Legal update for energy lawyers – March 2021

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.

Legal update for energy lawyers - March 2021

Contents

  1. Claim against Royal Dutch Shell allowed to proceed

Following its decision in Vedanta Resources plc v Lungowe, the UK Supreme Court has again considered whether a parent company may have a duty of care in respect of the activities of a subsidiary. This time in the context of a dispute concerning alleged environment damage in Nigeria (Okpabi and others v Royal Dutch Shell plc and another). Firstly, the court confirmed that, in respect of an interlocutory challenge to the court’s jurisdiction such as this, the court should not conduct a mini-trial in determining whether there is an arguable claim. The court should accept the factual assertions made in support of the claim, unless such factual assertions are obviously untrue or unsupportable. Secondly, the court provided further guidance as to when a parent company has tortious responsibility for the activities of its subsidiary. There is neither a general presumption or assumption regarding a parent company’s duty of care, nor a “special test” applicable in these circumstances. Furthermore, as confirmed in Vedanta, there is no “reliable limiting principle” as to when a parent company may have such a duty of care. The Supreme Court also considered that the Court of Appeal had placed too much emphasis on whether the parent company controlled the subsidiary. The question of control is merely a starting point. The “issue is the extent to which the parent company did take over or share with the subsidiary the management of the relevant activity”. In this instance, the court confirmed that there was an arguable claim against Royal Dutch Shell and so it had jurisdiction. This decision, coupled with Vedanta, may open the door to further claims from overseas claimants against parent companies in the English Courts.

  1. Battle of the forms

When contractual documents conflict, it is usually the latest document that is decisive – the ‘last shot’ doctrine. However, that is not always the case, especially if one document states that its terms should override those of later ones. That was the case in TRW Ltd v Panasonic Industry Europe GmbH, where the defendant’s general terms gave the German court exclusive jurisdiction over disputes, regardless of what subsequent purchase orders said. The English Technology & Construction Court reached its decision in the context of EU jurisdiction rules (contained in the Brussels Regulation (Recast) EU 1215/2012), which no longer apply because of Brexit, except in transitional cases. However, it would have reached the same conclusion in other contexts too. Also noteworthy is that the defendant’s general terms applied explicitly to the “entire business relation” between the parties, which also gave them an enhanced effect.

  1. Privileged emails and attachments

The UK Supreme Court has refused permission to appeal a decision obliging a company to disclose attachments to certain emails protected by legal professional privilege. In Frasers Group plc (formerly Sports Direct International plc) v The Financial Reporting Council Ltd, the claimant argued that the attachments should benefit from the privileged status of their covering emails. However, the court did not consider this an arguable point of law. Where attachments are not privileged to begin with, simply sending them under cover of a privileged communication does not change their unprivileged status.

  1. Exceptions to without prejudice privilege rule
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Parties often rely on the without prejudice privilege rule when settling (or attempting to settle) their disputes. If they could not do this, any admission or other statement made during negotiations might be used against them at a final hearing or trial. However, the rule is problematic, because it is subject to numerous exceptions, one of which is that it should not be used as a cloak for ‘unambiguous impropriety’. Nevertheless, the Court of Appeal has confirmed that this exception should be construed narrowly, so as not to undermine the without prejudice rule. In Motorola Solutions, Inc. and another v Hytera Communications Corporation Ltd. and another, it held that alleged threats made at a without prejudice settlement meeting did not constitute ‘unambiguous impropriety’. They were said to concern moving assets to ‘murky’ jurisdictions to frustrate the enforcement of a court judgment. The court did not consider this sufficiently serious to engage the exception and in any event, it was not clear that the threats had actually been made. The court therefore refused the freezing order requested by the claimant.

  1. Court orders disclosure of witnesses’ WhatsApp under disclosure pilot rules

A disclosure pilot scheme is now running in the English specialist (Business & Property) courts and has been extended to the end of 2021. Certain aspects of the scheme are controversial, and revised rules are being introduced in April, although these may be amended again. Under the scheme, traditional style disclosure should be ordered only on a selective basis, although parties are free to ask for a second round of disclosure where this is “necessary for the just disposal of the proceedings”, as well as being “reasonable and proportionate” (Practice Direction 51U, para 18.1). In Pipia v BGEO Group Ltd (formerly known as BGEO Group PLC), the court agreed to order further disclosure, although a large number of documents had been disclosed already and the case was close to trial.  This was partly because the judge thought that some of the additional ‘documents’ sought (a witnesses’ WhatsApp and other phone messages) were likely to give the court an unguarded – and therefore helpful – picture of some of the witness’s actions and intentions.  The case provides valuable guidance on the application of the scheme’s rules and also illustrates the courts’ interest in non-written records.

  1. Disclosing sensitive documents

If a document is relevant to court proceedings and supports or undermines a party’s case, it will generally have to be disclosed in English proceedings, whether it is confidential or not. In most cases, any sensitive information can be ‘blanked out’ (redacted) and disclosure of the remaining text is not problematic. However, in a few cases this is not possible and a different approach is required. In Oneplus Technology (Shenzhen) Co Ltd and others v Mitsubishi Electric Corporation and another, the English Court of Appeal has explored again the possibility of adopting a tiered approach. This might involve the most sensitive material being marked ‘for counsel’s eyes only’ (although expert witnesses might also have access to it), while less sensitive material is shown to a confidentiality club consisting of only a handful of individuals from each party. The remaining material can be disclosed in the normal way. The Court of Appeal’s guidance in this case does not break new ground, since a tiered approach has been tried before. However, it does lend new credibility to the tiered approach, although the court was keen to emphasise that arrangements restricting parties’ full access to disclosure documents (beyond simple redaction) should be rare, at least where they concern documents that might be important at the trial.

  1. Courts’ powers in arbitration
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Under the English Arbitration Act 1996, courts are meant to support arbitration but not interfere in it. Even their powers to issue injunctions and take other supportive measures may be excluded by the parties. However, the recent case of ETC Export Trading v APLAS Importer demonstrates the limits of this principle. Here it was argued that the court should not issue an injunction restraining demand for payment on a performance guarantee, despite the possibility of fraud. This was argued on the basis that because the parties had chosen GAFTA arbitration rules in one of their contractual documents, the courts were prevented from intervening in this way. The English High Court disagreed and granted the application for an injunction without notice, holding that to rule otherwise was not within the clear meaning of the GAFTA rules, which may not have covered the performance guarantee anyway, and courts should always be ready to intervene, if necessary, in order to prevent fraud. The case is a reminder that the courts always have a residual role in arbitration, and if parties wish to restrict the court’s powers to any degree, they need to be explicitly clear about that, particularly where there are multiple contractual documents, each with its own dispute resolution provision.

  1. Paris court finds French state liable for missing climate targets

A court in Paris has held the French state responsible for failing to meet fully its goals in reducing greenhouse gases, resulting in ecological damage. So far, the court has ordered the French state to pay only 1 Euro (for ‘moral prejudice’) but further orders may be made in the next few months. The case was brought by four NGOs, including Oxfam France and Greenpeace France, and has been hailed in the French press as the ‘case of the century’. More


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