When Calum Crighton, my Partner and Head of our Oil & Gas Team, and I were invited to take part in the panel discussion of the ‘Case Law Jukebox’ at the recent OGUK Annual Conference, I was perhaps a bit surprised to hear one of the questions asked was whether or not we were going to be wearing our Elvis Presley suits…
For those of you who didn’t manage to attend, the innovative format adopted by OGUK to this year’s virtual conference was to ask a number of leading law firms in the sector to record video blogs on key cases affecting the industry in the last year or so; then conference delegates voted on those that they wanted to be shown during the conference; with myself and other ‘jukebox’ panel members providing some ‘live’ industry insight to themes arising.
This blog contains some key conclusions we take from the cases, and how they may impact us in practical terms working in the energy sector:
- The Commercial Courts will continue to interpret commercial contracts, particularly those between sophisticated, commercially astute, contracting parties, such as companies operating in the energy sector, on a strict (likely narrow) basis. This is encouraging, because it gives some degree of certainty that the Court will focus on the natural meaning of the words of a contract; and avoid having to look behind the factual context in which the contract was framed (which can lead to costly disputes in court or arbitration). Only where there is ambiguity, will the Courts consider applying commercial common sense; and it will do so in the context of the whole wording of the contracts.
- Where the words of a contract are clear, even where that results in what might be seen as a subjectively harsh outcome for one party; that is how it will be interpreted. Therefore, it may seem obvious, but it is critical that, when contracts are being drafted, they are properly prepared to reflect what is intended by the parties, as the Court is unlikely to entertain arguments (except in exceptional circumstances) of other intentions not apparent from within the confines of the contract, such as those considered in Braganza v BP Shipping; or similar qualifications relating to mutual trust and loyalty which are said to exist in long term ‘relational contracts’.
- Which means that, as parties become ever more sophisticated, particularly as many companies are going through energy transition into offshore renewables, they ought to consider using bespoke contractual provisions, rather than blind reliance on boilerplate provisions and standard form contracts such as LOGIC or FIDIC contracts – but that needs to be done with extra care because neither template was designed with offshore renewables in mind. For further insight, see our previous blog.
- The issue of decommissioning liabilities remains a ‘hot topic’ for both transactional lawyers (in relation to sales and assignments), but also for litigation; and it is apparent that there is a need for precision relating to such offshore liabilities in considering the terms of section 29 notices; whereas no such provisions exist in relation to onshore facilities. For insight on some practical issues arising, see our previous blog.
- Therefore, external lawyers like myself and my colleagues working in the sector require to be innovative and creative; and responsive to the needs of our clients, whether that is in supporting in-house counsel or advising companies directly; and thereby making it more likely that, if we require to resort to litigation and arbitration (usually something all parties will want to avoid) they will be successful.
Click here for detailed summaries of the “Top 5’ on the OGUK ‘Caselaw Jukebox’.
As for the opening question….if only my Elvis suit wasn’t at the dry cleaners….
If you would like to discuss any issues arising, please contact Iain Clark or Calum Crighton as follows:
Iain Clark, Solicitor Advocate, Partner,
Litigation & Dispute Resolution Team
Phone: +44 (0)7908 022 304 OR +44 (0)141 530 2025
Calum Crighton, Partner,
Head of Oil & Gas Team
Phone: +44 (0)7841 920101 OR +44 (0)1224 011687
The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.