HOW LAWYERS CAN NAVIGATE THE GREEN LEAP FORWARD
As the march towards renewables continues, how can the legal community prepare for the future?
BY ASHUTOSH RAVIKRISHNAN
Talk of green growth is hard to ignore these days as energy sources are increasingly judged for how sustainable they are. While wind, solar, nuclear and geothermal energy are not new, technological advances have made them cheaper and safer to tap on than ever before. The transition to these newer forms of energy won’t just affect rank-and-file workers though—legal professionals in the energy and commodities space may also find themselves in this unfamiliar space.
Preparing for this future is key, says Mr Kelvin Teo, a Director at Drew & Napier. “When you’re moving into a greenfield area, you’re bound to encounter unknown risks alongside the familiar ones,” he tells SAL. “When your client builds an offshore wind farm in a part of the sea that no one has really explored before, how do you gauge risk and protect their interests? So you have to take these into account when planning your contract—and frankly, some of these risks are so out there that we can’t even begin to fathom them.”
But while she welcomes renewables, Ms Rebecca Andersen believes that oil and gas are here to stay—at least for the foreseeable future. The Head of Legal at petrochemical major Hengyi understands that any significant transition to cleaner energy forms is still some decades away. But that doesn’t mean keeping your head in the sand about developments. “As lawyers, we have to constantly evolve and move along with the times. This means, based on demand and supply, if renewable energy is on the horizon, then we must start preparing ourselves to adjust and anticipate what legal issues will surround the new energy forms,” she explains.
To those familiar with the energy space, these legal issues may seem somewhat familiar. “A lot of the legal lessons from older energy sources like oil and gas are equally applicable,” admits Mr Teo. “Of course, in any new area, you have to get used to the new terminology and jargon. But at the end of the day, energy is still energy and the same principles apply.”
COVID-19 AND COMMODITIES
These days, no conversation is complete without a mention of COVID-19. Ms Andersen brings up an interesting effect that the pandemic has had on the commodities world. “I’ve had to anticipate what would happen if a termination clause were to be suddenly triggered because of the drop in demand brought on by the pandemic. Before, force majeure was almost just be kept in the “closet” because it would never be likely to be triggered. But now we are a lot more conscious of force majeure and termination provisions and we now place a lot more importance on planning for the unexpected, for example, I have started to provide alternative arrangements in the contract should any unexpected event unfold, without having to kill the contract”
But the pandemic has not blighted one of the most enduring practices of the commodities world: the “battle of the forms”. Shares Ms Andersen, “You’ll be surprised that in oil trading, most contracts are never signed. Even when the cargo has already been loaded and shipped, and credit financing has been made, parties still go back and forth arguing on the contract terms! The danger in this practice will be strongly felt should there be a dispute later. This is because there will be complex issues as to which party’s contract clauses will apply in the dispute situation.”
Cross-currents between the clean energy and commodities worlds form the crux of an upcoming webinar featuring Mr Teo and Ms Andersen. The session will explore the role of lawyers and in-house counsel in managing and mitigating legal risk as the green revolution powers on. It will also explore the commonly faced legal issues and disputes in commodity trading, how we can avoid the pitfalls that may occur and how to minimise the risk of dispute.
“The webinar is a good opportunity for younger lawyers and even for lawyers in the same industry, as it gives them exposure to the energy world. It’s hard to get this kind of exposure without prior experience and to get experience without relevant exposure, so this webinar could help break the chicken-and-egg cycle,” advises Mr Teo.
