In March 2015, PV Crystalox GmbH, a German manufacturer of solar wafers, requested arbitration under ICC rules to enforce a long-term supply agreement with Neo Solar Power Corp, a Taiwanese photovoltaic company. Neo Solar Power Corp had ceased to procure wafers under the contract after prices for silicon wafers plunged in the wake of the financial crisis.

Counsel for the defendant retained Tomas Haug, Director in NERA’s Berlin office, to submit an expert report to the tribunal to determine whether the drop in silicon wafer prices was due to an unforeseeable change in circumstance and to determine the fair market value of the contract under the new market environment. Mr. Haug's team included NERA experts Bastian Gottschling and Dominik Huebler as well as Petra Loerke, Florian Mockel and Philipp Kroeger. The team’s analysis included an in-depth review of the developments that took place in the markets for silicon wafers and photovoltaic cells between the conclusion of the supply agreement and the request for arbitration.

The report showed that the confluence and effect of simultaneous demand and supply shocks caused by a variety of factors, such as the financial crisis, the withdrawal of government subsidies, and a rapid expansion of photovoltaic generation capacity in China and later Japan, were indeed unforeseeable at the time the parties concluded the supply agreement. Consequently, Mr. Haug devised a price reset that would distribute the losses from the new market environment appropriately between the parties.

The tribunal ruled that the defendant had to pay a total of US$28.1 million, plus interest, for the outstanding 22.9 million wafers. This amounts to a price of US$1.23 per wafer, much below the original contract price and close to Mr. Haug’s proposed price reset.

The outcome of this case reinforces the view that the developments taking place in the various supply markets for solar cells in the wake of the financial crisis were indeed unforeseeable. While this had likely been recognized by many other suppliers who cancelled or renegotiated their contracts at the time, the ruling confirms that the new market environment is legally recognized.

More information on this case can be found here.