Legal update for energy lawyers - October 2022

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:

• UK starts 33rd round of licensing for oil and gas exploration in the North Sea
• When contracts are void for common mistake
• New Bill to tackle illicit finance
• Enforcement of English judgments in Dubai made easier 
• French Supreme Court rules on law governing an arbitration agreement
• UK government reviews net zero target
• Consultation launched on reform of English Arbitration Act

1. UK starts 33rd round of licensing for oil and gas exploration in the North Sea

The UK’s North Sea Transition Authority has launched the 33rd round of licensing for oil and gas exploration in the North Sea. Priority will be given to four cluster areas in the southern North Sea that contain known hydrocarbons and are near existing infrastructure. In all, 898 North Sea blocks and part-blocks are affected, and the process could result in more than a hundred licenses being granted. The application process runs until 2pm on 12 January, and the first licences are expected to be issued in the second quarter of 2023. The government’s aim is to improve the UK’s energy security, bring down energy prices in the medium term, and create skilled jobs. However, environmental groups such as Greenpeace have described the licensing round as “possibly unlawful”, adding that they “will be carefully examining opportunities to take action”. Read more

2. When contracts are void for common mistake

In John Lobb SAS v John Lobb Ltd, the English High Court has clarified the conditions that must be met for a contract to be void for common mistake. Both parties must have assumed the existence of a state of affairs, and neither party should have warranted that the state of affairs exists. In addition, the non-existence of the state of affairs must not be attributable to the fault of either party, and must render performance of the contract impossible. Finally, the state of affairs may concern the consideration to be provided under the contract or the circumstances necessary for its performance. These conditions had been set out previously by the Court of Appeal, but there were doubts as to whether they were generally applicable. The High Court has confirmed that they are, provided the point about warranties is understood broadly, being essentially about “whether the relevant contract allocates to one of the parties the risk of the assumed state of affairs turning out to be wrong.” The point about impossibility should also be interpreted widely, so that it covers both literal impossibility and situations where the mistake “renders the subject matter of the contract essentially and radically different from what it was believed to be.” Claims based on common mistake are rarely made, but the judgment brings welcome clarity to a classic doctrine of English law.

3. New Bill to tackle illicit finance

The UK government has introduced into parliament the Economic Crime and Corporate Transparency Bill.  Its main aims are to deliver reforms to Companies House, to prevent the abuse of limited partnerships, and to give businesses more confidence to share information to tackle money laundering and other economic crime. In addition, it aims to create new intelligence gathering powers for law enforcement and additional powers to seize and recover suspected criminal cryptoassets. These assets could be the proceeds of crime, or they could be associated with illicit activity such as money laundering, fraud and ransomware attacks. The new powers to recover cryptoassets will be created by amending both criminal confiscation powers in Parts 2, 3 and 4 of the Proceeds of Crime Act 2002 and civil recovery powers in Part 5 of the same Act.   

4. Enforcement of English judgments in Dubai made easier

The UAE’s Ministry of Justice has sent a formal letter to the Dubai courts that should make it easier to enforce English judgments there. The letter follows an English High Court decision in Lenkor Energy Trading DMCC v Puri (2020), which allowed the enforcement in England of a Dubai judgment concerning a dishonoured cheque. The Ministry’s action is a significant development, given that there is no treaty for the mutual recognition and enforcement of court judgments between the two countries. It is hoped that the letter will lead to English judgments becoming easier to enforce in the UAE generally, as well as in Dubai itself. Read more

5. French Supreme Court rules on law governing an arbitration agreement

In Kabab-Ji SAL v. Kout Food Group, the French Supreme Court (Cour de Cassation) has ruled that arbitration clauses are governed by the law of the seat of the arbitration, not the law chosen by the parties to govern the agreement as a whole. This is already established French law, and means in practice that the validity and effectiveness of an arbitration clause, and questions regarding its transferability or extension to non-signatories, are all governed by the laws of France if the arbitration is seated there. The approach by the Cour de Cassation contrasts with the UK Supreme Court’s earlier decision in the same matter which confirmed that in the absence of express agreement, under English law, a choice of law clause governing the whole of the contract will extend to the law governing the validity of the arbitration agreement. The fact that the parties had chosen Paris as the seat of the arbitration was not enough to determine the choice of law. The decision by France’s highest court brings into focus the divergences between the two jurisdictions and is another reminder that when parties choose arbitration, or any other form of dispute resolution, it is always best to state explicitly what law governs the clause in question, and not the agreement as a whole.

6. UK government reviews net zero target

The UK government has commissioned a review of its net zero target, looking at whether it places too big a burden on businesses and consumers. The review will result in a report due to be published by the end of the year. In addition to consulting with a range of investors, industry representatives, experts and other stakeholders, the government’s Department for Business, Energy and Industrial Strategy has recently issued a broad call for evidence, “giving the general public, businesses and other organisations a chance to share their views on the whole economy transition, maximising net zero growth opportunities, the challenges to address in this review and the future of net zero.” It remains to be seen whether the government’s commitment to achieving net zero by 2050 survives political developments in the UK, although the Chair of the review, Chris Skidmore MP, has emphasised that this “is a moment not to recoil from our climate commitments… but to make the positive case for change, through creating new incentives to change". 

7. Consultation launched on reform of English Arbitration Act

In a long-awaited consultation paper, the Law Commission has recommended making a limited number of changes to the English Arbitration Act 1996. These promote the speedy resolution of issues without merit, clarify the law on arbitrators’ impartiality, and strengthen their immunity, which should support the finality of awards. Among the more minor changes proposed is a measure promoting greater diversity among arbitrators. However, no changes are proposed regarding other hot topics such as third party funding - an indication, perhaps, of how well the 1996 Act has stood the test of time. Read more