Questions answered in the 8th edition of our Energy and Natural Resources Case Law Update

Issue 8 of the Energy and Natural Resources Case Law Update

In what circumstances will COVID-19 restrictions trigger a party’s contractual right to terminate a contract for force majeure?

A force majeure clause entitling either party to terminate their contract in the event of an “inability to transfer” title to a vessel due to “restraint of governments” was invalidly invoked following COVID-19 restrictions imposed by the Indian government requiring vessels to wait outside the contractually stipulated anchorage area. The clause could not be invoked where transfer of title was possible. The vessel in question had got as close to the anchorage as possible, and consequently the relevant delivery obligations were satisfied. Although Indian COVID-19 restrictions caused a delay in delivery, this would be remedied once the restrictions were lifted and, in any event, they did not amount to an “inability” to transfer title. Accordingly, the claimant’s notice of termination was invalid, and it had repudiated the contract. NKD Maritime Limited v Bart Maritime (No 2) Inc.¹

What is the scope of the Quincecare duty on banks and financial institutions to take reasonable care in executing payment instructions?

A failure to establish a particular fraud in respect of the transactions in question was fatal to a claim for breach of JP Morgan’s Quincecare duty. Without establishing a fraud of which JP Morgan could have been on notice, there could be no breach of duty in actioning payments made under two settlement agreements entered into by the Nigerian government. Even if fraud had been established in respect of those agreements, JP Morgan’s liability to the Nigerian government was excluded under the relevant depositary agreement, save in the event of gross negligence. While JP Morgan was on notice of a risk of fraud, there was no serious disregard of such an “obvious risk” of the sort required to establish gross negligence. The Federal Republic of Nigeria v JP Morgan Chase Bank NA.²

In what circumstances will the court enforce a signed heads of terms?

A signed heads of terms agreement relating to the proposed lease of unused land for use as an anaerobic digestion plant was not intended to be, and was not, binding on the parties. Three factors were particularly relevant: (i) a requirement for the parties to adhere to the conditions of the heads of terms until the final agreement was signed had been removed from the final signed version; (ii) the essential terms of the lease had not been agreed and so were not reflected in the heads of terms; and (iii) in the context of the whole of the dealings between the parties, the absence of wording such as “subject to contract” did not matter. The only exception – a binding and enforceable lockout provision pursuant to which the parties agreed not to enter negotiations with third parties until a specified date – was not breached, as negotiations were commenced after that date. Pretoria Energy Company (Chittering) Ltd v Blankney Estates Ltd.³

Is significant delay an automatic bar to the grant of an anti-suit injunction?

Significant delay, even as long as a year, will not prevent an English court from awarding an anti-suit injunction where the delay could be properly justified. The lenders’ prior decision to appeal an interim injunction in Nigerian court proceedings did not amount to a submission to the Nigerian jurisdiction as the appeal did not (i) demonstrate an intention not to go to arbitration and (ii) was not an act done in furtherance of a defence. The lenders’ explanation for the 11-month delay in seeking the anti-suit injunction was reasonable, and since very little had happened in Nigeria during that period, there had been no significant waste of court time and expense. Africa Finance Corp. and others v Aiteo Eastern E&P Co. Ltd.⁴

Will a party to an option agreement be entitled to payment or compensation where the circumstances expressly contemplated under the agreement have not occurred?

A claimant was unsuccessful in its efforts to enforce an option agreement, including on grounds of unjust enrichment and breach of implied terms, since the court found that the agreement did not cover the circumstances which had arisen. The transferred assets that were the subject of the dispute did not fall within the definition of “Assets” contained in the option agreement. The claim for unjust enrichment failed in every aspect, and the claim for an implied term failed both the business efficacy and obviousness tests. Thurcroft Power Ltd (TPL) v Volta Energy Group Ltd.⁵

In the context of judicial review proceedings, under what circumstances will the Administrative Court intervene in the decision- making of a statutory or government body?

In the first of two cases on this topic, the Administrative Court held that the Export Credits Guarantee Department (UK Export Finance) (UKEF) has a wide discretion to assess the climate change impacts of a given fossil fuel project when determining whether or not to provide export finance to that project, given the complexity of the task, competing public interests at play and the fact it is a predictive exercise. UKEF’s decision required a relatively low intensity of review by the court, since the exercise required to be conducted by the UKEF involved a novel exercise of assessing climate change risks, which is an area in which reasonable experts might disagree. Although UKEF’s view that supporting the project in question was in line with Mozambique’s obligations under the Paris Climate Change Agreement 2015 (Paris Agreement) was “tenable,” the two judges disagreed as to whether UKEF had properly discharged its duty of inquiry in relation to calculating the Scope 3 emissions impact of the project, as required by the Paris Agreement. Accordingly, the claim was dismissed, with the claimants granted permission to appeal to the Court of Appeal. R (on the application of Friends of the Earth Limited) v Secretary of State for International Trade/Export Credits Guarantee Department (UK Export Finance), Chancellor of the Exchequer.⁶

In the second case on this topic, the Administrative Court held that it is for the Oil and Gas Authority (OGA) (now known as the North Sea Transition Authority) as expert regulator, not the court, to decide how to interpret the statutory objective of “maximising the economic recovery of UK petroleum” set out in the Petroleum Act 1998. An interpretation which includes a pre-tax approach is both lawful and rational, notwithstanding the legally binding commitment to meet the “net zero” target contained in the Climate Change Act 2008 by 2050. There was no support for the claim that Parliament must have intended to require the OGA to take into account tax implications. Further, the pre-tax approach was “entirely permissible” and therefore could not be said to be “irrational.” R. (on the application of Cox) v Oil and Gas Authority.⁷

¹[2022] EWHC 1615 (Comm).
²[2022] EWHC 1447 (Comm).
³[2022] EWHC 1467 (Ch).
⁴[2022] EWHC 768 (Comm).
⁵[2022] EWHC 338 (Comm).
⁶[2022] EWHC 568 (Admin).
⁷[2022] EWHC 75 (Admin).