On 12 October 2020, the English High Court handed down judgment in respect of various preliminary issues in the case of Travelport Limited and others v WEX Inc. The dispute concerns the issue of whether or not the occurrence of the global COVID-19 pandemic engaged the material adverse effect (“MAE”) provisions in an SPA in the context of a US$1.7 billion transaction, and therefore whether the purchaser under the SPA was entitled to back out of the deal. As part of determining a number of preliminary issues, it was necessary for the court to consider in detail how the relevant MAE provision should be interpreted. The decision underlines the importance of precise drafting and will assist those undertaking this exercise in future.
In circumstances where a period of consolidation in the North Sea oil and gas industry is predicted in response to the ongoing pandemic, we expect that parties will increasingly focus on MAE (and material adverse change) clauses in their negotiations, as a mechanism by which they can allocate risk for the current economic uncertainty.