Service Sector Contracting
Malcolm Mackay, Partner, Litigation, Brodies LLP
Eve Brazier, Contracts Specialist, Oil & Gas, Brodies LLP
Service Sector Contracting
Agenda
 Introduction to “supply chain contracts”
 Model contracts
 Allocation of risk
 Insuring the risk
 Dispute resolution
What is the oil and gas supply chain?
Meeting clients needs and relying on your subcontractors
Chain or matrix?
Model Contracts
 Introduced in the 1990s by CRINE (Cost Reduction in New Era)
now under the auspices of LOGIC (Leading Oil and Gas
Industry Competitiveness)
 Objective: reducing costs by 30% and helping to simplify the
industry’s procedures
 Suite of Model Contracts available for use throughout the oil
and gas industry
 Broad range of operations in the UKCS and are widely used
across the contracting community
Allocation of risk
 Exclusion of liability for death or personal injury resulting from
negligence is unlawful
 Parties allocate the risk such that the party best placed to insure
the risk bears the risk
 ‘Knock-for-knock’ indemnity regime commonplace: each party
indemnifies the other party’s group in the event of a claim
 Third Parties
 Pollution Risk
 Catastrophic Loss
 Consequential Loss
 IMHH (Industry Mutual Hold Harmless)
Limitation/Exclusion of Liability
 Common for contracting community to seek to limit their
liability for the risks they do agree to bear
 Indemnities are usually carved out
 Exclusion of terms as to quality etc implied by statute with
warranties as to fitness and quality expressed in the
contract
 Contracts provide for liquidated damages as sole and
exclusive remedy
Cancellation/Termination
 Company right to terminate for convenience
 Company right to terminate for default by Contractor
 Contractor generally has no right of termination
Insuring the risk
 Generally the contractor is obliged to provide insurance.
 Aim: to ensure that the contractor has adequate means to stand
behind his indemnity obligations.
 Common to expressly provide that the insurance amounts set out
in a contract in no way limit the liability of the contractor.
 Usually language requesting that the company is included on the
contractor’s insurance policies as an additional insured (except for
Employer’s Liability insurance) and that the underwriters will waive
their right to subrogate which means waive their right of recovery
against the party that actually caused the loss or damage which
would undermine the indemnity regime.
Governing Law/Dispute Resolution
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English contract law
Predictability of outcome and legal certainty
Fairness
Freedom of contract
Well-founded principles
Requirement for exact performance
Choice of law rules: choice of law rules are generally excluded in an
attempt to prevent a court applying a different governing law
Exclusive jurisdiction: ensure that the authority to adjudicate on a dispute
is limited to the English courts
Generally parties expressly agree to litigate instead of use arbitration to
resolve a dispute that has not been resolved by negotiation between the
parties.
Contact
Malcolm Mackay, Partner, Litigation, Brodies LLP
+44 1224 392274
+44 7891 398 503
malcolm.mackay@brodies.com
Eve Brazier, Contracts Specialist, Oil & Gas, Brodies LLP
+44 1224 392279
+44 7891 399516
eve.brazier@brodies.com