War and Disruption to the International Energy System

At the International Bar Association (IBA) Conference in Copenhagen held from 5-9 October, Glen McLeod co-chaired a session entitled ‘War, Energy Crisis and the Reordering of the Global Energy System: Legal Challenges Arising from Escalating U.S.-Iran Tensions’.

A panel of lawyers from Japan, China, USA, UK and Singapore addressed the topic from legal standpoints which covered National and International legal issues, including how the conflict affects global energy security, sanctions, cross-border investment, contractual risk allocation, maritime transportation and the future direction of the global energy system.

The session examined both the immediate legal consequences of the crisis and a larger question: are we witnessing a structural reordering of the global energy system including the shift towards renewable energy, electrification, critical minerals, battery storage, hydrogen, nuclear power and strategic industrial policy?

The general consensus was that like various recent global disruptive events, such as the Covid pandemic, the invasion of the Ukraine, continuing Middle Eastern and African  conflicts, we are seeing a more unsettled world of short-term disruptions and a longer term reshaping of policy and laws. This includes: short term diminishing implementation of climate change laws and policies; relaxing pro environmental taxes or tax breaks; the resort to force majeure clauses in contracts.

In the longer term the questions will include: whether force majeure clause will be fit for purpose; what will be the effect on marine insurance; will the established international arbitration options be retained; how do we maintain energy security; what will be done to and what is the future of sanctions and tariffs?

The crisis has changed thinking about not only where energy comes from, but also how governments address energy security, renewable energy, critical minerals and strategic autonomy. Investors may increasingly accept higher costs in return for politically secure or ‘friendly’ energy supply chains. It is also possible that the conflict will accelerate investment in renewables, storage and nuclear power as secure controllable energy production assets.

Global markets may not normalise. Energy markets may become increasingly regionalised. Governments have and may continue to become more interventionist in energy markets. If renewable energy and electricity increasingly replace seaborne hydrocarbons, how might global shipping patterns change over the next two decades?

We cannot foresee how all of this will play out. For now, uncertainty and the legal consequences of the conflict will continue to unfurl.

Note: The IBA has a membership of more than 80,000 worldwide. The 2026 Copenhagen conference was attended by over 6,000 people.