A review of the recent Energy Transition Survey Report by AGCC, KPMG and ETZ finds that sector confidence in the UKCS has dropped sharply, falling from +36 last April to -37 now. At the same time, confidence “remains high in terms of international work” and has even risen slightly since September 2022.
With this in mind, there has never been a better time to consider these top tips when contracting internationally.
1) Governing Law
Choose a familiar Law. Usual choices for a UK-based company are English Law or Scots Law. If the counterparty is insisting on their domestic Law, take advice on the pitfalls and try find a compromise e.g. we recently advised against Malaysian Law, the counterparty would not agree English Law, so we compromised on Singaporean Law, (very similar to English Law).
2) Dispute resolution method
In global business transactions, when disputes arise, the recommended method is International Commercial Arbitration – a form of private litigation, usually confidential – where parties choose Arbitrators to determine the dispute. With a high degree of flexibility, parties can agree the type of decision maker, streamline rules and procedures, timescales and costs.
Don’t accept clauses requiring resolution before national courts. That is fraught with danger in some jurisdictions, where courts are unsophisticated, subject to extensive delays, never mind bribery and corruption.
In International Arbitration, the seat (the legal place of any Arbitral Tribunal appointed) determines the procedural law and challenges of the conduct of the arbitration will ordinarily be before the local courts. So, choose a modern, ‘arbitration friendly’ city and country – usually somewhere ‘neutral’ to the parties (e.g. London, Geneva, Stockholm, Singapore, and even Aberdeen, Glasgow or Edinburgh, if the parties will agree).
Don’t nominate somewhere you are unfamiliar with the attitude of the local courts or applicable procedural rules and national arbitration laws.
4) Risk allocation and performance guarantees
Identify and allocate risks between the parties, including rights and responsibilities; scope of work or product specification; ownership and protection of intellectual property rights; force majeure events; changes in the scope of work/product specification; project delays; currency fluctuations; political risks; and changes in regulations or market conditions.
If you are a supplier to overseas companies, your key issue is securing timeous payment. If you are a purchaser of goods and/or services, you are seeking timeous performance. Consider using performance guarantees e.g. performance bonds, bank guarantees, or letters of credit, to ensure contractual obligations are fulfilled.
International Arbitration allows for reciprocal enforcement of the Award (the Judgment) through the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, in 172 Member States (currently); if necessary, supported by Interim Measures through the Tribunal and Court Orders (e.g. for preservation, storage, sale, disposal or delivery).
Iain K Clark is a Solicitor Advocate and Partner, Head of International Arbitration at Gilson Gray LLP