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DISPUTE RESOLUTION under INTERNATIONAL O&G AGREEMENTS
a presentation by
HEW R. DUNDASChartered Arbitrator DipICArb
International Arbitrator & Mediatorto the
CEPMLP25th November 2005
OVERVIEW of PRESENTATION
Introduction Oil Industry Agreements Dispute Resolution Clauses & Options Domestic/International Disputes Oil & Gas Industry – a Special Case ? A Case Study – the WRONG approach Conclusions
OIL INDUSTRY AGREEMENTS
State/Statee.g. Statfjord/Markham/JDZs
State/OilCoe.g. PPL/PSC/PSA
OilCo/OilCoe.g. JOA/SPA/FIA etc
OilCo/Contractore.g. drilling/construction contracts
Contractor/Subcontractor
DISPUTE RESOLUTION OPTIONS
Litigation Arbitration Domestic/International Expert Determination Mediation Other ADR Application in Oil & Gas Industry Advantages and Disadvantages
LITIGATION
Difficulties of Litigating Local Laws – are they adequate ? Courts – Good, Bad and Ugly Litigation against States Finality Timescales - long and VERY long Enforceability Costs
INTL. COMM. ARBITRATION (1)OVERVIEW
What Is It ?“International”“Commercial”“Arbitration”
Profusion of Laws Institutions and Tribunals Finality Enforceability
INTL. COMM. ARBITRATION (2)PROFUSION of LAWS
Law of the Contract Law of the Arbitration Agreement Law of the Arbitration (Lex Arbitri) Law governing Capacity of Parties Law of Seat (Lex Curiae) Law of Place of Enforcement Other Potentially Applicable Laws
INTL. COMM. ARBITRATION (3)SOME KEY LEGAL ISSUES
Arbitrability Capacity Substantive vs Procedural Laws Arbitrations against States/State
Immunity Enforceability Public Policy Exception (NYC V(2)(b)) Protectionism
INTL. COMM. ARBITRATION (4) INSTITUTIONS
UNCITRAL ICSID/NAFTA/ECT ICC/LCIA Chartered Institute of Arbitrators Regional Institutions incl. CIETAC/AAA LMAA GAFTA/FOSFA/LME/RSA Other
INTL. COMM. ARBITRATION (5) PROCEEDINGS (1)
Party Autonomy Ad Hoc vs Institutional Arbitration Choice of Lex Arbitri Choice of Rules/Institution Choice of Tribunal Choice of Seat
INTL. COMM. ARBITRATION (6) PROCEEDINGS (2)
Choice of Language Choice of Procedure Common vs Civil Law Cultures Communications Disclosure Ethics Tribunal Issues
INTL. COMM. ARBITRATION (7)AWARD & ENFORCEMENT
AppealsJurisdictionProcedural FailuresIssues of Law
Exequatur Enforcement New York Convention 1958
INTL. COMM. ARBITRATION (8)NEW YORK CONVENTION
Recognition of Arbitration Agreements Enforcement via NYC58; Court may refuse
Art. V(1)Capacity/InvalidityFailure of Due Process/other Procedural FailureOutwith JurisdictionAward Not Binding/Set Aside at seat
Art. V(2)Dispute not ArbitrableAward Contrary to Public Policy
Court MAY, not “shall”, refuse enforcement Enforcement other than via NYC58
INVESTMENT ARBITRATION
Private Investor vs State/State Entity Nature of Arbitration Agreement BITs/MITs Washington Convention/ICSID NAFTA Energy Charter Treaty State Immunity
ALTERNATIVE DISPUTERESOLUTION (1) - OVERVIEW
What is ADR ? Why ADR ? Relationship with Courts Compulsory or Voluntary ? Court Support of:
The ProcessThe Outcome
Qualifications and Training
ADR (2) – FORMS of ADR
Executive Negotiation Early Neutral Evaluation (ENE) Private Mini-Trials Adjudication, DABs DRBs Mediation/Conciliation Med-Arb, Arb-Med, MedExDet Arbitrediation Other/None of the Above
ADR (3) – MEDIATION
Consensual Process Confidentiality Facilitative/Evaluative The Process The Outcome Is Art 6 ECHR an Issue ? Strengths and Weaknesses
ADR (4) – MEDIATION HYBRIDS
US Origins Med-Arb Arb-Med MedExDet Arbitrediation Other Strengths and Weaknesses
ADR (5) - EXPERT DETERMINATION
Origins Nature of the Process Nature of the Decision English Law (Bernhard Schulte) Other Laws Enforceability Strengths and Weaknesses Use in O&G Industry
ADR (6) - ADJUDICATION
Origins in Construction Disputes Nature of the Process Nature of the Decision English Law HGCRA 1996 Other Laws – NZ/Singapore Contrast with Expert Determination Strengths and Weaknesses O&G Industry Excluded in UK
ADR (7) – DABs/DRBs
Prevention of Construction Disputes Neutral/Panel of Neutrals Nature of the Process Nature of the Decision Contrast with Expert Determination Strengths and Weaknesses Project Neutral during Negotiation
DISPUTE PREVENTION &DISPUTE MANAGEMENT
PreventionCorporate CultureCo-Operation – what do YOU WantConciliatory ApproachLocal Customs/Culture/Mores
ManagementDedicated Task ForceExpertise – technical/litigatorDecision-making
DISPUTE RESOLUTION in O&G AGREEMENTS (1)
State/StatePCJ/PCAArbitration e.g. UNCITRALDiplomacy
State/OilCoArbitrationConciliation/MediationDiplomacyGood Management
DISPUTE RESOLUTION in O&G AGREEMENTS (2)
OilCo/OilCoLitigation (……. Rules OK ?)ArbitrationExpert DeterminationMediation
OilCo/ContractorLitigationArbitrationThe Squeeze
SOME CURRENT ISSUES in the OIL & GAS INDUSTRY
Industry Preference for Litigation Expert Determination Failure to Grasp ADR Ignorance of non-Mediation ADR Composition of Arbitral Tribunals The Lawyers’ Involvement Macho Management/Lawyers
CASE STUDY: CATS DISPUTE CATS - North Sea Gas Pipeline Capacity Reservation by 3rd Party User Send Or Pay Obligation; £45m paid Fall In Gas Price – Contract Uneconomic High Court/CoA/House of Lords
Did the Subsea valve work ?
Was CATS “Available “ ?
£100m at stake; £8-12 million legal costs
CONCLUSIONS (1)
Wide Range of Dispute Resolution Tools Lack of understanding of ADR techniques Oilmen’s Decisions Best for Oily Disputes Prevalence of/Preference for Litigation Dinosaurs Still Survive You Cannot Afford Macho-Man
CONCLUSIONS (2)
Oil Industry Myth (1) - Certainty Oil Industry Myth (2) - $000,000s = Judge Judges/QC Arbitrators are NOT Engineers Judges/QC Arbitrators are NOT Oilmen Widen The Options Think ‘outside the box’ Take Risks – Caution is Expensive
CONCLUSIONS (3)
Oily Arbitrators and Expert Determiners
RULE THE WORLD Or should do !!!!!! The CATS case proves the point
THANK YOU for
your ATTENTION