Energy/Resources

The main types of legal risk in the energy/resources industry are as follows.

In energy/resources supply and sales contracts, the transaction volume, the method of determining price, delivery dates, quality standards, and force majeure clauses must be clearly defined.

Given the high price volatility that characterizes this field, price adjustment conditions and dispute resolution procedures are important, and including them clearly in the contract helps prevent disputes.

Termination and damages clauses should also be reviewed in detail, and the credit risk of the counterparty must always be assessed.

In joint development agreements entered into for new technology development or project execution, the attribution of intellectual property rights, the scope of technology transfer, and the allocation of responsibility are the central issues.

For license agreements, it is important to clarify the scope of use, royalties, whether exclusivity applies, and whether sublicensing is permitted, and to include measures for responding to a breach of contract.

Risks should be minimized by including dispute resolution clauses (arbitration, litigation, and the like) within the contract.

In international energy/resources transactions, differences in the laws and regulations of each country, customs clearance procedures, the imposition of tariffs, and exchange rate fluctuation risks must be examined closely.

The contract should clearly specify the governing law and dispute resolution procedures, and it should also include measures for managing financial risk.

Related legal trends should be reviewed periodically so that the company can respond promptly to policy changes in each country, such as trade sanctions and import or export restrictions.

Because the energy/resources industry carries a high risk of environmental pollution, such as the emission of hazardous substances into the air, the discharge of wastewater, and soil contamination, the related regulations must be strictly observed.

If emission limits are exceeded, strong administrative dispositions, such as administrative fines and the closure of business sites, may be imposed, and the possibility of civil claims for damages also exists.

Establishing a system to accurately measure and report pollutant emissions, together with regular inspections, is indispensable, and a plan for prompt response and remediation should be prepared in the event of a pollution incident.

Waste generated at a business site must follow strict legal standards for separation, storage, transport, and treatment, and a violation may result in administrative dispositions and criminal punishment.

When entering into a waste treatment contract, it is important to contract with a lawful treatment provider and to establish a system that manages treatment records transparently.

The introduction of eco-friendly processes to reduce waste generation, along with employee training, is also recognized as one pillar of compliant management.

The government operates an emissions trading system to reduce greenhouse gas emissions, and energy/resources companies must strictly manage emissions monitoring and the contracts for purchasing and selling emission rights.

Support policies and related incentive programs to expand the supply of renewable energy are in place, and actively using them to pursue eco-friendly management is one way to strengthen competitiveness.

1️⃣ Management of Permits and Administrative Regulations
□ Confirm whether the permits required for the business (power generation business license, mining permit, import and export permit, and the like) have been obtained

□ Periodically check the status of compliance with permit conditions and ancillary obligations

□ Confirm in advance the validity period of permits and the timing of renewal

□ Review the administrative dispositions, penalty surcharges, and criminal liability that may arise from a permit violation

□ Check whether essential legal obligations, such as environmental impact assessments and safety management plans, have been fulfilled

2️⃣ Compliance with Environmental Law and Safety Management
□ Confirm compliance with regulations on air, water, noise, waste, and greenhouse gas emissions

□ Confirm whether an emergency response manual and a remediation plan for environmental pollution incidents have been established

□ Confirm whether a safety and health management system has been established under the Serious Accidents Punishment Act and whether the management official's obligations are being fulfilled

□ Confirm whether regular environmental inspections and statutory inspections are being carried out

□ Manage any history of environmental regulation violations and cases of penalty surcharges or criminal punishment

3️⃣ Legal Review of Contracts and Transactions
□ Review the legal risks of long-term supply agreements, EPC contracts, and REC and carbon emission rights trading contracts

□ Clarify penalty and damages clauses within key contracts

□ Analyze the risk of non-performance and default by major business partners

4️⃣ Protection of Intellectual Property Rights and Response to Infringement
□ Confirm whether patent rights for core technology, design rights for equipment, and trademark rights for brands have been registered

□ Confirm whether a legal response system is in place in the event of a patent, trademark, or design dispute

□ Review the provisions on the attribution of rights, the scope of use, and confidentiality in technology transfer and license agreements

□ Investigate the existence of prior patents and earlier-filed trademarks and check the possibility of infringement

5️⃣ Compliance in Renewable Energy and Carbon Emission Rights Trading

□ Check whether carbon emission rights (ETS) allocations have been exceeded and review any history of false reporting

□ Confirm whether there has been unlawful trading, double selling, false reporting, or manipulation

□ Conduct a legal review of REC and emission rights trading contracts and revise the damages clauses

□ Check the risk of improper receipt of government incentives and of clawback

6️⃣ Compliance with the Monopoly Regulation and Fair Trade Act and Competition Law
□ Check for price collusion, abuse of a superior bargaining position, and unfair contracts

□ Confirm whether there is an obligation to report M&A or business combinations and conduct a prior legal review

□ Confirm any history of penalty surcharges or civil and criminal liability arising from unfair trade practices

□ Check the risks of joint acts, data exchange, and information sharing with competitors

7️⃣ System for Responding to Changes in Legislation and Policy
□ Periodically monitor amendments to related legislation, such as the Energy Act, the Electric Utility Act, and environmental laws

□ Analyze changes in the government's carbon neutrality policy and energy transition policy and reflect them in the business plan

□ Conduct a legal review when permit standards, environmental regulations, or the emission rights allocation system are reformed

□ Identify changes to the renewable energy incentive program and confirm whether it is being used

8️⃣ Establishment of a System for Dispute Prevention and Legal Advisory
□ Confirm whether regular legal risk assessments and an advisory contract are in place

□ Confirm whether a response system for provisional injunctions, damages, criminal complaints, and the like is in place in the event of a dispute

□ Secure a strategy for responding to the procedures of international arbitration, administrative appeals, administrative litigation, and civil and criminal litigation