Marc Hammerson Quoted in Commercial Dispute Resolution on Post-Brexit Implications for Scotland’s Energy Sector
Akin Gump cross-border transactions partner Marc Hammerson was quoted in the Commercial Dispute Resolution article “Fueling Post-Brexit Energy Disputes, The Scottish Way,” looking at the ramifications for Scotland’s energy sector of last year’s Brexit vote. Scottish voters, who overwhelmingly favored remaining part of the European Union, may now soon have a second opportunity to vote on whether to remain part of the United Kingdom, the article notes.
Hammerson said a ‘yes’ vote on Scottish independence would lead to an allocation of oil and gas fields between Scottish and English sectors of the North Sea, with an independent Scotland likely adopting petroleum tax as a significant source of revenue. “The maritime areas over which [Scotland and England] may claim future jurisdiction,” Hammerson pointed out, “may be a source of dispute.” This, he said, would have an impact on governments and commercial companies alike, with those acquiring assets in disputed waters seeking assurances that they are dealing with the right licensing authority before investing.
Post-Brexit currency movements, Hammerson suggested, could affect gas producers and, in turn, lead to cancellation of contracts, withdrawal from joint ventures and arguments over pricing of long-term supply arrangements. “Companies with unhedged currency positions may be more litigious in seeking to extract themselves from contracts which, with a post-Brexit weaker currency, turn out to be bad bargains,” he stated.
Finally, Hammerson predicts that the reliance on international sources of gas is likely to increase when the North Sea depletes. Additionally, any attempts to impose tariffs or non-tariff barriers on the import of natural gas are likely to increase consumer prices and become a political issue. He thinks the UK government is likely to look to international trade rules to guarantee that the UK’s gas importation will not become constrained as a result of the country’s exit from the European Union.