Energy sector and the EU: The impact of a Brexit vote
Much of the UK’s energy sector law is a product of EU membership. Katie Kozlowska, the head of our energy sector, looks at some of the implications a Brexit would represent for the sector.
Energy and climate change secretary Amber Rudd is a supporter of the UK remaining part of the EU and warns of ‘unknown’ consequences for the energy market if we left. This, she says, is because a large portion of UK law affecting the energy sector derives from the EU.
However, those wanting to leave the EU point to Iceland and argue that the country’s export trade, which is dominated by energy, has thrived after its decision not to join the EU.
Funding for energy subsidies
EU regulations currently restrict when state aid can be used to fund UK businesses and supporters of a Brexit insist that a vote to leave would give the UK greater scope to provide funding to businesses in the energy sector.
This would, of course, hinge on any subsequent negotiations with the EU – including whether the UK would still have to abide by the exact same EU regulations as part of a deal.
Is a reduction in red tape realistic?
One of the key arguments against Britain remaining in the EU is burdensome ‘red tape’, much of which relates to energy regulation.
For example, the UK is currently bound by various EU targets, including the reduction of greenhouse gas emissions and an increase in the use of renewable energy. According to the Open Europe Think Tank, the UK renewable energy strategy costs Britain around £4.7 billion a year.
Whether these regulations would remain in place following a Brexit would depend on any subsequent negotiated deal. It is also likely that a review would be carried out to determine which regulations would be kept and which would be repealed.
Would contracts need to be reviewed?
It is common for contracts in the energy sector to refer to EU regulations so contracts would probably need amending to reflect the repeal of any current regulations.
Additionally, anyone wanting to escape their contractual obligations may try to terminate them by citing Britain’s exit from the EU as a ‘force majeure’ event, or one that ‘frustrates’ the contract, thereby bringing the agreement to an end.
If the UK does vote to leave the EU, parties to such contracts should seek professional advice and have their terms and conditions and any on-going agreements reviewed.
Harrison Drury’s team of specialist energy lawyers advises a wide range of clients in the energy, renewables and environmental sector. For more information contact Katie Kozlowska on 01772 258321. We have solicitors based in Preston, Lancaster, Kendal, Garstang and Clitheroe.
I am a journalist with Interfax energy and currently covering the impact of the Brexit. It would be great if you could have a look at the questions below and get back to me with some thoughts- or have a quick call about this?
Which impact do you expect the Brexit to have on BP and Shell?
They are trading higher following the Brexit- is this mainly due to the fact that their costs are billed in the lower pound, while their revenues are largely paid in dollars, as some analysts said?
Are only the headquarters in the UK impacted by the Brexit?
How else do the companies finance projects etc (holdings set up in Luxembourg and Holland etc for tax deals)? Do you see any changes to that trend?
Do you expect North Sea reserves or LNG trade to be particularly impacted?
Very much appreciate your help.