Tackling dispute resolution with lessons from India

Nguyen Tuan Phat, head of the Energy and Infrastructure Working Group of the Vietnam International Commercial Mediation Center

The Law on Public-Private Partnership Investment 2020 came into effect on January 1, helping to facilitate open auctions to select investors of renewable energy projects with a total contribution of at least VND500 billion ($21.7 million), except when investing in power transmission systems.

According to Article 96 of the law, if any dispute cannot be settled amicably by the investors and the procuring entity, the investors can bring the case to the competent authorities and the Dispute Settlement Advisory Board.

Article 74 of Decree No.35/2021/ND-CP states that this board is an ad hoc committee that decides by majority votes and is established within five working days from the receipt of the settlement request from an investor.

The board would be divided into three levels. First is central government level: including the chairman – who is the representative of the Ministry of Planning and Investment (MPI), the members who include other representatives of the MPI, the competent authority, the central agency or another agency, and relevant associations and experts if the chairman deems these necessary.

Second is the ministerial level, including the chairman who is also the head of the agency in charge of the managing investor’s selection, along with other members including representatives of relevant agencies, competent authorities, and associations and experts.

Third is the local authority level: the chairman, who is director of the department of planning and investment; with other members including representatives of the department, competent agencies and representatives of specialised agencies under provincial people’s committee, and relevant associations and experts.

However, the Dispute Settlement Advisory Board will not decide how the dispute shall be settled. The board will send a report on the dispute resolution to competent agencies for consideration and issuance of decisions.

In practice, such a board regarding the investor selection of auction of renewable energy projects has yet to be actually established. Therefore, the risks on applicability and feasibility of the board should be appraised diligently by learning from experiences of other countries, such as India, which is implementing auctions for solar energy projects under public-private partnership (PPP) frameworks.

In March last year, Gujarat Urja Vikas Nigam from the state electricity regulation board of Gujarat (GUVNL), invited bidders for the 700MW solar auction in Dholera Solar Park of the state of Gujarat, which was developed by GUVNL.

Last October, ReNew Power, Tata Power, state-run SJVN Ltd., TEQ Green Power, and Vena Energy Renewables Urja were issued a Letter of Award for capacity at prices up to 3.84 US cent per kWh.

However, in last December, a 500MW solar auction by GUVNL yielded a new record low tariff of 2.72 US cent per kWh.

Therefore, GUVNL ordered the Gujarat Electricity Regulatory Commission (GERC) to re-tender the 700MW Dholera auction because, in light of the latest price trends, the financial implication of higher tariffs offered for a period of 25 years would be substantial.

In February, the GERC approved GUVNL’s order to cancel the 700MW solar auction as it appeared to be for the public and common good, with the beneficiary being the public if the lowest tariffs were found.

This was not the first time the state of Gujarat cancelled solar auctions. Citing winning bids that were too high, the state had cancelled its 500MW auction held in March as well as one in December 2018.

Immediately after the GERC approved GUVNL order to cancel the 700MW solar auction, Tata Power, SJVN, and Vena Energy filed an urgent listing with the Appellate Tribunal for Electricity (APTEL).

APTEL had been established by India’s Ministry of Power to hear appeals against the orders of the adjudicating officer or the Central and State Electricity Regulatory Commissions under the Electricity Act 2003.

In February, APTEL heard the case filed under an emergency listing by Tata Power and others and reserved judgment on the matter. Until an interim order is passed, GUVNL cannot go ahead with its intended re-auction of the same project.

From India’s experience, a dispute settlement advisory board of renewable energy projects under the PPP law of Vietnam might face similar issues of authorisation because the board has no power to decide how the dispute shall be settled. Additionally, the board has no decision-making power in how to mediate between the investors and procuring entity.

Currently, Vietnam’s Ministry of Industry and Trade (MoIT) is developing a mechanism to encourage the development of solar power in Vietnam which might not follow the law on PPP. However, following the open auction mechanism under the law is also an option for the MoIT.

In either case, today’s crisis in India could be the future of Vietnam. Therefore, Vietnamese policymakers should prepare for a potential crisis of dispute resolution.