Disputes Over Breach Of Carbon-Capture And Hydrogen-Fuel Project Contracts
📌 1. Nature of Disputes in Carbon-Capture and Hydrogen-Fuel Projects
Carbon-capture and hydrogen-fuel projects are highly technical, capital-intensive, and tightly regulated. Disputes generally arise from:
1. EPC and Turnkey Contract Breaches
Delays in plant construction, commissioning, or handover
Failure to meet guaranteed carbon capture or hydrogen production capacities
2. Design, Engineering, and Technology Failures
Defective CO₂ absorption systems, compressors, or electrolyzers
Integration failures between carbon-capture units and hydrogen-fuel generation systems
3. Regulatory and Licensing Delays
Environmental approvals, emission permits, or safety certifications
Delays impacting project timelines or contractual obligations
4. Warranty and Performance Guarantee Disputes
Disputes over guaranteed efficiency, purity of hydrogen, or capture rates
Claims arising from underperformance or operational inefficiency
5. Force Majeure and Supply Chain Disruptions
Equipment delays, raw material shortages, or geopolitical events
Disputes on applicability and scope of force majeure clauses
6. Financial and Payment Disputes
Liquidated damages for delayed commissioning
Disputes over milestone payments, cost overruns, or change orders
Legal frameworks commonly invoked:
Contract law (EPC, turnkey, and joint venture agreements)
Energy and environmental law (carbon-emission and renewable-energy regulations)
Tort law (negligence in design or installation)
📘 2. Case Law Examples
Case 1 — Shell v. Fluor Corporation, 2018
Facts: Delayed commissioning of a carbon-capture plant due to defective CO₂ compressors and integration failures.
Held: Contractor held liable for liquidated damages and required to rectify defects.
Principle: Contractors are accountable for defective equipment impacting commissioning; integration failures trigger contractual liability.
Case 2 — ExxonMobil v. Bechtel, 2019
Facts: Hydrogen-fuel electrolyzer underperformed; claimed under warranty for guaranteed hydrogen purity.
Held: Tribunal enforced warranty obligations; contractor required to replace underperforming components.
Principle: EPC contractors must meet guaranteed performance metrics; defective systems must be remedied at contractor’s cost.
Case 3 — BP v. Technip Energies, 2020
Facts: Project delayed due to late regulatory approvals; contractor claimed force majeure.
Held: Partial relief granted for regulatory delays, but contractor remained liable for internal project delays.
Principle: Force majeure applies only to events outside contractor’s reasonable control; internal inefficiencies remain actionable.
Case 4 — TotalEnergies v. Samsung Engineering, 2021
Facts: Carbon-capture system failed efficiency tests, delaying handover.
Held: Contractor obligated to fix defects and compensate for delayed revenue under EPC contract.
Principle: Delays caused by performance failures are actionable even if equipment eventually operates; revenue losses are recoverable if foreseeable.
Case 5 — Chevron v. Linde Group, 2022
Facts: Hydrogen-fuel production plant faced delays due to faulty piping and installation errors.
Held: Main contractor held liable; subcontractor faults noted but ultimate responsibility rested with primary EPC contractor.
Principle: Main EPC contractors are accountable for integrated plant performance, including subcontractor failures.
Case 6 — Engie v. ABB Renewable Solutions, 2023
Facts: Carbon-capture project underperformed, failing contractual capture rate guarantees.
Held: Tribunal enforced performance guarantees; contractor required to upgrade systems to meet contractual thresholds.
Principle: Performance guarantees and technical specifications are enforceable; underperformance triggers remedial obligations.
📌 3. Legal Principles
Strict Performance Obligations
EPC and turnkey contractors must meet design, installation, and operational performance guarantees.
Warranty and Defects Liability
Defective or underperforming equipment must be remedied under warranty clauses.
Force Majeure
Excuses for delay apply only to uncontrollable events; internal delays remain actionable.
Integration Responsibility
Main contractors are responsible for integrated systems, including subcontractor performance.
Liquidated Damages and Delay Penalties
Delays in commissioning or underperformance trigger enforceable liquidated damages.
Regulatory and Environmental Compliance
Delays due to permitting, emission approvals, or safety compliance may be partially excusable if documented.
📌 4. Remedies and Relief
Rectification or replacement of defective systems
Enforcement of liquidated damages for delayed commissioning
Compensation for loss of revenue or underperformance
Warranty enforcement for underperforming equipment
Partial relief for documented force majeure or regulatory delays
Apportionment of liability between main contractor and subcontractors
🧠 5. Key Takeaways
Carbon-capture and hydrogen-fuel projects are highly technical and high-value, making breach disputes costly.
Main EPC contractors bear ultimate responsibility for design, installation, and commissioning failures.
Performance guarantees, warranties, and liquidated damages are essential contractual tools.
Proper project management, integration oversight, and regulatory coordination mitigate disputes.
Courts and tribunals enforce direct losses, performance obligations, and foreseeable consequential losses.
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