Legal Update For Energy Lawyers - July 2020

• Published date: 10 July 2020
• Subject Matter: Litigation, Mediation & Arbitration, Coronavirus (COVID-19), Arbitration & Dispute Resolution, Government Measures, Litigation, Contracts and Force Majeure
• Law Firm: Clyde & Co
• Author: Mr David Leckie, Tom Roberts, Siobhan Neill and Sabrina Janzik

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.

1. Costs penalty for rejecting offer of mediation
   An English court deprived a successful defendant of a substantial portion of its costs on the basis that it failed to accept two offers of mediation, one at the pre-action stage and another before witness statements were exchanged (Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd and another). The judge was of the view that mediation had a reasonable prospect of success at both stages of the proceedings, and so in his judgment refusing the offer was unreasonable. He therefore considered that this justified a costs penalty under principles established by the Court of Appeal in Halsey v Milton Keynes General NHS Trust (2004). This case follows a string of decisions by the English courts that a party, which unreasonably refuses to engage in mediation, or other forms of ADR, will be penalised on costs.
2. Interpretation of Force Majeure Clauses
   Given the pandemic and current interest in force majeure clauses the High Court's recent decision in 2 Entertain Video Ltd v Sony DADC Europe Ltd is a reminder that parties seeking to rely on force majeure will need to demonstrate that the purported force majeure event is the cause, and not merely the context, of its losses.
   
   In this case, Sony provided warehousing services to 2 Entertain During the London riots in 2011, a gang set fire to the warehouse that held 2 Entertain's stock. The contract contained a force majeure provision covering "circumstances beyond the reasonable control of the party affected including.riot [and] civil commotion." However, the Court found that the risks of unauthorised entry and arson were reasonably foreseeable and Sony had not in fact secured the warehouse adequately against these risks. The broader context of civil unrest would not be sufficient to engage the force majeure provision when the underlying cause of loss was within Sony's reasonable control.
3. Government guidance on responsible contractual behaviour
   On 7 May 2020 the Government published a non-binding guidance note, 'Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency', which applies to all contracts impacted by the pandemic with immediate effect. The Guidance applies only to...