Energy disputes heat up as oil and commodities prices crash

Rising financial stress in the global energy sector has created an upswing in disputes as energy companies increasingly seek legal remedies to protect their interests following widespread price collapses.

Around 80% of CMS’s energy disputes mandates are international, highlighting the global nature of the oil and commodities price shocks. These cover Afghanistan, Algeria, Angola, Brazil, Cameroon, Congo, Denmark, Egypt, Gabon, Germany, Iraq, Jordan, Kenya, Madagascar, Morocco, the Netherlands, Nigeria, Oman, Qatar, Tunisia, Turkiye and Turkmenistan. (See box: ‘Energy disputes: the global picture.’)

With oil and commodities prices going through the floor, energy market participants have been aggressively protecting their interests. This has created a major uptick in the number and size of energy disputes.

Phillip Ashley, Partner, CMS UK

“Energy clients increasingly look for disputes lawyers who are immersed in the industry and are able to respond quickly to complex, high value disputes. Our teams sit within one Oil, Gas & Power Group covering all practices and the know-how this creates is considerable.”

In a dispute described by Lloyd’s List as, “the most spectacular shipping legal imbroglio so far this century”, CMS teams in London were instructed by Rosneft Marine (UK) to intervene in an oil products case in the Court of Appeal.

The Court of Appeal affirmed the previous High Court decision that bunker supply contracts containing a retention of title clause in favour of the supplier, where the relevant supply contract provides that the goods can be used or consumed before payment becomes due, do not fall within the scope of the Sale of Goods Act 1979.

In an unprecedented move for an arbitration case, the Court of Appeal granted our client, which was the owner of the goods yet not party to the original proceedings, permission to make submissions as an interested party to seek to overturn the element of the High Court decision directly impacting it. This case is likely to have broad implications for similar contracts.

Faina Weitsman, In-house Legal Counsel at Rosneft Marine (UK), said, “Phillip was our key contact in the matter. He definitely took the initiative, and knowingly and efficiently directed our intervention application into a desired outcome.

“Phillip’s and his team’s understanding of the industry and, what’s more, the litigation part of it, allowed him to correctly assess the legal nuances of our business, identify core matters and avoid lengthy explanations and misunderstandings on our part.”

Energy disputes: the global picture

• Represented an international oil company in a USD 243m ICC arbitration seated in Geneva concerning a production sharing agreement under Algerian law – CMS also acted as advocates
• Represented an international oil company in a EUR 2bn ad hoc arbitration seated in Europe concerning rights of a long-term gas sales agreement – CMS also acted as advocates
• Represented an international oil company in two London Court of Arbitration arbitrations in excess of USD 50m concerning rights under joint operating agreements for assets in Angola – CMS also acted as advocates
• Represented Cyclotech, a subsidiary of oilfield services company Schlumberger, on a High Court engineering claim over the design, fabrication and assembly of five water treatment packages for a Floating Production Storage and Offloading as part of the multi-billion dollar redevelopment of oil fields in the North Sea
• Represented a subsidiary of an international oil company in the Commercial Court concerning the termination of key contracts for a GBP 700m development on the United Kingdom Continental Shelf, which could have rendered the client’s entire project/ company valueless.