When Contingent Dollars Silence Climate Justice -By Fransiscus Nanga Roka

The Siccar Point vs Ithaca Energy case is the archetype of a multimillion pound commercial tussle gone awry on a transaction. On a deeper level, it is the quintessential example of how modern private law by means of contract drafting, private equity deal making and litigation strategy, cuts climate justice off at its knees while squeaking through without any appearance other than “neutrality” and “technicality.”

At the centre is the Share Purchase Agreement (SPA) relating to Ithaca’s 2022 purchase of Siccar Point’s North Sea package which includes Rosebank. The structure, significant initial cash coupled with significant contingent consideration based on future commodity prices and development is a realization of the ideological promise of modern contract theory: allocation of risk in accordance with conditional obligations. The purpose of such clauses is to calibrate incentives, effectively manage parties’ expectations and internalize uncertainty. In practice, they create exactly the kind of grey area in which major players can subsequently argue whether/if obligations are actually “due”, hiding behind market volatility and conceptual vagueness.

And this tension finds dramatic expression in the Siccar Point claim that Ithaca paid only a fraction of its alleged 56.6 million dollar obligation, leaving a disputed total close to 88.2 million. Litigated, a contingent payment that operated as one component of the price floods into a zone of “reasonable disagreement” over triggers, calculations and timing. There is more to it than a drafting issue. It reveals a profound normative attitude: private law is comfortable with the idea that long term commitments may be subject to negotiation in response to short run balance sheet requirements. The more contingent the architecture, the easier it is to marginalize strategic nonperformance as honest interpretive struggle.

This interaction is compounded by the role of private equity. The funds behind Siccar Point are structurally aligned to achieve the highest exit valuations before limiting post closing exposure. Contingent consideration is a way to inflate nominal deal value at the time of closing, soothing investors while sedating the bulk of the econometric truth within a future that has contested legal recourse if it is to turn out badly. Control of the assets transfers to a listed operator, such as Ithaca, and then the power balance shifts; the acquirer can employ complexity against vendors, delay payments by revolving around legal obligations at ARPOs and wield litigation threat and reputational cost like a negotiating hammer. Here, the SPA is more than a mere private ordering tool, it is an engineered battlefield and so allows non payment to be not a straightforward breach but rather one of several plausible strategic options.

That’s a litigious kind of path that corroborate the picture. Because contracts are publicly filed and their clauses subject to careful judicial scrutiny, a High Court trial would have required lawyers and judges to explain how they see the contingent obligation clauses in huge fossil deals reading, writing valuable rules about how other similar transactions will be conducted along with guidance for courts that find themselves interpreting those same structures. This last minute confidential settlement turns the court from an institution of public reason into a bargaining chip. Bilateral compromise sacrifices what doctrinal clarity could have emerged. Legally, this is privatization of norm production: the furthest reaches of climate relevant commerce are adjudicated in virtual secrecy, leaving doctrine underdeveloped and power asymmetries intact.

Here climate justice is not referred to, but absent. Traditional contract theory is based on party autonomy and equality of bargaining power in form. However, in Rosebank type deals, the missing third party is the public: communities, future generations and ecosystems that will suffer downstream impacts from extraction decisions they are structurally excluded from influencing. The SPA carefully splits contingent dollars into a private equity fund and an oil company, with zero allocated to emissions, ecological damage or stranded asset risk. Cynically, this is no accident; it is exactly how liberal private law succeeds at mobilizing systemic harm to maintain the illusion that “interests” are represented at the negotiating table.

Thus the Siccar Point – Ithaca saga exposes a hidden hierarchy of seriousness in our legal architecture. Default on tens of millions stiffs cooperatives, sets off lawsuits and procedural choreography while giving settlement leverage. Legally this prospect of locking in decades of carbon intensive production from Rosebank is invisible at the locus where decisions with possibly profound consequences are made; within the SPA and accompanying settlement which remains confidential. In this sense contract design, becomes a technofix to governing through the issues that have been defined as policy relevant: contract design translates intensely political questions (should we even be doing this?) into only narrowly private ones (who owes how much, when?)), to then be resolved by hearings that are patently legalistic but virtually divorced from climate realties.

For legal theory, the case is a prompt to cease regarding complex deal structures as value neutral technical feats. Fossil fuel M&A use contingent consideration clauses, mechanisms that do not only allocate risk creatively but enable accountability to be deferred, diluted or defeated, financially and ecologically. Private equity exit strategies are not passive responses to market forces, but strategic decisions to capitalize relatively heavy carbon portfolios whilst shifting the long-term risk they pose onto society. In addition, commercial courts are not just dispute-resolution venues, but informal police lines for the limits of legally cognizable harm.

A genuine climate responsive legal theory of contract would require that a contingency in Rosebank type transactions be framed not only monetarily but notionally as a carbon, community and temporally responsibility. An obvious question would be how parties can negotiate so precisely over cash flows for price movements, but leave climate triggers, regulatory developments, litigation risk, social licence collapse sitting outside the formal architecture. Until that change happens, cases like Siccar Point v. Ithaca Energy will remain superficially unremarkable complex commercial disputes. In fact, they are but a small reflection of a much larger phenomenon: A private law machine trained to meticulously count dollars when it comes to corporations and almost intentionally blind when counting costs imposed on everybody else.

Fransiscus Nanga Roka

Faculty of Law University 17 August 1945 Surabaya and Managing Partner of Law Firm Victorious Indonesia