Herbert Smith Freehills has achieved a significant success in a trial of preliminary issues in the English High Court acting on behalf of BP, Talisman Sinopec, Eni and JX Nippon (the "Defendants") in a claim brought by Scottish Power. Scottish Power UK Plc v BP Exploration Operating Company Limited and others  EWHC 2658 (Comm).
The trial concerned the interpretation of long term gas sales agreements (the "GSAs"). Under the GSAs, the Defendants sold natural gas to Scottish Power from the Andrew Field, an oil and gas field in the North Sea. Between May 2011 and December 2014 the Andrew Field was shut in and the Defendants delivered no natural gas to Scottish Power. Scottish Power argued that, as a result of this outage, the Defendants were in breach of the GSAs. Scottish Power sought very significant damages for breach of contract.
Five preliminary issues were decided at trial. These included issues as to the interpretation of the definition of the "Standard of a Reasonable and Prudent Operator" in the GSAs and whether a notification requirement was a condition precedent to a claim made by the Defendants for force majeure.
One further key issue was whether Scottish Power could claim damages as a result of the Defendants' failure to deliver natural gas. The Defendants argued that the GSAs contained a contractual remedy of "Default Gas" which applied in the event of underdelivery of gas.
Leggatt J found for the Defendants on this key issue. The judge dismissed Scottish Power's claim for damages. Scottish Power's remedy is therefore limited to Default Gas for the period of the outage. Following detailed consideration of the relevant authorities, the judge also decided in the Defendants' favour that non-compliance with a notification requirement did not cause the Defendants' force majeure claim to fail. A copy of the judgment can be found here.
This decision is of particular interest for its analysis of the interplay between a contractual remedy and a claim for damages and also for Leggatt J's findings on the circumstances in which compliance with a contractual notification requirement is a condition precedent to a force majeure claim.
Leggatt J granted Scottish Power permission to appeal in relation to the Default Gas issue.