England vs Scotland: Crucial legal differences in energy construction projects

The UK operates a single electricity and gas market, but the legal systems across the UK are not the same. As such, energy projects in England and Scotland can find they are subject to different frameworks of laws, different processes under law, and different interpretations of the law.

Where there are material differences these, if overlooked, could affect the validity of contract documentation, financing structures and enforceability of rights.

This article highlights some important areas of divergence that are particularly relevant to energy schemes from a construction perspective.

Execution and validity of contracts

Even something as simple as signing a contract in England or Scotland can differ:

• In England: Construction contracts are often executed as deeds and there are various requirements for this, including around execution witnessing and delivery. Alternatively simple contracts can be written or oral, but require various elements, like offer, acceptance and consideration (essentially reciprocity, where each party is promised or given something in return).
• In Scotland: Contracts may be formed without consideration and some contracts must comply with the Requirements of Writing (Scotland) Act 1995 (the Act). A document signed and witnessed in accordance with that Act can become 'self-proving' and benefit from evidential presumptions.

As a practical point, documents valid in England may not satisfy Scots law formalities and vice versa. For example, an agreement that may fail in England for want of consideration can nonetheless be binding in Scotland. As such, the parties to any contract should be clear on which law applies and ensure the contract is entered into in the right way to make sure it is enforceable.

Assignment vs assignation

Assignment is the transfer of an existing right or interest in intangible property (like contractual rights) from one party to another. Assignation is the Scottish equivalent of the English law assignment. However, again, there are differences in formalities:

• In England: Assignment of contractual rights must be in writing and signed by the party assigning the rights. Written notice must then be given to the other party who has the obligation in relation to those rights.
• In Scotland: Rights are transferred by assignation, which need not be in writing, but the transfer is not perfected until intimation is made to the debtor. Execution of an assignation alone is insufficient; intimation is essential to complete the transfer.

As a practical point, be aware of the different rules around assigning rights and even though assigning in Scotland can be oral, it is best to evidence the assignment in writing.

Time bar: limitation vs prescription

Most legal systems around the world have a limit whereby the claimant or pursuer must raise a claim and this is widely known as a time bar. In Scotland, time bar is known as prescription. In England, the equivalent time limit is known as limitation. Again, there are differences:

• In England: very broadly speaking, a six year limitation period exists for simple contracts and a twelve year period exists for deeds, from when the cause of action accrued.
• In Scotland: Most contractual claims prescribe after five years. The five year period runs from the date the pursuer was aware (or ought to be aware) of the loss, injury or damage. The law on prescription in Scotland is in a state of flux due to a number of Court of Session decisions that have impacted upon what date a pursuer can be said to have been "aware or ought to have been aware" it suffered a loss.

As a practical point, bear in mind that these shorter prescription periods in Scotland may extinguish claims earlier than expected. Advice should be sought at the earliest opportunity if you have suffered (or you may suffer) a loss.

Security and financing

Further differences include:

• Security over English assets: Security granted by UK registered limited companies and limited liability partnerships are registered at Companies House and security over land by any natural person/legal entity is registered at the Land Registry.
• Security over Scottish assets: Security is governed by a different legal framework than in England (for example, security over land takes the form of a standard security, as distinct from a legal charge/mortgage in England). Security granted by UK registered limited companies and limited liability partnerships are registered at Companies House and security over land by any natural person/legal entity is registered at the Registers of Scotland (and security over certain assets may also be required to be registered at the Register of Assignations and/or Register of Statutory Pledges). Enforcement processes differ from those in England.

As a practical point, lenders will require separate Scottish advice on the different forms of security (and Scots law governed security documents) over Scottish assets and related registrations.

Dispute resolution

Choice of law and jurisdiction must be considered carefully. English jurisdiction is often chosen in energy schemes, but where assets or land are in Scotland, Scots law and jurisdiction may be preferable or even unavoidable.

The remedies and procedures North and South of the border for dispute resolution are very different and advice should be sought as soon as possible if a dispute is anticipated.

Our observations

Scotland represents a key market for onshore wind, hydro and emerging energy technologies. However, material divergences in Scots law on contractual validity, assignation, prescription and security mean that reliance on English precedents carries risk. Developers, funders and investors should ensure that Scots-qualified advice is sought at an early stage to safeguard enforceability and project bankability.

Womble Bond Dickinson's Construction and Engineering Team and Banking Team have lawyers in both England and Scotland.