Legal Issues to Consider and Manage in 2022/2023 2022 was a challenging year for many businesses, including for those in the energy sector. 2023 looks to be just as demanding. Slow global growth, the war in Ukraine, continuing supply chain challenges as well as the after-effects of the COVID-19 pandemic are some of the factors causing disruption to business. Here, we highlight some of the legal issues that a party doing business in the energy sector in a volatile market could expect to encounter, and how the risks may be managed. Supply chain risk Current supply chain shortages and restrictions, exacerbated by labour and materials cost inflation which continue from the Covid-19 pandemic. Manage risks by:Actively reviewing robustness of supply chain in a crisis (at all tiers). Ef­fect­ive force majeure drafting and planning. Ensuring there is sufficient security for delivery obligations and carrying out regular credit checks on suppliers.  Termination risk Volatile markets tend to result in additional termination risks:Manage risks by:Review portfolio of key contracts for contracts at risk. Actively engage with counterparties to mitigate risk of termination for essential contracts. Utilise termination rights to escape onerous contracts. Counterparty risk Increased counterparty insolvency risk caused by market volatility. Manage risks by:Conducting effective due diligence. Carrying out detailed assessments on cred­it­wor­thi­ness. Ensuring financial security in the event of insolvency (on-demand bonds, letters of credit etc.). Government intervention The increasing export or import-related restrictions imposed by Governments. Manage risks by:Considering fulfilment of contractual obligations. Reviewing contractual rights and ability to use alternative sources of supply. Careful consideration of trade portfolio. EPC ‘Hot market’ A perfect storm of under supply, over demand, inflation pressures, and legacy of the Covid-19 pandemic for the engineering procurement and construction market will require effective management of:Proper assessment of ability to deliver at tender stage. Contractual damages and incentives for ‘on time’ delivery. Managing project change. Sanctions Sweeping financial global sanctions as a result of Russia’s War on Ukraine may impact your business. Manage risks by:Reviewing nexuses to Russia. Identifying sanctions which apply. Managing any business from a reputational and ESG-based perspective, and consider alternative options. Price volatility LNG spot price is at an all-time high, with potential volatility in all commodity markets. Manage risks by:Careful consideration of counter-party non-delivery, force ma­jeure/ter­min­a­tion. Preparing for circumstances of an inability to deliver / accept delivery and whether any force majeure clause excuses performance. Check price review / reopener clauses in long-term agreements. Careful consideration of any impact on cost base and margin calls. ESG transformation The drive towards net zero and ESG expectations. Manage risks by:Reviewing contractual arrangements for carbon neutral trading and contracting. Considering whether counter-party net zero and / or ESG commitments have adequate remedies in the event of breach. Managing regulatory changes and company policies.