Disclaimer
Please note that the contents of this article do not constitute legal advice from Signature Litigation or the GFSB and should not be relied upon or treated as a substitute for seeking separate and specific legal advice.
Introduction
Despite hopes that the LNG power plant would assist in meeting the energy demands of a growing local economy, power cuts remain frustratingly common. Only last week, we were affected by a Gibraltar-wide blackout said on this occasion to be the result of a cable interference by a local contractor, which halted trading at a crucial time of the working day. Those not protected by backup generators or other alternative power supplies were inevitably the worst impacted.
Members are naturally keen to understand whether it is possible to bring claims seeking compensation for business interruption caused by power cuts.
Summary
The position in the United Kingdom
Claims for compensation arising from unplanned power cuts in the UK may be brought in prescribed circumstances. Consumers’ rights in the UK are protected by a robust regulatory framework serving as a watchdog for energy companies falling foul of their obligations to customers.
If a power cut is a result of poor or extreme weather conditions, consumers left without power for a period of 24 hours or more may claim compensation totalling £70 with further sums capable of being claimed for every subsequent 12-hour period of outage up to a maximum of £700.
Customers may also entitled to compensation where power outages are a consequence of some other fault or reason (for example, mechanical/infrastructural issues). The amount payable by energy
In this case, a contractor (Martin & Co) carrying out work digging up a road negligently damaged an electric cable which it knew supplied power to a factory (Spartan Steel). Spartan had to dispose of molten metal out of their furnace to prevent damage to the furnace, which meant that the metal lost value and they suffered a loss of profit it was sold. They also lost profits from further work and production could have been undertaken had the power not been cut. The English Court of Appeal held that Martin & Co:
The basic rationale for limiting the liability of Martin & Co was stated by the English Court of Appeal to be fundamentally one of public policy. The Court reasoned that:
The common law has therefore sought to protect defendants from being exposed to an unknowable scope of potential liability. The Court’s fear behind allowing claims for “pure economic loss” is that potentially unlimited claims could flood in. The Court has continued to have regard to these public policy considerations in cases involving public utilities and has limited the right to make claims for damages due to concerns that it may open the floodgates to litigation.
Summary
Applying the above legal principles to the current issue affecting Members, our view is that:
companies will generally depend on the severity of the power cut and the number of homes affected. In the case of single interruptions, providers have a period of 24 hours in which to restore supplies. Domestic customers may claim a sum of £75 and non-domestic customers (i.e. businesses) £150 for every subsequent 12-hour period of outage.
Can I bring a claim against the Gibraltar Electricity Authority under the Act?
Unfortunately, energy customers in Gibraltar do not enjoy this same protection.
The duties and obligations of Gibraltar’s sole provider of electrical power, the Gibraltar Electricity Authority (the “GEA”), are reflected in the Gibraltar Electricity Authority Act 2003 (the “Act”).
Section 9 of the Act sets out the duties owed by the GEA to customers and the obligations it is required to meet in the performance of its functions. Section 9(f) in particular imposes upon the GEA a duty to:
Section 9(f) of the Act notionally allows for a claim to be brought against the GEA for damage arising from a negligent act which results in a customer experiencing “inconvenience and detriment”.
However, this right to compensation under section 9(f) of the Act is stated to be subject Section 7 of the Act which expressly precludes a legal claim being brought against the GEA in respect of:
“….any injury, damage, or economic loss of inconvenience caused by or arising directly or indirectly from any interruption, defect, variation or discontinuance of the supply of electricity of from any break-down of or accident to the authority’s machinery or any other apparatus.”
The upshot is that a customer will not be able to pursue a successful claim for damages or compensation arising from an interruption to the electrical supply under the Act.
Can I bring a claim against the GEA under common law principles?
The English common law (which applies to Gibraltar) provides guidance and instruction as to the recovery of economic losses suffered by businesses in certain circumstances, including in relation to business interruption arising from power cuts.
Economic loss is, as a matter of law, divided into:
The approach of the English (and Gibraltar) courts both to “consequential” and “pure” economic losses is exemplified in the case of Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd, a 1973 English Court of Appeal case concerning the recovery of economic losses caused by negligence.
Disclaimer
Please note that the contents of this article do not constitute legal advice from Signature Litigation or the GFSB and should not be relied upon or treated as a substitute for seeking separate and specific legal advice.
However, please feel free to contact our legal team at Signature Litigation if you have any questions about the work we do or would like to enquire about our services.
Paul Grant
paul.grant@signaturelitigation.com
www.signaturelitigation.com/people/paul-grant/
Ben Pharoah
ben.pharoah@signaturelitigation.com
www.signaturelitigation.com/people/ben-pharoah/
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