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Enforcement

How do courts in your jurisdiction resolve competing clauses in multiple contracts relating to a single transaction, lease, licence or concession, with respect to choice of forum, choice of law or mode of dispute resolution?

While the case law in this area is not entirely consistent, the decision of an English court in a situation involving competing dispute resolution or governing law clauses will usually turn on the interpretation of contractual terms.

In relation to competing dispute resolution clauses, the Court of Appeal in Sebastian Holdings Inc v Deutsche Bank AG [2010] EWCA Civ 998 (and endorsed in AmTrust v Trust Risk [2015] EWCA Civ 437) discussed adopting a ‘broad and purposive construction’. The court stated that ‘what is required is a careful and commercially minded construction of the agreements providing for the resolution of disputes’. Similarly, in UBS AG v HSH Nordbank AG [2009] EWCA Civ 585 Lord Walker stated that ‘the parties must be presumed to be acting commercially’. As regards competing governing law clauses, the matter was considered by the High Court in Desarrollo v Kader Holdings [2014] EWHC 1460 (QB) and, again, the question was treated as one of construction.

Whether the approach of the courts will change following the Supreme Court’s call for a more literal contractual interpretation in Arnold v Britton & Ors [2015] UKSC 36 remains to be seen.

Are stepped and split dispute clauses common? Are they enforceable under the law of your jurisdiction?

Stepped clauses for dispute resolution are increasingly common in contracts governed by English law. Stepped clauses will typically require discussions at management or board of director level, followed by mediation and finally litigation or arbitration.

The practical and commercial benefits of such clauses are obvious: they require the parties to attempt to reach settlement at an early stage that, if successful, avoids the costs and delays associated with litigation and arbitration and may also allow parties to preserve their commercial relationship. The Civil Procedure Rules now expect that parties will consider alternative dispute resolution methods before litigating and using a stepped pre-action process is a good way to meet this requirement.

Until the decision in Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm), the English courts had been reluctant to find that prescribed steps such as senior executive negotiations are conditions precedent to commencing litigation or arbitration on the basis that agreements to agree are unenforceable. However, in Emirates Trading the judge held that a time-limited obligation to hold ‘friendly discussions’ to resolve the dispute was enforceable and therefore a condition precedent to the right to arbitrate. Parties who wish to incorporate stepped clauses into their contracts should therefore take care with the drafting to ensure that the agreement is sufficiently certain to be enforceable.

Split clauses are less commonly used in energy contracts and would typically only be found in energy financing documents. A typical clause will specify that the courts of one jurisdiction will have exclusive jurisdiction to resolve any disputes, but then provide that such exclusivity is stipulated solely for the benefit of financing parties, who may, should they wish, bring an action against the borrower before any other court with competent jurisdiction. If suitably drafted, split clauses are generally enforceable as a matter of English law.

How is expert evidence used in your courts? What are the rules on engagement and use of experts?

Independent expert evidence is used to assist the court when a claim involves particular technical or specialist issues about which the court does not have the necessary knowledge. While experts are party-appointed, their primary duty is to help the court and this duty overrides any duty to the instructing party.

An expert will typically give their opinion evidence in the form of a written report and will then be called to give oral evidence at trial. Pursuant to CPR 35.4, no expert report may be served or expert evidence used without the court’s permission. The experts’ written reports will normally stand as evidence in-chief, so the expert does not need to provide oral evidence on the matters set out in their statement. The opposing party can cross-examine the expert, following which the party calling the expert has the opportunity to re-examine that expert. The expert may also be asked questions by the judge.

Since 1 April 2013, the court has been able to order that oral evidence from experts at trial be given concurrently. The court may set an agenda for the taking of expert evidence, or may direct that the parties agree to such an agenda subject to the approval of the court. This is known as ‘hot-tubbing’. Anecdotal evidence suggests that hot-tubbing is not being widely used in practice.

The rules governing the conduct of expert witnesses can be found in CPR 35 and the accompanying Practice Direction. The Courts and Tribunals Judiciary has also published guidance for the instruction of experts in civil claims that should be referred to, together with the relevant court guide, when appointing an expert.

What interim and emergency relief may a court in your jurisdiction grant for energy disputes?

The English courts have wide powers to grant interim and emergency relief, including interim injunctions, freezing injunctions, search orders, specific disclosure, security for costs and payments into court. Usually, English courts will only make orders relating to property within their jurisdiction. However, in exceptional circumstances, the English courts will grant freezing injunctions with extra-territorial or worldwide effect.

The English court may also grant interim relief (typically in the form of freezing injunctions) in aid of legal proceedings anywhere in the world. On 17 July 2014, the European Account Preservation Order (EAPO) Regulation entered into force, creating a new procedure under which a creditor is entitled to freeze monies in any EU bank account held by a debtor up to the value of its debt. The procedure started to be applied by participating member state courts on 18 January 2017. The UK government has not opted into the Regulation and currently EAPO is not an alternative to seeking a freezing injunction in England. However, account holders and companies operating in participating member states will still be affected by the Regulation in situations where an application for an EAPO is made by a creditor in a participating member state against the bank account of an English entity that is located in another member state.

What is the enforcement process for foreign judgments and foreign arbitral awards in energy disputes in your jurisdiction?

Foreign judgments

Broadly speaking there are four regimes for enforcing foreign judgments in England and Wales:

  • the UK regime covers judgments from Scotland and Northern Ireland;
  • the European regime covers judgments from EU and certain European Free Trade Area countries;
  • the statutory regime covers judgments from most commonwealth countries; and
  • the common law regime covers judgments from other countries, such as the USA.

The regime under which the foreign judgment falls will determine the ease or difficulty of enforcement, in addition to the types of defence open to the party against which the judgment has been awarded. However, it remains to be seen how the UK’s withdrawal from the EU influences the manner in which judgments from the EU and European free trade areas are implemented.

Foreign arbitral awards

The UK is a party to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) meaning that courts in England and Wales will recognise and enforce arbitral awards made in the territory of another contracting state as if they were a UK award. Arbitration proceedings in England and Wales are governed by the Arbitration Act 1996. The procedure for enforcement is largely the same as for domestic awards.

Where the New York Convention does not apply, foreign awards may be enforceable under the Geneva Convention, the Foreign Judgments (Reciprocal Enforcement) Ordinance (mainly applicable to former Commonwealth nations) or common law rules.

Alternative dispute resolution

Are there any arbitration institutions that specifically administer energy disputes in your jurisdiction?

At present, there is no arbitral institution in England or Wales dedicated to energy disputes. However, the London Court of International Arbitration and the London Maritime Arbitrators’ Association administer a significant number of energy and marine-related arbitrations, both for UK matters and internationally.

Is there any general preference for litigation over arbitration or vice versa in the energy sector in your jurisdiction?

The choice of dispute resolution method will very much depend on the subject matter of the contract and surrounding circumstances. Where there are concerns with regard to international enforcement or confidentiality, arbitration will generally be selected. However, the English courts remain very popular with both domestic and international players in the energy sector since they offer a relatively quick, cost-efficient and predictable forum for dispute resolution.

Are statements made in settlement discussions (including mediation) confidential, discoverable or without prejudice?

Negotiations, whether written or oral, which are genuinely aimed at settlement are generally subject to without prejudice privilege, meaning they are excluded from evidence. This is to encourage parties to ‘fully and frankly put their cards on the table’ (Cutts v Head [1984] CH 290, 306 (CA)). If there is a challenge to a without prejudice claim, the court will look to the substance rather than the form of the disputed document. Accordingly, labelling a document ‘without prejudice’ will not necessarily bring it within the without prejudice privilege rule.

Privacy and privilege

Are there any data protection, trade secret or other privacy issues for the purposes of e-disclosure/e-discovery in a proceeding?

The Data Protection Act 1998 (DPA) contains mechanisms that restrict the circumstances and means by which an organisation can disclose personal data to third parties. However, the English Court of Appeal (Durham County Council v Dunn [2012] EWCA Civ 1654) has established that these provisions may effectively be overridden by obligations to disclose information during the course of proceedings under the Civil Procedure Rules.

Further, the General Data Protection Regulation (GDPR), which came into force in May 2018 (and effectively replaced the DPA) is likely to impact e-disclosure in proceedings before English courts.

The concept of ‘personal data’ is very wide under EU data protection laws and this remains the case under the GDPR. Personal data encompasses any information relating to an identified or identifiable natural person. Given the wide scope of personal data and processing activities, data protection may touch disclosure at various stages. For disclosure in English civil litigation, the main risk, from a data protection perspective, is the disclosure of irrelevant personal data. That is, personal data that is not within the scope of the disclosure ordered by the court. This risk can be mitigated by either redaction or by taking steps to closely control sources of data captured as part of the disclosure exercise.

In addition, the general legal and regulatory obligations described above should always be borne in mind.

What are the rules in your jurisdiction regarding attorney-client privilege and work product privileges?

Under English law there are two principal types of privilege: legal advice privilege and litigation privilege.

Guidance from Three Rivers [2005] 1 AC 610 states that legal advice privilege extends to communications (both written and oral) between a client and a lawyer (or an intermediate agent of either) that is made in confidence for the purpose of giving or obtaining legal advice or assistance and whether or not in the context of litigation. Third-party communications (lawyer and a third party or a client and a third party) are not covered by legal advice privilege.

For the purpose of legal advice privilege, the word ‘client’ is narrowly construed to apply to only those individuals within the company who are authorised to instruct lawyers and to receive legal advice on the entity’s behalf on the matter in question. The narrow interpretation of ‘client’ was most recently applied in the case of The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch), where it was confirmed that ‘client’ only extended to those individuals who are authorised to seek and obtain legal advice on behalf of the organisation and does not include those who are authorised only to provide information to the lawyers. Where a third party (or an employee who is not part of the client) provides information to the lawyer, this will not be privileged outside the litigation context. In Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006, the Court of Appeal indicated that had it been open to it to depart from Three Rivers it would have done so. However, it considered it properly a matter for the Supreme Court.

Litigation privilege

Litigation privilege covers confidential oral and written communication between a client or lawyer on the one hand and third parties on the other (or other documents created by or on behalf of the client or his lawyer) that come into existence once litigation is in contemplation or has commenced for the dominant purpose of use in the litigation.

The courts will look at the dominant purpose of the communication or document. Where there is a dual purpose, it is necessary to identify the dominant purpose. It is not sufficient if the relevant litigation purpose is a secondary or equal purpose. In addition, litigation must have commenced or be contemplated; it must be more than a ‘mere possibility’ or even a distinct possibility that sooner or later someone might make a claim. Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006 is a case involving various communications connected with an internal investigation (including notes of interviews with employees and ex-employees). At first instance, the High Court held that litigation privilege did not apply to the documents. Andrews J held that it could not be said that litigation was in contemplation when the company initiated internal investigations. In any event, even if litigation was in contemplation, the documents were not created for the dominant purpose of use in the litigation.

On 5 September 2018, the Court of Appeal reversed the High Court’s decision in relation to litigation privilege. The court found that the judge had been wrong ‘to suggest a general principle that litigation privilege cannot attach until either a defendant knows the full details of what is likely to be unearthed or a decision to prosecute has been taken’. On the facts, litigation was in reasonable contemplation when the company initiated its internal investigation and certainly when it received a letter from the SFO. This was so notwithstanding that the letter expressly stated that the SFO was not carrying out a criminal investigation at that stage, but only made reference to ‘recent intelligence and media reports concerning allegations of corruption and wrongdoing by ENRC’ and urged ENRC to consider carefully the SFO’s 21 July 2009 Self-Reporting Guidelines while undertaking its internal investigations. The judgment provides useful guidance as to when litigation will be ‘in contemplation’ for the purposes of litigation privilege.

Further, the court held that the fact that ENRC’s solicitors prepared certain documents with the ultimate intention of showing those documents to the opposing party does not automatically deprive the preparatory legal work of litigation privilege. There may be many circumstances where solicitors spend much time fine-tuning a response to a claim to give their client the best chance of reaching an early settlement. The discussions surrounding the drafting of such a letter would be as much covered by litigation privilege as any other work done in preparing to defend the claim. The Court of Appeals’ observations in this regard are noteworthy. Legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.

Jurisdiction

Must some energy disputes, as a matter of jurisdiction, first be heard before an administrative agency?

It is not usual for energy disputes to be first heard before an administrative agency. One exception, however, is that the OGA may intervene, or be requested to intervene, in disputes between infrastructure owners and third parties relating to access to upstream oil and gas infrastructure (see question 22). The OGA has also been granted dispute resolution powers under the Energy Act 2016.