UK: Clyde & Co Research Shows Cancelled Contracts Expected To Be The Main Cause Of Energy Disputes
Last Updated: 26 April 2016

86% of international senior oil & gas executives and lawyers expect cancelled contracts to be the main cause of disputes this year

The majority (86%) of international senior oil & gas executives and lawyers expect cancelled contracts to be the main cause of disputes this year, according to research by global law firm Clyde & Co.

Clyde & Co says that current attitudes to litigation and arbitration in the oil and gas industry have changed significantly over the past 12 to 18 months.

As a result of the financial pressures faced by the industry, companies are far more bullish than they used to be. Consequently there is significantly more contentious correspondence between parties, some of which ultimately leads to the commencement of legal proceedings.

Clyde & Co explains that some of the most common flash points for disputes include termination of contracts (purportedly for cause but in fact for convenience), non-payment of invoices, declarations of force majeure and JV/PSA disputes.

David Leckie, International Arbitration Partner at Clyde & Co, says: "During this financial downturn oil & gas disputes are inevitably on the rise. We've seen an increase in contentious correspondence between parties and a far more bullish approach than in previous years."

"Clearly, any decision to commence proceedings must be carefully risk assessed. The direct costs of litigation and arbitration are significant, not to mention the hidden costs of extensive management time and reputational risks."

"The stakes are high, especially if the dispute is under English law, where the loser will almost always be ordered to pay most of the winner's legal costs."

"Businesses are often faced with the stark choice of having to write the amount in issue off, pay the sum demanded or litigate/arbitrate. In many situations, the only way forward is to commence proceedings and then seek to resolve the dispute by way of alternative dispute resolution, such as mediation."

Clyde & Co says that the most important issue to consider before commencing any proceedings is whether any judgment can be enforced. In international disputes, this is a very complex issue which needs to be addressed at the outset, to avoid pouring good money after bad. 

"There is nothing worse than a Pyrrhic victory," adds Leckie.

Changes to operational arrangements as a result of cost-cutting, the shelving of planned projects and lack of investment in existing operations, could all have a major impact on relationships across the supply chain.

David Leckie comments: "The oil & gas supply chain is built on an intricate network of inter-related supply agreements, JV partnerships and contractor relationships. If one business is unable to meet its contractual obligations it may have a knock on effect on another business's contractual obligations, potentially leading to a domino effect of disputes."

Clyde & Co's research shows that JV partners, contractors or suppliers becoming insolvent or unable to fulfil their contractual obligations is also a key concern for the industry. Four fifths (81%) of international senior oil and gas executives expect this to lead to increased dispute activity.

"A counterparty insolvency can cause real problems for businesses as it makes it much harder to get your money or assets back," says David Leckie.

"In this challenging and fast-changing environment, managing supplier and contractor relationships positively and pro-actively is vital."

How is the oil & gas industry managing its contractors and suppliers?

According to Clyde & Co, just a third of international senior oil & gas executives are already renegotiating contracts with suppliers and contractors.

A fifth (21%) appear to be positioning themselves for a similar move by pre-emptively reviewing contractual obligations and performance.

The research found that 42% of international senior oil & gas executives are taking a "wait and see" approach to supplier and contractor management, saying they are closely monitoring supply chain activities to ensure they are aware of stress points. 

David Leckie, comments: "It's surprising that such a large proportion of the industry is taking the potentially risky 'wait and see' approach to supply chain management. Taking a proactive stance is key to being on the front foot with supplier and contractor disputes."

"Businesses that are unable to renegotiate contracts should consider the choice of law and dispute resolution clauses and escalate the dispute resolution process sooner rather than later."

Clyde & Co's top ten legal tips: dispute resolution

Pre contract – carry out extensive credit checks and, if possible, obtain security
Be vigilant – keep a constant eye on unpaid invoices and the changing financial status of the debtor
Keep careful records – document all phone calls and meetings and preserve all emails and documents
Review contract termination provisions – in particular termination for cause – and follow the contractual notification process to the letter
Don't delay – consider the choice of law and dispute resolution clauses and escalate the dispute resolution process sooner rather than later
ADR – make sure you closely follow any contractual alternative dispute resolution procedures before commencing litigation/arbitration
Look carefully at enforcement before spending a lot of money on litigation/arbitration – there is nothing worse than a pyrrhic victory
If the counterparty is in serious financial difficulty, litigation/arbitration should be commenced as quickly as possible – it may be possible to obtain a judgment in default and enforce that (eg by a third party debt order or a charge over property or shares). Once enforcement is complete this may allow you to keep the recovery, as a secured creditor. However, if you do not complete enforcement before an insolvency process commences, you are usually part of the general body of unsecured creditors (and may make only a minimal recovery)
Consider using expedited procedures within the relevant arbitration rules or rules of court – consider interim remedies, such as freezing of assets and security for costs
Manage the litigation/arbitration carefully – through cost control and consideration of innovative litigation funding, such as third party finding or insurance backed products. Don't throw good money after bad

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Press Releases from this Firm
Recent Content from this Firm
By Clyde & Co LLP
By Laura Cooke, Karen Boto
By Clyde & Co LLP
By Max Ebrahim, Thomas Henstra
By Clyde & Co LLP
By Peter Walmsley
By Shabnam Karim, Louise McDonald
By Michael Cripps
By Andrew Harakas, Christopher Carlsen, Deborah Elsasser, JP Ellis, J. Thompson Thornton, Daniel Correll, Philip Weissman
By Toby Scott
Font Size:
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.