On 3 April 2019, Quadrant Chambers held its Annual Energy Disputes Event. This year, the focus was on the current challenges and risks for the oil and gas industry. The event was hosted by Stephenson Harwood LLP and chaired by Simon Rainey QC. The panel comprised a mixture of esteemed in-house lawyers, solicitors and barristers

The first to speak was Sarah Roach, Senior Counsel at BP. Sarah’s topic was climate change litigation and the dual challenge of capping the global temperature rise whilst meeting the increasing global demand for energy. To put it another way, the challenge of generating more power whilst lowering emissions.

Climate change litigation is a growing area of the law, with most cases having occurred since 2015. Whilst the defendants are mostly States, companies are increasingly being brought into disputes. The most notable recent case is Urgenda Foundation v Kingdom of the Netherlands, which was a successful claim against the Netherlands for failing to mitigate the risks associated with climate change. There is a pipeline of cases pending in Europe which must be monitored to see whether other countries will follow the same approach as the court in Urgenda.

Elizabeth Sullivan, Senior Legal Counsel at Centrica Storage, spoke about the surge of new investment in the North Sea and the legal challenges it poses. The Oil & Gas Authority is trying to encourage new entrants to the market, but there is a legal impact of working with private equity. For example, whereas the contractual allocation of risk has previously often involved uncapped liabilities, private equity investors wish to cap their contractual liabilities.

Overall, the new investment in the North Sea presents both risks and opportunities. Private equity investors are providing investment at a time when other entities are exiting the basin. On the other hand, some parties will attempt to block private equity investors on the basis that they do not have the necessary financial and technical capability.

The third to speak was Sue Millar, Partner at Stephenson Harwood LLP. Sue’s topic was the changing sanctions regime at a time of global political turmoil. Sue focussed on the sanctions affecting Russia, Iran and Venezuela and how they have changed recently, for example since the commencement of the Trump Presidency.

In relation to Russia, the US and EU sanctions regimes were previously aligned, but that is no longer the case. The inventively titled Countering America’s Adversaries Through Sanctions Act provides for a substantial expansion of US sanctions, but is largely not yet in force. In relation to Iran, President Trump has announced that the US will withdraw from the Joint Comprehensive Plan of Action. The EU has responded with an amended EU Blocking Regulation, which has been implemented differently in different Member States. Finally, the US has been increasing its sanctions on Venezuela, but they do not appear to have extra-territorial effect. Thus, the sanctions tapestry continues to change.

Gemma Morgan of Quadrant Chambers spoke about the recent case of Seadrill Ghana Operations Limited v Tullow Ghana Limited [2018] EWHC 1640 (Comm), in which she appeared as junior counsel, and the risks associated with declaring a force majeure event. In particular, the case addresses the situation where there are concurrent causes of the inability to perform, some amounting to force majeure events and some not, as well as reasonable endeavours clauses.

The case establishes that a defence of force majeure is only likely to be available if the force majeure event is the sole cause of the inability to perform. As for reasonable endeavours clauses, whilst economic factors are not irrelevant, it will in general be difficult to establish that it was reasonable not to take steps which were available, albeit uneconomical.

Finally, Chris Smith QC, also of Quadrant Chambers, spoke about complying with contractual notification regimes. He explored the inconsistency in the existing authorities as to what will and will not amount to a condition precedent. For example, imperative language may or may not be sufficient. Similarly, identifying a fixed period of time for compliance may or may not be sufficient. Ultimately, the best advice which can be given is to use the exact words ‘condition precedent’ in the clause if that is the intended effect.

As a whole, the talks demonstrated that the oil and gas industry continues to face perennial challenges such as force majeure provisions and contractual notification regimes, but also faces a host of new challenges from such issues as climate change, private equity investment and changing sanctions regimes.

The seminar was filmed and the video can be viewed at https://www.quadrantchambers.com/seminars/energy2019