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Ontario’s Working for Workers Five Act receives royal assent
On October 28, Bill 190, Working for Workers Five Act, 2024 received royal assent.
United Kingdom | Publication | June 2023
In a dispute concerning a decommissioning security agreement (DSA) based on an amended form of the industry standard, the Commercial Court has held that:
In an expert determination pursuant to the terms of the DSA:
This case concerned the construction of a DSA between Apache North Sea Limited (the Claimant) as operator and Esso, Shell and bp (the Defendants) as former licence participants in the Forties and Brimmond Fields (the Field or Fields).
The forecast for decommissioning spend over the next decade in the UK North Sea is £20bn demonstrating the very significant cost of dismantling and removing oil and gas infrastructure. To ensure that the taxpayer does not pick up the cost there is a wide ranging statutory liability regime in the UK which provides that oil and gas companies involved in the exploitation of oil and gas pay these costs on a joint and several basis. To mitigate exposure to decommissioning costs, oil and gas companies enter into DSAs in order to ensure that there is sufficient security held on trust to cover anticipated decommissioning costs at the end of an assets productive life.
In this case, the DSA was an amended form of the industry standard DSA. As the Judge acknowledged, in a DSA arrangement the security provider’s aim is to minimise the amount of security provided for the field, while the aim of the those who benefit from the security is to ensure that full security is provided so as to minimise or eliminate their decommissioning liabilities. It was this conflict of objectives which gave rise to the dispute.
The amount of security provided each year by the Claimant is calculated by a formula set out in the DSA which includes estimates for Net Cost and Net Value. That estimation exercise is necessarily judgmental since it involves looking into the future, most notably in terms of anticipated costs, capital expenditure and production projections. The DSA includes detailed provisions as to how the exercise is to be conducted, including certain assumptions to be taken into account when calculating the estimates.
Where the Defendants dispute the Claimant’s calculation of decommissioning security, there is a contractual mechanism under the DSA for resolving disputes through expert determination.
In this case, the Defendants disputed the Claimant’s security calculation for 2023 and sought to refer the dispute for expert determination. The Claimant began court proceedings, applying for an injunction to stay the expert determination on the basis that the dispute concerned the construction of the DSA, and that issues of construction should be resolved by the Court not an expert. At the injunction hearing, where the Defendants cross applied for a stay of proceedings, the Judge ordered an expedited trial, out of which this judgment arose.
There were a number of issues before the Court for determination, three of which are likely to have wider interest for industry players:
While the case relates to the interpretation of a specific contract, as DSAs are used widely across the industry and there is an industry pro-forma, the Court’s treatment of how inflation may be taken into account in the calculation of security is likely to be of interest in the current global inflationary environment. Equally, the RPO standard is widely used in oil and gas contracts and the Court’s guidance on how the expert should approach the question of whether that standard has been met also provides helpful insight. Finally, on the basis of the wording of this DSA, an expert faced with contested issues of construction was found to be able to proceed with their determination, and only after they have done so may their interpretation be challenged on the basis of an error in law. While this will depend on the wording of the particular expert determination provision, this may provide some assistance to those involved in expert determinations in general, the process for which can become contentious before parties even reach the substantive dispute.
Publication
On October 28, Bill 190, Working for Workers Five Act, 2024 received royal assent.
Publication
The Federal Court of Appeal’s 2023 decision in Canada (Attorney General) v Benjamin Moore & Co [Benjamin Moore FCA] overturned the Federal Court’s decision in Benjamin Moore & Co. v. Canada (Attorney General) [Benjamin Moore FC] that had previously established a new test for patentable subject matter in computer-implemented inventions.
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