INTERNATIONAL ARBITRATION 1/3LY
SPECIAL REPORT 21
RECEN T C A SE S ON THE IN T ERPRE TAT I ON OF CON T R A C T S
In terms of disputes, the conclusions of the recent survey of the oil & gas industry carried out by Clyde & Co are entirely consistent with our own experiences in the sector, throughout the Clyde & Co offices globally. As a result of acute financial pressures caused by the sustained low oil price, disputes in the oil & gas industry are on the rise. This represents a considerable change in attitude for an industry which, historically, has been relatively reluctant to trigger contractual dispute resolution provisions, due to the close, inter-connecting relationships which exist, often globally, throughout the supply chain. Themain pressure points for disputes include attempted renegotiation of contracts, early termination of contracts, and non-payment. When times were good, many companiesmay have written off unpaid invoices or sought a commercial compromise, but in today’s climate a harder edged, more bullish approach is increasingly prevalent. Many of the disputes are resolved by either mediation or by negotiation, oftenwith the close involvement of the senior management of the respective companies in dispute. Such top level intervention can be highly effective in reaching a pragmatic compromise which avoids the need to engage in costly and time consuming legal proceedings. CONTRACTUAL INTERPRETATION For those cases which cannot be resolved amicably, the contractual dispute resolution process, whichwill stipulate either arbitration or litigation, can in some cases be the onlyway to reach a conclusion. This, in turn, brings the precise wording of contracts, and how such terminologywill be interpreted by the courts/tribunals, under themicroscope. From the litigation following the Piper Alpha disaster in 1988, which finally concluded in the House of Lords in 2002, through to the more recent Macondo litigation in Louisiana, there have beenmany examples of how the courts interpret oil &gas contracts, and in particular, any exclusions in the contracts. What is crystal clear from the decisions is that clear, unambiguous and express wordingmust be usedwhen drafting exclusion clauses. For example, where parties wish to agree that indemnities shall apply irrespective of negligence, then the language of the clausemust specifically address negligence.
BY DAVID LECKIE, PARTNER, CLYDE & CO
RECENT SUPREME COURT C A SES Different approaches to interpretation
One of themost controversial debates in the English courts is the tension between the strict “literal” approach to contractual interpretation and themore expansive “commercial common sense” approach; in particular the extent to which the courts should “read in” provisions to contracts which the parties have not expressly included. Two recent decisions of the Supreme Court in England have provided an invaluable insight into the current thinking of our most senior judges. The dissenting judgment of Lord Carnwarth in the Arnold v Britton case demonstrates that this is, by nomeans, a straightforward area of law.
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