Legal update for energy lawyers - July 2023

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: 

1. Supreme Court to hear landmark legal challenge
2. Oil spills unlikely to constitute continuing nuisance under Supreme Court ruling
3. Representative action can only be brought under CPR 19.8 if the represented class has the "same interest" in the claim
4. Default interest rate found to be penal
5. Significant increase in commercial court cases in arbitration-related applications
6. The new rules of the Saudi Centre for Commercial Arbitration

1. Supreme Court to hear landmark climate legal challenge

The Supreme Court will make a definitive ruling on whether the climate change impact of fossil fuel development in the UK should be considered before granting planning permissions. On 21 June 2023, the Supreme Court in London heard a significant legal challenge that could potentially have far-reaching implications for new fossil fuel projects in the UK. The case, brought on behalf of the Weald Action Group and supported by Friends of the Earth, revolves around Surrey County Council's approval of oil drilling at Horse Hill without taking into account the climate impact of the downstream emissions resulting from the extracted oil. The case is centred on the growing occurrence of omitting "Scope 3" emissions from environmental impact assessments for fossil fuel projects, which the claimants argue disregards the urgent need to address the climate crisis and achieve net-zero targets. 

2. Oil spills unlikely to constitute continuing nuisance under Supreme Court ruling 

The Supreme Court has clarified the law of private nuisance and the limitation of actions in the case of Jalla and another v Shell International Trading and Shipping Co Ltd and another [2023] UKSC 16. The case involved a claim for damage caused by an oil spill off the Nigerian coast. The defendants opposed the claimants' request to amend their claim, arguing that it was outside the limitation period. The key issue was whether the oil spill damage constituted a "continuing nuisance." The Court ruled that it did not, as the oil leak was a one-off event that was promptly rectified. Therefore, the claimants were out of time to amend their claim. The decision reaffirms the requirement for repeated activity or an ongoing state of affairs for a continuing nuisance to exist. 

3. Representative actions can only be brought under CPR 19.8 if the represented class has the "same interest" in the claim 

The High Court recently examined the feasibility of opt-out class action claims under CPR 19.8 in the context of data privacy. The case of Andrew Prismall v Google UK sheds light on the challenges faced by claimants in constructing such claims and the potential avenues of defence available to defendants in representative class actions in English courts. A key issue raised in the case is the requirement to demonstrate that every member of the class has suffered more than minimal loss and damage for the claim to proceed. The court found that a representative action under CPR 19.8 can only be brought if the represented class has the "same interest" in the claim. The court's decision emphasises the need for individualised assessment and the difficulties in establishing a reasonable expectation of privacy and unlawful interference across the entire claimant class. The ruling has implications for future assessments of opt-out claims and highlights the importance of strike-out applications in the early stages of proceedings.

4. Default interest rate found to be penal 

The High Court recently found that a clause imposing a default interest rate of 4% per month was a penalty, as the rate increased by four times the initial 1% rate. The Court clarified in Houssein vs London Credit Limited that the test for whether a default interest rate is enforceable is derived from Cavendish v Makdessi, and whether the rate protected the ‘legitimate interest’ of a lender. The court decided in this case that it did not, for several reasons. These included that the default rate was set without any reference to the borrower or the particular loan; that the same default rate applied to each breach under the agreement; and that a typical default rate would be 3% per month, and there was no justification for it being 4%. However, the court accepted that charging a higher rate on a default is justifiable in certain circumstances, such as where there is an enhanced credit risk. 

5. Significant increase in commercial court cases in arbitration-related applications 

The Commercial Court Report for 2021-2022, published by the Judiciary of England and Wales, reveals a notable increase in arbitration-related applications, demonstrating London's continued prominence as a global hub for international arbitration. Around 25% of claims filed in the Commercial Court pertain to arbitration matters, including challenges to arbitral awards, injunctions related to arbitration, enforcement of awards, and other applications supporting the arbitral process. The report provides statistics on applications made under various sections of the Arbitration Act 1996, such as lack of substantive jurisdiction (s67), serious procedural irregularity (s68), appeals on a point of law (s69), and injunctions under s44. The data shows an increase in challenges under s67 and s68, a slight rise in s69 applications, but a decrease in s44 applications. The report also presents outcomes for these applications, notably revealing low success rates for challenges to arbitral awards, underscoring the court's commitment to upholding the finality of such awards.

6. The new rules of the Saudi Centre for Commercial Arbitration 

The Saudi Centre for Commercial Arbitration has recently introduced an updated set of rules to ensure disputes are resolved more fairly, efficiently, and reducing unnecessary costs and delays. The rules introduce the SCCA Court, which has the power to appoint and remove arbitrators, fix costs, consolidate proceedings, and review awards. The rules now clarify that each party may be represented or assisted by foreign legal practitioners, regardless of the jurisdiction in which they are based or licensed to practice. One significant change from the prior rules is that the new rules permit the SCCA to make public any award, order, decision, or other ruling unless this is objected to by any party before the arbitration has concluded. The SCCA will have the power to anonymise or redact any such decision which is made public.