Scottish Power UK Plc v BP Exploration Operating Company Ltd & Ors

Scottish Power UK Plc v BP Exploration Operating Company Ltd & Ors

Failure to operate the Sellers’ Facilities was not automatically a breach of Article 7.1; breach depended on non-compliance with the Reasonable and Prudent Operator standard. The Andrew owners did not comply with this standard as they were not seeking to perform their contractual obligations. Article 16.6 provides the sole remedy of Default Gas for losses caused by underdelivery, excluding damages for such loss. Article 4.6 does not exclude Scottish Power’s claim for the normal measure of damages. Compliance with Article 15.4(2) is not a condition precedent to force majeure relief; the only remedy for breach is damages.

Parties
Claimant: Scottish Power UK Plc; Defendant: BP Exploration Operating Company Limited; Defendant: Talisman Sinopec North Sea Limited; Defendant: ENI TNS Limited; Defendant: JX Nippon Exploration and Production (UK) Limited
Jurisdiction
England and Wales
Judgment Date
25 September 2015
Procedural Posture
Commercial Contract Dispute / Judgment on Preliminary Issues
Outcome
Preliminary issues determined; partial success for both parties.
Legal Topics
Interpretation of Contract Terms, Force Majeure, Remedies for Breach of Contract, Exclusion Clauses, Take or Pay Contracts
Contract Law Commercial Law Oil and Gas Law Interpretation of Contract Terms Force Majeure Remedies for Breach of Contract Exclusion Clauses Take or Pay Contracts

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Parties

Scottish Power UK Plc

Claimant

BP Exploration Operating Company Limited

Defendant

Talisman Sinopec North Sea Limited

Defendant

ENI TNS Limited

Defendant

JX Nippon Exploration and Production (UK) Limited

Defendant

Procedural Posture

Commercial Contract Dispute / Judgment on Preliminary Issues

Legal Issues

  1. 1 Whether failure to operate facilities was a breach of Article 7.1 of the Agreements
  2. 2 Whether the Andrew owners complied with the Standard of a Reasonable and Prudent Operator
  3. 3 Whether Article 16 provides the sole remedy for underdelivery, excluding damages

Ratio Decidendi

Failure to operate the Sellers’ Facilities was not automatically a breach of Article 7.1; breach depended on non-compliance with the Reasonable and Prudent Operator standard. The Andrew owners did not comply with this standard as they were not seeking to perform their contractual obligations. Article 16.6 provides the sole remedy of Default Gas for losses caused by underdelivery, excluding damages for such loss. Article 4.6 does not exclude Scottish Power’s claim for the normal measure of damages. Compliance with Article 15.4(2) is not a condition precedent to force majeure relief; the only remedy for breach is damages.

Court Disposition

Preliminary issues determined; partial success for both parties.

Orders

  • Declaration that breach of Article 7.1 depends on Reasonable and Prudent Operator standard, not automatic.
  • Declaration that Andrew owners did not comply with the Reasonable and Prudent Operator standard in shutting in the field for AAD works.