Legal Update for Energy Lawyers – November 2021
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Legal Development 26 November 2021 26 November 2021
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UK & Europe
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Energy & Natural Resources
This newsletter provides general information and is not intended to be comprehensive or to provide specific legal advice. Professional advice appropriate to a specific situation should always be sought.
Contents
- Claimants Fail to Satisfy “Same Interest” Test in Representative Action
- Court of Appeal gives guidance re representative actions
- Scottish court dismisses appeal re drilling in North Sea
- Contractual duty to mitigate loss does not exceed common law duty
- Onerous term not incorporated by reference into contract
- Failure to engage in mediation does not affect arbitrator’s jurisdiction
- Global Methane Pledge
- Dubai changes its legal landscape
- Consultation on windfarm development and offshore transmission
- The Law Society Publish Climate Change Resolution Ahead of COP26
In a case with significant ramifications on the viability of representative actions, the UK Supreme Court has recently handed down judgment in the case of Lloyd v Google. Mr Lloyd sought to bring a claim as a representative action against Google on behalf of around 4 million individuals, claiming Google had unlawfully processed browser data directly from users’ mobile devices without their consent. The procedure for bringing a claim as a representative action is embodied in Rule 19.6 of the Civil Procedure Rules, which requires that such a claim may be brought by or against a representative of others who have the “same interest” in the claim. Mr Lloyd argued that this “same interest” test was satisfied as each of the individuals he sought to represent had had their data protection rights breached in the same way. He argued that it was not necessary to prove any facts particular to individuals, on the basis that compensation should be awarded under the DPA 1998 for “loss of control” over their personal data. The Supreme Court rejected both arguments on the basis that damages are not recoverable under the Data Protection Act 1998 for loss of control of data and even if damages were available, the claim did not satisfy the “same interest” test as it would have been necessary to assess the extent of the unlawful processing in each individual case. An obligation to prove individual damages is likely to significantly restrict parties’ ability to successfully bring representative actions in the future.
Similar to Lloyd v Google discussed above, the Court of Appeal has highlighted the limitations of the representative action procedure. In Jalla & Others v Shell International Trading & Anr, the claim related to an oil spill in the Bonga oilfield 120km off the Nigerian coast, with 27,800 individuals and 457 communities being represented by two claimant representatives. The High Court found that the claim could not be pursued as a representative action as each claimant would need to show that they had suffered damage and since the land each claimant owned was different, and may have been affected differently by the spill, the facts of each claim would also have to be investigated separately. The claimants appealed the High Court decision and the Court of Appeal dismissed the appeal on the basis that the claimants could not be said to have the same interest “for all practical purposes” or to have “the same cause of action or liability”. For this reason, the representative action procedure would fail in its main aim, which was to save time and costs and to ensure that the outcome was equally binding on all the parties represented.
In Greenpeace v Advocate General and Oil & Gas Authority , the UK’s Secretary of State for Business Energy and Industrial Strategy (“BEIS”) and the Oil & Gas Authority (“OGA”) consented to BP and Ithaca drilling for oil in the Vorlich field in the North Sea. Permission was given by OGA in accordance with section 3(1) of the Petroleum Act 1998. Greenpeace challenged this under the Offshore Petroleum Production and Pipe-lines (Assessment of Environmental Effects) Regulations 1999, arguing as an “aggrieved person” for the consent to be reduced. It also argued that BEIS’s decision was invalid because it was made without full knowledge of the environmental effects of the relevant licence, including how the oil would ultimately be used. The court (Inner House, Court of Session) found the arguments about procedure to be “overwhelmingly technical and unconvincing”, but BEIS’s obligations to consider environmental effects did not in any event extend to looking at the use made of oil and gas once it had been sold to consumers. However, the court acknowledged that there was scope for future environmental challenges, particularly where procedure is not in fact followed correctly. It is therefore likely that further challenges of this kind will be made.
In Equitix EEEF Biomass 2 Ltd v Fox and others, which concerned the sale of shares in an energy company, the English High Court found that the sellers were in breach of various warranties in the relevant Share Purchase Agreement (SPA). The sellers argued that the buyer had a common law and contractual duty to mitigate, and argued that a clause in the contract requiring the buyers to take “all reasonable action” to mitigate loss was wider than the common law doctrine. The court rejected that argument, holding that there was no common law duty of mitigation. Further, the mitigation clause did not set a standard of conduct that was any higher than the threshold imposed at common law and there was no reason to "beef up the paragraph into a ‘best endeavours’ obligation”. For this and other reasons, the court did not accept that the buyer had failed to mitigate its loss, and therefore no adjustment should be made to the damages awarded. The case shows the difficulty of imposing special obligations on a party to mitigate loss, without explicitly referring to its duty to use ‘best endeavours’ in this respect.
In Blu-Sky Solutions Ltd v Be Caring Ltd, a business customer signed a supplier’s electronic purchase order confirming that it had read the supplier’s standard terms, which were available on a website. The English Commercial Court held that this had the effect of incorporating those terms, with the exception of one term requiring the purchaser to pay early cancellation fees. This was not only onerous in itself, but was also difficult to spot - indeed the court described it as “cunningly concealed in the middle of a dense thicket which none but the most dedicated could have been expected to discover and extricate.” To be sure that an onerous term is incorporated by reference, a supplier should take the opposite approach and actively draw it to the customer’s attention.
The English High Court has confirmed that a party’s failure to attempt mediation before arbitration, in breach of a dispute resolution agreement, does not affect an arbitrator’s jurisdiction to determine the dispute. In NWA and another v NVF and others, the parties had agreed that if mediation did not result in settlement within 30 days, the dispute was to be referred to LCIA arbitration under an expedited procedure. However, the claimants refused to engage in mediation at all. The defendants filed a request for arbitration and the arbitrator issued a partial award finding that the claimants’ failure to mediate did not affect his jurisdiction to deal with the dispute. The claimant challenged the award, arguing that the primary obligation to arbitrate had not yet accrued. The court found that section 67 of the Arbitration Act 1996 was not engaged as the failure to mediate did not mean that the arbitration clause was invalid. Following Sierra Leone v SL Mining Ltd, decided earlier this year, the court held that failure to attempt mediation in breach of a dispute resolution clause was not relevant to the arbitrator’s jurisdiction over the dispute, but went to the admissibility of the defendant’s claim in the arbitration. It was therefore a matter for the arbitrator to determine.
The USA and European Union launched a Global Methane Pledge at the COP26 climate change conference in Glasgow. It builds on the EU’s existing Methane Strategy, which aims at reducing methane emissions in the energy, agriculture and waste sectors. Countries joining the Pledge commit, among other things, to a collective goal of reducing global methane emissions by at least 30% from 2020 levels by 2030. Given the potency of methane as a greenhouse gas, it is estimated that the Pledge could lead to a reduction in warming of at least 0.2C by 2050.
The Government of Dubai has issued a decree abolishing the DIFC-LCIA Arbitration Centre’s administering body, the DIFC Arbitration Institute (“DAI”) and the Emirates Maritime Arbitration Centre (“EMAC”).The Decree was issued on 14 September and came into force just six days later, bringing about, overnight, significant changes to Dubai’s legal landscape for the resolution of disputes. In so doing, it has spawned concerns over the status of the DIFC-LCIA Arbitration Centre and EMAC, as well as arbitration under the DIFC-LCIA Arbitration Rules and EMAC Arbitration Rules. More
The UK’s Department for Business Energy and Industrial Strategy has launched a consultation on windfarm development and offshore transmission. The current offshore transmission regime is developer-led and has resulted in individual connections for each windfarm. The growing demand for offshore wind power has meant this uncoordinated approach poses a problem, environmentally and for local communities, and is a barrier to future development. The government is therefore seeking to develop a long-term regime that takes a more strategic and holistic approach. Although the main focus of the consultation is wind power, the new regime could affect all forms of offshore energy development. The consultation paper sets out 14 questions, to which responses are invited by 23 November 2021.
On 28 October 2021, the Law Society of England and Wales published a ‘call to arms’ for the legal profession to engage in climate conscious practices. The resolution came on the eve of COP26 in Glasgow and sets out four key commitments: to support and educate solicitors on how they can act to mitigate the climate crisis; to encourage solicitors to engage in climate conscious legal practices, including advising clients on climate-related risks and opportunities; to urge law firms to operate in a way which restricts the increase in global warming; and to encourage law firms to promote climate change adaptation through pro bono activities and engaging in legislative and policymaking efforts to mitigate the crisis. The Law Society has recognised the need for the legal industry to take rapid action to tackle climate change and hopes the profession can become a forerunner in this regard. You can find further climate change resources published by the Law Society here.
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