Sample News Story
English Judges Prolong Gas Contract Battles
28/10/1996
Those parties who hoped that the courts of England would be any less quirky or any clearer than their American counterparts when their turn came to interpret gas contract law can think again. Two Appeal Court judgements in the last month overturned aspects of lower court decisions (in respect of United Gas and National Power (Gas Matters, October 1995, page 3) and J-Block partners and Enron (Gas Matters, May 1996, page 9) adding tiny niches but little clarity to the case law.
Victory or rematch? It is hard to accept United Gas’s rapid claim of outright victory over National Power as United appears to have suffered an unequivocal loss and only won a rematch. However, that would be as much an oversimplification of what happened as would United’s rather one-sided public chortle over the result.
You lose you win The judges, for quite different reasons, ruled that United’s case that its contract only applied to gas from the Phillips sub-terminal at Bacton was nonsense (why have a conversions table if you plan to take only one calorific value?), but this means National Power must prove that it only supplied gas from Bacton, not from the grid or other terminals. And it must do so at a full trial.
Information This ruling meant National Power could keep some of the money it won in the lower court, while some of what it won before must go back in the pot for dividing up after the result of a new trial is known. But the bulk of the appeal judgement overturns National Power’s case that this was a simple matter, capable of “summary judgement” by a judge; it sends the wider matters back to a full trial. At the same time the judges said the case cried out for amicable settlement without further court proceedings. (Don’t count on it). The basic issue is whether National Power provided physical or paper gas to United, and, even more seriously, whether its refusal to provide all of the information United requested on this issue amounted to a material breach of the contract, enabling United to unilaterally terminate the contract.
See you in court National Power has been silent, in contrast to United with its cries of victory, so we will have to wait and see what case National can mount. But I suspect that United would be wise not to count its court victory before it is hatched. The judges have shown that the English courts can be just as unpredictable as their American counterparts. United may well have struck a blow for buyers as a whole by simply raising the information issue. If it wins in the trial, sellers may become more generally obliged to provide any operational information buyers seek. And National Power’s Bacton victory will prove hollow if it cannot prove it supplied the gas from Bacton. But this will all be decided in the upcoming trial; it was not decided by the Appeal Court.
Enron wins In Enron’s case the victory is clearer cut but limited. With one judge strongly dissenting, two other appeal court justices effectively said that if Enron doesn’t want to commission facilities early, despite language in the contract indicating that it should, it doesn’t have to do so if that means accepting a gas price it doesn’t like. The fine point of law was whether parties can contract an agreement to agree (apparently not). The significant new case law feature is allowing commercial consideration to stall technical completion. Phillips is taking the decision to the House of Lords (England’s highest court) but don’t be surprised if that body isn’t interested. However, between the J-Block partners and Enron there is much left to fight over and the court room battle is underway on other issues.