The Taiwanese government is pushing for the Non-Nuclear Homeland policy, aiming to raise renewable energy to 20% of the total power supply by 2025, and the development of offshore wind farms is in full swing, progressing from the Phase 1, the Phase 2, to the Phase 3 Zonal Development, which currently completed the stage 1 developer selection process. During such progress, apart from following the Directions of Application for Offshore Wind Zonal Development or the Directions of Grid Capacity Allocation for Offshore Wind Energy Zonal Development (hereinafter referred to as "Directions of Grid Capacity Allocation ") issued by the Bureau of Energy(hereinafter referred to as "BOE"), the Ministry of Economic Affairs(hereinafter referred to as "MOEA"), the selected developers are also required to sign the Offshore Wind Power Zonal Development Contract^[1] (hereinafter referred to as "the Zonal Development Contract" with the BOE, which is used by the government to regulate various issues involved in the wind farm development and set forth many key rights and obligations. One of the developers of the Phase 1, Fuhai Wind Farm Corp., Ltd., had even been involved in disputes with the BOE over a breach of the Demonstration Contract^[2]. The importance of such a contract is self-evident. Given any "contract" signed between two companies, the contract is valid as long as both parties reach a consensus and sign, then both parties shall follow the contract terms to perform their duties. However, things get complicated if one of the contracting parties is a government agency. It is then necessary to consider whether the government agency is legally required to establish the contract and whether the law authorizes its actions. What is the legal ground of the administrative contract between the government and the developer? Are the terms of the administrative contract proper and reasonable? Such fundamental issues require more attention from businesses as they eagerly attempt to be selected for zonal development

Legal Ground of Administrative Contracts

Taking the Directions of Grid Capacity Allocation as an example, there is already a potential controversy over whether it is a Administrative Rule^[3] or a Legal Order^[4]. By definition, Administrative Rules regulate only the "internal" affairs and operation of the agency itself and do not require the authorization of any law. On the contrary, Legal Orders involve changes in the "external" legal relationships. Under the Administrative Procedure Act, the agency must specify the authorization conferred by laws and avoid exceeding the scope of legal authorization or the purpose of the legislation. Let's take a closer look at the Directions of Grid Capacity Allocation. We can see that the prerequisites for capacity acquisition (environmental impact assessments, letters of site recordation from the MOEA), the evaluation items to determine the performance capability, and the selected applicants' obligation of signing administrative contracts, etc., are all included. These terms seem to involve changes in the legal relationship between the government and businesses. If they are indeed classified as Legal Order, lacking the authority of law may invalidate all of them. Under such situations, what will happen to the administrative contracts that are based on these potentially invalid directions? In the aforementioned lawsuit against the penalty in the Demonstration Contract, the parties did not dispute this premise or the validity of the contract during the lawsuit, which shows that this issue has not been fully addressed yet, nor has sufficient attention been directed to such matter. The validity of the contract is a fundamental issue for subsequent claims. As controversies emerge and the government continues applying the same administrative contract model to define the relationship between the government and businesses in the following Transition Round and Zonal Development, the importance of the legal ground of the administrative contracts is further highlighted.

The reasonableness and predictability of administrative contract terms

Ørsted's decision not to enter the Zonal Development Round auction left a lasting shockwave in the industry ^[5]. The Asia Pacific director of Ørsted delicately stated that under the current regulation's limitations, they couldn't make the projects investable at this stage. If we examine the Zonal Development Contract^[6] in terms of the Industrial Relevance Program , the contract covers the current and later versions to be published by the BOE^[7], meaning that the government can alter the scope of contractual obligations at any time by simply updating the Industrial Relenvence Program. Such disadvantages would never occur in any type of business contract where the parties are not allowed to unilaterally change the contractual terms unless otherwise agreed upon. Consequently, the scope of the Zonal Development Contract's obligations became much more unpredictable.

Conclusion

Taiwan's unique wind farms have brought immense business opportunities to the island. However, as the government aspires to promote more green power policies, legal controversies spring up like mushrooms after rain. One hopes that our perspectives will lead to more discussions on the subject. As the industry blooms, the importance of the rule of law should also be taken into account, safeguarding the rights of the private sector.

(The article was originally published in the 2023.3.14 Energy OMNI [Expert's Eye] article series.)

1. Directions of Grid Capacity Allocation for Offshore Wind Energy Zonal Development, Article 17: "The selected applicant shall apply for the execution of the administrative contract with the Ministry (MOEA) within the period specified by the Ministry by submitting the selection notification of capacity allocation and proof of payment of performance bond. " (return)
2. Taipei High Administrative Court 107 Su-Zi No.763 Judgment (return)
3. Administrative Procedure Act, Article 159: (return)
   • The term "administrative rules" used in this Act means generalized and abstract provisions issued by a superior authority to its lower units or by a superior officer to his subordinate officers, by virtue of its or his powers, for the purpose of regulating the internal order and operation of the authority, with no direct external effects as legal norms.
   • Administrative rules include the following provisions:
   1. ) General provisions relating to the organization, allotment of affairs, the manner in which business is conducted, personnel management, and other internal matters of the authority; and
   2. ) Provisions of an interpretation nature and guidelines on the exercise of discretion, issued to assist lower units or subordinate officers in making unified interpretations of laws and regulations, finding the facts, and exercising the power of discretion.
4. Administrative Procedure Act, Article 150: (return) 
   • The term "legal order" used in this Act means an abstract prescription with external legal effects, established by an administrative authority as enabled by law in respect of general matters and applicable to a multiple number of non-specified persons.
   • A legal order shall specify the authority conferred by law based on which it is established, and shall not transgress the scope of such authority or divert from the legislative purposes of the enabling law.
5. (https://ec.ltn.com.tw/article/breakingnews/4075197) Ørsted Refuses to Bid for Stage 3 Development of Offshore Wind, Calls It "A Difficult Decision"; Liberty Times Financial News, 2022/09/30. (return)
6. The Bureau of Energy published the version on September 26, 2022. (return)
7. Offshore Wind Power Zonal Development Contract Draft (Phase 1: completion and connection from 2026 to 2027), Article 7, Item 2: The Industrial Relevance Program of the aforementioned term shall not violate the Industrial Relevance Policy for Offshore Wind Power Zonal Development (Phase 1: applicable to those completed or to be connected from 2026 to 2027) announced by Party A on December 6, 2021 (or versions subsequently published); however, if Party A agrees to change the program under Article 12, Section 2 of this contract, Party B shall perform it following the change. (return)