FORCE MAJEURE IN ENERGY CONTRACTS (DLA PIPER)

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Force majeure (FM) is a legal principle, either provided for by contract or imposed on parties by law or courts, which fully or partially frees both parties from liability when an extraordinary event or circumstance beyond the control of the parties prevents one or both of them to perform their contractual obligations. FM provisions can be found in any commercial contract and often give rise to dispute and litigation due to the difficulty of proving whether or not an FM event has occurred.

The system of oil and gas pipelines serves as a national and international network to move the resources needed from production ports to consumers as efficiently as possible. The rules and regulations governing the operation and monitoring of natural gas and oil transmission pipelines vary significantly from country to country. Gas and oil pipelines are routinely inspected and monitored by the operational organizations during the planning, construction, operation, and decommissioning phases.

Broadly speaking, EO Services may be applied to identify and provide evidence of both the (non-)occurrence and the impact of an FM event. On the one hand, this means using EO to help a party prove that the other party is falsely claiming FM to be freed from its obligations under the contract. EO may provide evidence that either (a) the FM event has not occurred, (b) that it has occurred but was not the reason the other party failed to perform, or (c) that the other party has not mitigated the consequences following an FM event. On the other hand, this means that EO can be used to help prove that an FM event has, in fact, occurred and that the other party is wrongfully preventing an FM clause from being triggered.

In both of these scenarios, EO systems would allow for the collection of data that can provide clear evidence for the claim of a client and, thus, avoid dispute resolution at court and the related costs of litigation. The stakeholders of this case are the contracting parties themselves and any customers and third parties that benefit from the performance of the contract. The topics this case will focus on are:

  • The gathering of relevant information on the nature and scope of a certain event;
  • The contractual obligations of parties to an energy contract; and
  • The compliance with environmental and social impact laws.

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