Legal Update for Energy Lawyers - September 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. SFO drops ENRC probe after 10 years
2. Cautionary tale for termination notices in the TCC
3. Mixed month for UK windfarms
4. UK raises possibility of withdrawal from ‘outdated’ Energy Charter Treaty 
5. The Hague Judgments Convention 
6. Law Commission recommends changes to the Arbitration Act 1996
7. English Commercial Court Refuses ASI Relief in Support of an Arbitration Agreement Seated Outside the Jurisdiction

1. SFO drops ENRC probe after 10 years

In August 2023, the Serious Fraud Office (SFO) announced that it was closing its decade long case against the Kazakh mining company, Eurasian Natural Resources Corporation (ENRC), on the basis of “insufficient admissible evidence to prosecute”. An internal SFO investigation that “examine[d] the alleged conduct and exhausted all reasonable lines of enquiry” reached the conclusion that the case should be closed. No charges were brought against ENRC as a result of the investigation, which was opened in 2013, and focused primarily on suspected bribe payments between ENRC and the Democratic Republic of Congo in respect of mining contracts between 2009 and 2012. 

2. Cautionary tale for termination notices in the TCC

In Topalsson GmbH v Rolls-Royce Motor Cars Ltd [2023] EWHC 1765 (TCC), the Technology and Construction Court held that the defendant (Rolls-Royce) had validly terminated a software agreement with the claimant (Topalsson) following two attempts at a termination notice. Rolls-Royce's first termination notice, which had been rejected by Topalsson, was found to be erroneous and invalid because it relied on milestone dates that had been replaced in a later plan. However, the court found Rolls-Royce’s second termination notice was effective. This notice used the correct, legally binding milestone dates to show that the late and missed milestones amounted to a material breach. This in turn allowed Rolls-Royce to terminate under the relevant provision in the software agreement. The case once against highlights the importance of ensuring the accuracy of termination notices if they are to be valid.

3. Mixed month for UK windfarms

No new offshore windfarms will be developed in the UK resulting from the latest government renewables auction, which received a total of zero offshore windfarm bids. The industry had warned that the auction’s maximum price was set too low following steep increases to the price of materials for building and installing wind turbines due to the energy crisis. Ministers failed to respond to these warnings and arguably did not fully grasp the scale of the cost increases faced by offshore wind developers. This impacts the UK’s plan to triple Britain’s offshore wind capacity to 50GW by 2030, with Greenpeace labelling it the “biggest disaster for clean energy policy in the last eight years”.

In a more positive turn, the Government has announced minor amendments to the National Planning Policy Framework that aim to encourage onshore wind farms to be built. These changes reverse some of the rigidity of the planning tests established in 2015. The amendments:

1. Allow potential windfarm sites to be identified in more targeted and efficient ways, rather than solely through the local authority's development plan.
2. Allow planning authorities to grant permissions if local residents have been consulted (even if some object) and support can be shown through direct benefits to the local area, such as from cheaper energy bills.

4.  UK raises possibility of withdrawal from ‘outdated’ Energy Charter Treaty 

The UK government announced that it will consider withdrawing the UK's membership of the Energy Charter Treaty (ECT) unless member states reach agreement on modernised terms by November 2023. The current treaty was described by the Minister of State for Energy Security and Net Zero, Graham Stuart, as “outdated” and providing no support for countries like the UK which are looking to transition to cleaner energy sources. Although an agreement on a modernised text of the ECT was reached by contracting parties in June 2022, the vote to adopt it was postponed. Negotiations for modernisation have since stalled due to difficulties finding a common position between the EU and member states. The government’s announcement states that it will continue to consider stakeholder views from business, civil society, and Parliament to inform its approach regarding the ECT.

5. The Hague Judgments Convention 

The Hague Judgments Convention, aimed at establishing a global framework for enforcing foreign court judgments, has officially entered into force, albeit currently binding only EU member states and Ukraine. This long-awaited convention, adopted in 2019 by the Hague Conference on Private International Law (HCCH), sets out uniform rules for recognising and enforcing civil or commercial judgments across borders. Notably, it excludes judgments related to sovereignty, public policy, and various other categories, leaving room for potential challenges to enforcement. The HCCH believes that the convention has the potential to reduce costs, enhance access to justice, and facilitate international trade. However, its impact will depend on widespread ratification, which has been historically slow for similar conventions. 

6. Law Commission recommends changes to the Arbitration Act 1996

The Law Commission published its recommendations of changes to the Arbitration Act 1996 (the Act) on 5 September 2023 following its consultation. The consultation largely approved of the Act in its current form, and recommended the following reforms:

1. Codifying the duty of arbitrators to disclose circumstances that reasonably raise doubts as to their impartiality;
2. Preventing a party which makes a section 67 challenge (i.e. a challenge to the jurisdiction of the tribunal), and which participated in the relevant arbitration, from submitting new grounds of objection or evidence to the court;
3. Strengthening arbitrator immunity such that arbitrators should not face liability for resigning unless it was unreasonable;
4. Introducing a simplified rule that the arbitration agreement is governed by the law of the seat unless the parties expressly agree otherwise; and
5. Introducing a power for arbitrators to make an arbitral award on a summary basis.

No changes have been recommended for codifying confidentiality rules, prohibiting discrimination in the appointment of arbitrators or codifying a duty of independence. 

7. English Commercial Court Refuses ASI Relief in Support of an Arbitration Agreement Seated Outside the Jurisdiction

On 21 August 2023, the Commercial Court handed down judgment in SQD v QYP. The judgment concerned SQD’s application to the Commercial Court for an anti-suit injunction (ASI) and anti-enforcement injunction (AEI) against QYP. SQD and QYP had entered into a contract relating to an overseas project. A dispute arose under the contract, and QYP terminated. The contract was governed by English law, but provided for ICC arbitration seated in Paris. QYP commenced court proceedings in its own country (not disclosed in the judgment), seeking payment of the sums owed to it under the contract. SQD applied to the Commercial Court for interim ASI and AEI relief. 

The Commercial Court considered whether it was appropriate to grant an ASI, given that the seat of the arbitration was not in the jurisdiction. It ultimately refused to do so on the basis that the seat of the arbitration was in Paris. The English Court was not the appropriate forum. The case highlights the limits of relying on the English Court for injunctive relief in respect of arbitrations with a foreign seat.