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DISPUTE RESOLUTION under INTERNATIONAL O&G AGREEMENTS

DISPUTE RESOLUTION under INTERNATIONAL O&G AGREEMENTS. a presentation by HEW R. DUNDAS Chartered Arbitrator DipICArb International Arbitrator & Mediator to the CEPMLP 25 th November 2005. OVERVIEW of PRESENTATION. Introduction Oil Industry Agreements

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DISPUTE RESOLUTION under INTERNATIONAL O&G AGREEMENTS

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  1. DISPUTE RESOLUTION under INTERNATIONAL O&G AGREEMENTS a presentation by HEW R. DUNDAS Chartered Arbitrator DipICArb International Arbitrator & Mediator to the CEPMLP 25th November 2005

  2. 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

  3. OIL INDUSTRY AGREEMENTS • State/State • e.g. Statfjord/Markham/JDZs • State/OilCo • e.g. PPL/PSC/PSA • OilCo/OilCo • e.g. JOA/SPA/FIA etc • OilCo/Contractor • e.g. drilling/construction contracts • Contractor/Subcontractor

  4. DISPUTE RESOLUTION OPTIONS • Litigation • Arbitration Domestic/International • Expert Determination • Mediation • Other ADR • Application in Oil & Gas Industry • Advantages and Disadvantages

  5. 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

  6. INTL. COMM. ARBITRATION (1)OVERVIEW • What Is It ? • “International” • “Commercial” • “Arbitration” • Profusion of Laws • Institutions and Tribunals • Finality • Enforceability

  7. 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

  8. 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

  9. 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

  10. 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

  11. INTL. COMM. ARBITRATION (6) PROCEEDINGS (2) • Choice of Language • Choice of Procedure • Common vs Civil Law Cultures • Communications • Disclosure • Ethics • Tribunal Issues

  12. INTL. COMM. ARBITRATION (7)AWARD & ENFORCEMENT • Appeals • Jurisdiction • Procedural Failures • Issues of Law • Exequatur • Enforcement • New York Convention 1958

  13. INTL. COMM. ARBITRATION (8)NEW YORK CONVENTION • Recognition of Arbitration Agreements • Enforcement via NYC58; Court may refuse • Art. V(1) • Capacity/Invalidity • Failure of Due Process/other Procedural Failure • Outwith Jurisdiction • Award Not Binding/Set Aside at seat • Art. V(2) • Dispute not Arbitrable • Award Contrary to Public Policy • Court MAY, not “shall”, refuse enforcement • Enforcement other than via NYC58

  14. INVESTMENT ARBITRATION • Private Investor vs State/State Entity • Nature of Arbitration Agreement • BITs/MITs • Washington Convention/ICSID • NAFTA • Energy Charter Treaty • State Immunity

  15. ALTERNATIVE DISPUTERESOLUTION (1) - OVERVIEW • What is ADR ? • Why ADR ? • Relationship with Courts • Compulsory or Voluntary ? • Court Support of: • The Process • The Outcome • Qualifications and Training

  16. 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

  17. ADR (3) – MEDIATION • Consensual Process • Confidentiality • Facilitative/Evaluative • The Process • The Outcome • Is Art 6 ECHR an Issue ? • Strengths and Weaknesses

  18. ADR (4) – MEDIATION HYBRIDS • US Origins • Med-Arb • Arb-Med • MedExDet • Arbitrediation • Other • Strengths and Weaknesses

  19. 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

  20. 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

  21. 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

  22. DISPUTE PREVENTION &DISPUTE MANAGEMENT • Prevention • Corporate Culture • Co-Operation – what do YOU Want • Conciliatory Approach • Local Customs/Culture/Mores • Management • Dedicated Task Force • Expertise – technical/litigator • Decision-making

  23. DISPUTE RESOLUTION in O&G AGREEMENTS (1) • State/State • PCJ/PCA • Arbitration e.g. UNCITRAL • Diplomacy • State/OilCo • Arbitration • Conciliation/Mediation • Diplomacy • Good Management

  24. DISPUTE RESOLUTION in O&G AGREEMENTS (2) • OilCo/OilCo • Litigation (……. Rules OK ?) • Arbitration • Expert Determination • Mediation • OilCo/Contractor • Litigation • Arbitration • The Squeeze

  25. 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

  26. 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

  27. 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

  28. 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

  29. CONCLUSIONS (3) • Oily Arbitrators and Expert Determiners RULE THE WORLD • Or should do !!!!!! • The CATS case proves the point THANK YOU for your ATTENTION

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