Oil and Gas - "Hanged on a Comma"? Punctuation in Financing Agreements



In Vitol E&P Limited v New Age (African Global Energy) Limited [2018] EWHC 1580 (Comm), the Commercial Court was asked to consider the relationship between a corporate lending facility and a reserve based lending facility.  As such financing arrangements are common in the oil and gas industry, the approach of the Commercial Court will be of interest to many in the industry. The approach of the Commercial Court reinforces the importance of clarity in interrelationship of such financing facilities.


New Age indirectly owned a 25% share in the licence in respect of the offshore area of hydrocarbon reserves named Block Marine XII offshore West Africa. In order to enable New Age (through its subsidiaries) to meet capital commitments in respect of its participation in Block Marine XII, Vitol and New Age entered into a facility agreement for a loan to New Age (the “Facility”).  At the time of the Facility, it was envisaged that New Age would also enter into a reserve based lending facility (the “RBL Facility”) with other lenders (the “RBL Lenders”). Vitol agreed to negotiate with the RBL Lenders the terms of an intercreditor agreement within a specified negotiation period. Vitol and New Age executed a financing fee side letter in connection with the Facility (the “Side Letter”).

Pursuant to Clause 3.1 of the Side Letter, New Age agreed to pay a financing fee of US$2 per BBL in respect of each of the first 22,500,000 barrels of crude oil lifted from the Block Marine XII asset. There was also provision for the fee to be reduced to US$1 per BBL as follows:

“provided that, if the intercreditor agreement is not exercised by the relevant parties by the end of the intercreditor negotiation period, the borrower may elect to prepay the facility in full out of the proceeds of the RBL facility and, following the date of prepayment in full and provided that the final discharge date has occurred, within 10 business days following the expiry of the intercreditor negotiation period the financing fee shall be reduced to $1.00 per BBL”.

Vitol invoiced New Age for the full financing fee, assessed at US$2.00 per BBL. New Age disputed the invoice and paid the lower amount of US$1.00 per BBL. Vitol brought proceedings to recover the difference between the price invoiced and the price paid. The dispute turned on whether the phrase “within 10 business days following the expiry of the intercreditor negotiation period the financing fee shall be reduced” meant:

  1. (the New Age argument) once the Facility had been repaid, the reduction of the fee occurred at a point in time falling “within 10 business days following the expiry of the intercreditor negotiation period”; or
  2. (the Vitol argument) the fee was to be reduced only if prepayment of the facility (and the final discharge date) had occurred within 10 business days following the expiry of the negotiation period.


The Commercial Court found in favour of Vitol.  This was for the following reasons.  In giving judgment, Commercial Court recalled the textual and contextual approach to interpretation in Wood v Capita Insurance Services Ltd [2017] UKSC 24.

Analysis of the text

  1. Clause 3.1 had to be construed as a whole, including the words, syntax and punctuation, in order to determine the objective meaning. There was no requirement that interpretation should be supported by any immutable principle of grammar or syntax.
  2. On New Age’s interpretation, it immediately struck an objective reader as odd that a fee was to be reduced “within” a period of 10 business days; the normal meaning of the word “within” did not connote a fixed date.
  3. However, there was no apparent mechanism to determine the date on which the fee reduction was to occur. That appeared to lead to an “unworkable result” and suggested that it was not the natural meaning of the clause.
  4. By contrast, Vitol’s interpretation led to the conclusion that the comma was incorrectly placed. There was a very great difference between inserting or removing words and concluding that punctuation had gone awry. Moreover, if, as New Age contended, the phrase “shall be reduced” was intended to reflect a reduction in the fee which would operate with effect from a date in the past, clear language might have been expected to make that distinction explicit by use of a phrase such as “with effect from” such date.
  5. Therefore, the natural meaning of the language in Clause 3.1 was not unambiguous.

Analysis of the purpose and commercial effect

  1. It was common ground that the purpose of the fee reduction was to provide an incentive for Vitol to agree to the subordination of the Facility to an intercreditor agreement within the negotiation period. If the negotiation failed, repayment could still be made at the reduced financing fee.
  2. The ten-day period was the mechanism for effecting drawdown and repayment once the outcome of the negotiations was known. Since the fee was part of the overall return that Vitol received in return for lending funds to New Age, it would produce a surprising result if the fee reduction occurred with effect from the end of the ten day window following the expiry of the intercreditor negotiation period, even where the loan was not repaid and Vitol continued to have a commercial exposure by reason of its loan to New Age under the Facility.
  3. In those circumstances, Vitol would be receiving a substantially lower fee even though the facility had not been repaid.

Conclusion on interpretation

The position of the comma was not and could not be conclusive. The Commercial Court had to strike a balance between the indications given by the language and the implications of the competing constructions, while remaining alive to the possibility that one side might have agreed to something which, with hindsight, did not serve its interests. When the rival interpretations were tested against the commercial consequences, including the commercial purpose of Clause 3.1, Vitol’s interpretation, viewed objectively, was the natural, objective meaning of the language of that provision and, when checked against the commercial consequences, it was consistent with business common sense.


It is not entirely apparent whether Vitol and New Age were ever on the ‘same page’ as to the operation of the reduction in the fee. Deals drafted under time pressure, for good reason, can result in circumstances where the parties have a different understanding as to the commercial bargain reached. If this occurs, the prospects for an eventual dispute increase. It seems that Vitol’s interpretation was favoured by the court as the alternative was thought by the Commercial Court to be uncommercial.  As such, it is a reminder that if an outcome is sought that might be considered uncommercial, clear drafting is likely to be required.

Unlike the conclusion in this case, commas can be important.  In 1916, a Roger Casement was executed for treason under the Treason Act 1351.  He had committed the offence in Germany.  The Treason Act read: “if a Man … be adherent to the King’s Enemies in his Realm giving to them Aid and Comfort in the Realm or elsewhere…that ought to be judged Treason”.  During the trial, the question was whether the offence only applied to adherence to enemies “in [the] Realm”.  The judges reviewed the original Norman French text and, in effect, inserted a comma into the unpunctuated text, crucially altering the sense so that “in the Realm or elsewhere” referred to where the adhering to enemies was done and not just to where the “King’s enemies” might be.  Roger Casement was said to have been “hanged on a comma”.

The consequences of moving a comma in the current case were much less severe for New Age.

The distinction drawn between “inserting words which are not there or removing words which are there” and “concluding that the punctuation has gone wrong”, suggests that the English courts will be more flexible when interpreting a provision with incorrect punctuation, as opposed to incorrect words.

Link to case: Vitol E&P Limited v New Age (African Global Energy) Limited [2018] EWHC 1580 (Comm).