising jurisdictional power. It is also entitled to take interim measures on disputes relating to granting titles to exercise energy activities. Decisions rendered by CRD are considered as administrative acts. As such, they are subject to recourse before the administrative chamber of the Supreme Court in case of challenges based on legality grounds. Dispute resolution proceedings conducted by the energy regulation bodies are labeled in some African countries, including Chad, as arbitration. However, this qualification could not be appropriate even if the proceedings are conducted independently. Such disqualification is mainly related to the fact that CRD decisions are qualified as administrative acts and are subject to annulment recourse before the Supreme Court. The disqualification is also in line with the common definition of arbitration including under OHADA Arbitration law as a private mechanism of dispute resolution.
Energy Cases Before Arbitral Tribunals
Despite the existence of a specialized settlement dispute body, the involvement of private and foreign companies in the Senegalese energy sector promotes the recourse to arbitration.
Energy arbitrations in Senegal involve both commercial and investment arbitral tribunals. Commercial arbitration is more related to disputes between private parties in Senegal, generally based on Power Purchase Agreement (PPA) agreements. The liberalization of the market should extend the scope of commercial arbitration in Senegal, involving competition disputes between operators and transport disputes between transport operators and third parties using the national interconnected grid. Disputes between producers and funders of electricity projects are also subject to commercial arbitration. Most Independent Power Producers (IPPs) in Senegal are financed by third parties, including private investors and multilateral financial organizations.
Investment arbitration in Senegal involves private companies and the State, mainly occurring when States face investors’ claims regarding their conduct toward projects. This includes cases of changes in law, such as new taxation against energy companies, license-related disputes, and changes due to international commitments in environmental matters.
In practice, commercial and investment arbitrations linked to the same economic operation could be conducted separately. For example, when the State interferes in a project involving its own company acting commercially, the State could be subject to investment arbitration while a commercial arbitration could be initiated against its owned company for distinct legal grounds but on economically linked claims.
Two recent pending cases relating to the Sendou coal plant project near Dakar in Senegal confirm this situation. An investment claim is introduced by Louis Claude Norland Suzor and SBEC Systems Limited against Senegal before an arbitral tribunal under the aegis of the International Centre for Settlement of Investment Disputes (ICSID Case No. ARB/22/1).
The case relates to the Sendou coal plant project in the South of Dakar operated by the Compagnie d’Electricité du Sénégal, in which the claimants hold 50% of shares. While the exact origin of the dispute is not disclosed on the ICSID Website, it is reported in Senegalese press that Mr. Louis Claude Norland Suzor, a shareholder of the Compagnie d’Electricité du Sénégal, was evicted from the project, hence the ICSID arbitration.
At the same time, a commercial case was introduced before an arbitral tribunal under the aegis of the International Chamber of Commerce by the same claimant, i.e., Compagnie d’Electricité du Sénégal against Senelec (ICC Case No. 26162/DDA).
The arbitration is based on the PPA between the disputing parties dated 24 January 2008. The claimant argues that Senegal has breached its contractual agreement under the PPA including its payment obligation, the commitment to provide a letter of guarantee to the claimant, and the connection of the company to the national grid.
Conclusion and Perspectives
Currently, there are sporadic arbitration cases related to the limited liberalization of the energy sector. With reforms such as Law n°2021-31 of July 2021 establishing the Electricity Code and the implementation of the ECOWAS Energy Protocol aiming at liberalizing the energy sector in the Region, one can expect a new dimension in the energy sector’s dispute resolution environment. These measures could result in more disputes from Power Purchase Agreements (PPAs), transportation, management of the interconnected grid, and competition disputes.
ABOUT THE AUTHORS
Mouhamed Kebe is a Managing Partner at Geni & Kebe LLP, a member of DLA Piper Africa. He is admitted to practice in Cote d’Ivoire and Senegal. He acts for states and their entities, as well as for corporate clients in all types of disputes, focusing on energy and natural resources, infrastructure, telecommunications, banking, and finance. He sits also as an arbitrator serving under the rules of ICC, ICSID, UNCITRAL, CCJA. He is a member of the Court of Arbitration of the ICC, a member of the panel of arbitrators of the Common Court of Justice and Arbitration of OHADA, and a member of the panel of arbitrators of the China International Economic and Trade Arbitration Commission (CIETAC).
Aissatou Ndong is a Senior Associate at Geni & Kebe LLP. She is a member of the dispute resolution and finance teams and advises clients on various areas such as corporate, finance, construction, and regulatory issues. Aissatou has been admitted as an Avocat à la Cour in France since 2006 where she practiced prior to her relocation to Senegal, her home country. She holds an LLM in Comparative and International Dispute Resolution from Queen Mary, University of London, as well as a French Master in business law and worked as a visiting lawyer at the arbitration department of Al Tamimi in Abu Dhabi.
Mahamat Atteib is an Associate at Geni & Kebe LLP. His practice is focused on energy and natural resources as well as international arbitration. He assists and represents private and public entities on transactional and advisory matters and before arbitral tribunals. Mahamat is a member of the Panel of arbitrators of the Arbitration, Mediation, and Conciliation Centre (Senegal). He is also a member of the ICC Commission on Arbitration and ADR.
Find more data-backed insights in our 2023 Energy Arbitration Report
