Legal update for energy lawyers - August 2022
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Market Insight 05 September 2022 05 September 2022
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UK & Europe
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Energy & Natural Resources
This newsletter provides general information and is not intended to be comprehensive or to provide specific legal advice. Professional advice appropriate to a specific situation should always be sought.
Contents:
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Court overlooks poor drafting and enforces liquidated damages
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Sierra Leone’s parliament passes new arbitration legislation
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New guidance on the National Security and Investment Act 2021
The UK has broadened the sanctions it imposed on Russia in response to the invasion of Ukraine. Previous trade sanctions included prohibitions on the exports of oil refining goods and technology of various kinds. The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulation 2022 also prohibit, among other things, the export of energy-related goods to Russia, regardless of their eventual point of use, and the making available of energy-related goods to a person connected with Russia. In addition, prohibitions on drilling or well testing, for example, are expanded so that these services may not be provided to any oil and gas exploration and production projects in Russia. More
In Vitol SA v Genser Energy Ghana Ltd, the English Commercial Court ordered the defendant to pay Vitol interest under the Late Payment of Commercial Debts (Interest) Act 1998 (‘the Act’), on the basis that the parties’ international propane sales contract was connected with England. This is despite the fact neither party was based in the UK and the propane was to be delivered in Ghana. However, as payments were made in England and Vitol was carrying out relevant parts of its commercial business in London, the court held that these factors amounted to a “significant connection” between the contract and England for the purposes of section 12(1) of the Act, and since the contract was governed by English law, the Act applied. The decision highlights the broad scope of the legislation, which imposes levels of interest that are intended to be punitive rather than compensatory. Where parties would prefer lower levels of interest to apply, they should draft their English law contracts accordingly.
In Buckingham Group Contracting Ltd v Peel L&P Investments and Property Ltd, the English High Court considered a dispute arising from the construction of a manufacturing facility. The parties’ contract included liquidated damages (LDs) provisions allowing deductions to be made from the sums due to the contractor if there were delays, but the contractor argued that these provisions were unclear and therefore unenforceable. Among other things, the schedule of LDs was headed ‘proposal’ and included two lists of deductions that could be made, without it being obvious which applied in this case. The court nevertheless considered the deductions/LDs to be enforceable, since the intentions of the parties were clear enough, given the background facts. The case is a reminder of the pragmatic approach of the English courts to contractual interpretation, but also of the need to draft contracts clearly to avoid litigation.
In ARI v WXJ, the English High Court has ruled that the appointment of an arbitrator may be valid, regardless of whether a binding contract had been concluded. Instead, what is essential is whether there has been a “clear and unconditional communication of acceptance of the appointment by the arbitrator”, and whether such communication has been notified to the other party. Alternatively, it is sufficient for there to be communication of an unconditional willingness by the arbitrator to accept the appointment, and for the appointing party to act on this by communicating the appointment both to the appointee and to the other party. This flexible approach has benefits, but may sometimes lead to arbitrators being appointed without their knowledge, or before fees are agreed.
The UK government has published a Hydrogen Sector Development Action Plan, which builds on its first Hydrogen Strategy of August 2021. The purpose of the Plan is to highlight the nature and scale of opportunities across the hydrogen economy in the UK. It focuses on four key areas - investment, supply chains, jobs and skills, and exports - and sets out the actions in those areas being taken by the government and industry to maximise the benefits from scaling up the UK hydrogen economy. The Plan is not exhaustive, and the government will continue to work with industry, investors and others to monitor events, adding new actions as it becomes clearer how the UK’s hydrogen economy will grow.
Sierra Leone's House of Parliament has passed the Arbitration Act 2022, which now awaits signature by President Julius Maada Bio. The new Act replaces existing legislation (chiefly Chapter 25 of the Laws of Sierra Leone 1960) which was based on the English Arbitration Act 1950. Among other things, the new Act deals with third party funding, allows for the establishment of the Sierra Leone International Arbitration Centre, and implements the country’s obligations under the New York Convention, which it joined in January last year.
The UK government has published Market Guidance Notes relating to The National Security and Investment Act 2021. This allows the government to assess and intervene in investments and other acquisitions of control that may give rise to national security risks. Whilst the Act itself already includes some guidance, the new Market Guidance Notes supplement this by answering questions and providing advice based on the first six months of the statute’s operation. In particular, the Note explains how to avoid common errors on notifications, and how to submit a single notification for multiple acquisitions. It also helps higher education institutions decide whether to make a notification at all.
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