On the face of it, the licence renegotiation clause appears problematic on both issues. The trigger point is potentially very wide. As the ABP argued, how could an arbitrator determine when there was a “major physical or financial change in circumstances” within the meaning of the clause? Relevant market conditions, and they did, would fluctuate sharply over relatively short periods of time (in fact, the strength of sterling in 2015 now seems to be a distant memory). Nevertheless, the court said the trigger was not too vague. It was possible to identify changes that would definitely enter the trigger area. Others would clearly be left out. This has made the trigger text sufficiently secure, although it may be “difficult to trace the exact separation between changes falling on both sides of the line.” The trigger was not completely open: the party who invoked the clause would have to show that the corresponding amendment affected the operation of the steelworks or port. The arbitrator could reasonably consider that the parties did not intend to identify temporary changes in market conditions within the scope of the clause. If the licence explicitly provided for the effects of certain events, it was unlikely that the parties intended to use it as a trigger for the renegotiation clause. Similarly, the basis on which the parties should agree on conditions amended or determined by the arbitrator appears vague. ABP submitted that there were no guidelines for objective criteria both inside and outside the licence.
There was a potentially infinite range of possible outcomes. But once again, the court upheld the clause as enforceable. There are many cases where the court has underestimated a provision that the hearing must lead to an “appropriate” term, for example in terms of price or quality. Sometimes expert evidence can help determine what is appropriate in the circumstances. The judge summed up this point as follows: “I do not accept that the clause is as open as ABP claims. The referee is not faced with putting new conditions in the void. First of all, he or she will have before him or her the existing conditions of the license… [they] show what the parties considered to be a fair and reasonable good deal in the circumstances of the licensing.
It is a useful starting point. The arbitrator should then take into account the actual physical or financial change and take into account the impact it has had on the activities of the parties in order to appropriately change the terms of the licence.