Questions answered in Issue 9 of the Energy & Natural Resources Case Law Update

To what extent can parties rely on force majeure clauses when considering non-contractual performance?

A strict refusal to accept non-contractual performance may not always be defensible where the contract defines a force majeure event by reference to an obligation to use "reasonable endeavours", or similar wording. Accordingly, a party was not able to rely on a force majeure clause to refuse payment in Euros instead of US Dollars as stipulated by the contract. The purpose of the payment obligation was to ensure that the recipient would ultimately have the right quantity of dollars in its account at the right time, and payment in Euros with a subsequent conversion to dollars would have achieved this. MUR Shipping BV v RTI Ltd

 

In what circumstances will claims against a parent company for the actions of its foreign subsidiary be stayed or struck out?

The Court of Appeal has overturned a first instance decision in which claims against a parent company for the actions of its subsidiary in Brazil were struck out as an abuse of process. According to the Court of Appeal: (1) the judge was wrong to focus on the manageability of the claim when considering whether bringing the claim was an abuse of process; and (2) the inadequacies of multiple related and parallel Brazilian proceedings meant there was nevertheless a real risk that the Claimants would be unable to obtain justice in Brazil, and therefore the existence of the Brazilian proceedings could not justify a stay or striking out of the English claims. Municipio de Mariana and others v BHP Group (UK) Ltd (formerly BHP Group plc) and another

 

What is required of a party in order to validly exercise an option to arbitrate?

Parties with the benefit of an option to arbitrate must meet a relatively low threshold requirement to validly refer a dispute to arbitration. The option must be exercised by an unequivocal statement that is irrevocable. However, it is not necessary to exercise an arbitration option by commencing an arbitration if it is not commercially sensible to do so (given that the invoking party might be a party asserting it has no liability). On the facts, the option to refer a dispute to arbitration had been validly exercised by the filing, in Nigerian Court proceedings, of a Notice of Appeal contending unequivocally that the Nigerian Court should decline jurisdiction and that the dispute in question should be referred to arbitration. Aiteo Eastern E&P Company Limited v Shell Western and Trading Limited

 

How will the Court determine the scope of an express contractual duty of good faith?

The Court of Appeal has provided useful guidance on how the courts will interpret express contractual good faith clauses and what will amount to breaches of the obligations imposed. The clause should be considered in context and with regard to the other terms of the agreement. Accordingly, prior court decisions should not be applied automatically to every case. An express contractual good faith clause imposes a core duty of honesty, and may also impose a duty not to act in bad faith. However, if the parties intend more specific duties to apply, they must be set out expressly, failing which they fall to be derived by interpretation of the rest of the agreement, or by implication. Re Compound Photonics Group Ltd

 

In what circumstances can parties challenge an arbitral tribunal on the grounds of apparent bias, and its powers to award interim relief under the UNCITRAL Rules?

The threshold to establish bias on the part of an arbitral tribunal such that it could be removed and/or that its awards can be set aside under section 68 of the Arbitration Act 1996 is high. In addition, though arbitral practice may permit interim remedies to be recorded in a tribunal's award, rather than in an order, practitioners should consider whether an express request for relief in the precise form specified in the UNCITRAL Rules is advisable where there is a risk of such relief being challenged before an English court. Parties should consider expressly granting the tribunal, in the arbitration agreement, a power to order on a provisional basis any relief it would have the power to grant in a final award. EGF v HVF, HWG, TOM, DCK, HRY

 

To what extent, and when, are directors required to consider the interests of creditors?

The Supreme Court has unanimously confirmed the existence of a common law rule requiring directors to have regard to the interests of creditors in certain circumstances. The duty is engaged when a company is: (i) insolvent or bordering on insolvency (either commercial or balance sheet insolvency); or (ii) facing inevitable liquidation or administration. The Supreme Court also considered how directors should allocate weight between potentially divergent creditor and member interests. BTI 2014 LLC v Sequana SA and others

 

In what circumstances will the Court intervene in the decision-making of a regulator?

An energy regulator granted a relatively broad margin of discretion and judgment may, as part of an exercise to bring a system into compliance, temporarily adopt a methodology which might create a transient risk of non-observance with applicable regulations. Moreover, a public decision maker cannot prevent itself from complying with its statutory duties by entering into, or approving, an inconsistent private law contract. In the context of transmission charges on the UK electricity transmission system, the Court found that congestion management costs must be included in the calculation of transmission charges. Such costs are therefore now subject to a cap, to the benefit of generators. R. (on the application of SSE Generation Ltd) v Gas and Electricity Markets Authority