‘Despite recent developments in the field of Litigation, parties embroiled in an oil and gas dispute still prefer to choose International Commercial Arbitration as a preferred method of resolving their disputes.’
Examine the truth behind this statement and evaluate the reasons why this may be the case in Oil and Gas Disputes.
NB: Your evaluation must reveal evidence of sufficient reading and research, and, must refer to industry related academic journals and articles adequately.
Total marks for assignment: 100
Legal Aspects of Oil and Gas Industry
The oil and gas industry includes unpredictable, unsafe and costly operations which typically keep going for quite a while. Exceptional contracts are utilized in overseeing connections among different gatherings occupied with these operations. Attributable to the multifaceted nature of operations and relations between different substances, the oil and gas industry is inclined to different sorts of debate (UK oil and gas development potential assessed, 2008). Question may emerge in territories, for example, universal oceanic limit claims; gear related cases; claims over locale; master determination; claims identifying with amount and nature of products; protection issues; and supporting. Therefore, all together not to hamper advancement of oil and gas operations is the key that suitable method for determining such debate are concurred by gatherings.
It is the creator’s view that gatherings in oil and gas industry decide on concurred debate determination (ADR) forms as opposed to eluding those questions to national courts. ADR in some locale is known as option question determination. ADR fundamentally alludes to all method for debate settlement other than prosecution which incorporates intervention, mediation, master determination, arrangements, mollification and early impartial assessment (Born, 2009). In supporting his view the creator basically look at the elements which make universal business intervention handle best than suit.
Arbitration is the form of American depositary receipt that allows the disagreements between the two parties that to be resolved outside traditional system of court. The parties to the dispute would refer to one or more than one person known as the arbitral tribunal or arbitrators by whose award or decision agree to be bound. The international commercial arbitration can be either ad hoc or institutional arbitration (Cassese, 2005). Under the process of the institutional arbitration parties to the dispute agree submit the dispute for the determination by an arbitral institution. The process of ad hoc arbitration is not administered by an arbitral institution. The institutional arbitration has some advantages which include availability of the pre-established procedures and rules that ensure that the proceedings of arbitration begin in a timely manner. Other advantages of the process includes administrative assistance from institutions that usually provides a court or secretariat of the arbitration and list of the qualified arbitrators to select from and assistance to encourage the reluctant parties in order to proceed with the arbitration and established format with the proven record (Cheremisinoff and Rosenfeld, 2009).
The institutional arbitration also has some disadvantages such as administration fees for the use of facilities and services that can be considerable if the dispute is large and sometimes more than the actual amount of the dispute that can lead to additional costs and delays (Diebold, 2010). In ad hoc arbitration, the parties to disputes select rules and arbitrators outside the arbitration. The main advantage of the arbitration is the cost effectiveness. There is no payable of fees in ad hoc arbitration to the arbitral institution and the fees are payable to the arbitrators that are negotiated directly between the arbitrators and parties (Estevadeordal, Suominen and Teh, 2009). Apart from this, ad hoc arbitration is more flexible because it allows the parties to identify different aspects such as framing or choice of rules, selection of arbitrators and venue. It is considered to be the most appropriate method for the settlement of the disputes which can be related to less wealth or small claims parties.
The ad hoc arbitration has limitation such as the effectiveness is dependent on the eagerness of the parties to agree on the procedures of arbitration at time when they are in disputes. If the parties have not agreed with the terms and conditions of the arbitration before arise of any disputes they are fully cooperate in the disputes (Gaillard, 2010). If the parties do not agree with the process of dispute resolution then either party can go to the court.
There are numerous arbitral organizations on the planet yet the real ones are three specifically, the International Chamber of Commerce, International Court of Arbitration; the American Arbitration Association’s ,, International Center for the Dispute Resolution and the London Court of International Arbitration (Handbook on international arbitration practice, 2010).
The ICC is one of the main suppliers of debate determination administrations for people, organizations, states, state elements and global associations looking for different options for court prosecution. A 2010 exploration study attempted by the School of International Arbitration at Queen Mary University, London, inferred that “ICC is the most favored and broadly utilized mediation foundation”, with half of respondents leaning toward ICC (Inkpen and Moffett, 2011). The review additionally uncovered that “the most regularly utilized organization in the course of recent years was ICC (56%)”, trailed by a tied second place for two different foundations at 10%.
There are components which recognize the ICC from other arbitral establishments. The as a matter of first importance each ICC arbitral recompense is investigated by the Court of Arbitration, this implies the grant is not given to parties until it has been audited by the Court. The second component is that before the initiation of the discretion the gatherings are required to fill an archive called Terms of Reference which incorporates the accompanying arrangements of things, synopsis of cases and reliefs looked for, names of gatherings, venue of intervention, the tenets and other data identifying with disclosure or booking (Lovell, 2010). This permits gatherings to the question to know right from the earliest starting point the parameters of the intervention. The ICC is situated in Paris however it oversees assertion everywhere throughout the world.
The LCIA is one of the main worldwide foundations for business question determination. It is made out of thirty five individuals and it is the last power for the correct understanding and use of LCIA Rules. It is in charge of delegating tribunals, deciding difficulties to authorities, and controlling procedures. LCIA is the most established universal arbitral foundation. Its Secretariat is going by an enlistment center who directs question alluded to the LCIA (Mistelis, 2010). LCIA is situated in London however it has set up LCIA India, a free discretion establishment situated in New Delhi. It has additionally settled the DIFC-LCIA Arbitration Center in Dubai.
One of the benefits of LCIA is that it is financially savvy as in authoritative charges and expenses are not in view of entireties in issue. An enlistment expense is payable with the Request for Arbitration and from there on, hourly rates apply for both LCIA and the referees (O’Neill and O’Neill, 2011). LCIA additionally goes about as the selecting power and discretion controlled under the United National Commission for International Trade Law (UNCITRAL) mediation rules. It is perceived as the most mainstream global mediation establishment on the planet.
The American Arbitration Association is an association with workplaces all through the United States. It has a long history and involvement in the field of option question determination, giving administrations to people and associations who wish to determine clashes out of court. The International Center for Dispute Resolution is a division of AAA which gives worldwide assertion and other debate determination administrations (Schmitt, 2007). ICDR is the headquartered in New York and has different workplaces in Ireland, Singapore, Mexico and Bahrain.
ICDR is in charge of regulating mediation procedures, including giving assertion rules; delegating authorities; appointing caseworkers; setting hearings; transmitting archives; and planning phone calls. ICDR keeps up an overall board of more than 650 autonomous referees and arbiters, who are relegated to hear and resolve cases.
Global intervention is a well known ADR technique for question determination in the oil and gas industry. In the accompanying sections the creator talks about reasons which make the global business discretion more ideal than prosecution.
Oil and gas contracts every now and again include parties from various national purviews. Practically speaking, no gathering to an agreement is willing to be liable to the national locale of another gathering which would be the situation if the gatherings were to present a question to the courts of a host nation. So as to keep away from a ‘nation of origin point of preference’ of the other party, it is normal for gatherings to pick discretion for the nonpartisanship of the discussion (Schütze, 2012). Under discretion, a party concurs in the agreement or after the debate has emerged for unbiased mediators, impartial arbitral foundation, nonpartisan standards and unbiased seat of assertion.
Keeping in mind the end goal to guarantee the impartiality of mediators, the ICC Rules requires that “in affirming or selecting authorities, the Court should consider the planned referee’s nationality, habitation and different associations with the nations of which the gatherings or alternate referees are nationals.” This prerequisite is started on the regular law rule of nemo debet esse judex in propria causa, that is, nobody can be a judge in his own case (Schütze, 2013). The fundamental reason for existing is to guarantee that referees are fair and autonomous in their basic leadership. The International Bar Association (IBA) Rules of Ethics for International Arbitrators obliges authorities to be free from inclination. These Rules go further to give components of predisposition in particular prejudice and reliance. Absence of prejudice or absence of autonomy with respect to an authority is a ground for testing the mediator on the ground of open strategy.
Discretion, as other ADR forms, gives parties a level of independence which is inaccessible under litigation. Party self-rule is a basic standard in worldwide business arbitration. The guideline is encapsulated in both global and national laws of intervention. Article 19 (1), of UNCITRAL Model Law gives that “subject to the procurement of this Law, the Parties are allowed to concur on the system to be trailed by arbitral tribunal in directing the procedures”. In the United Kingdom, the Arbitration Act of 1996 perceives the opportunity of gatherings to concede to how they need their question to be determined.
In both specially appointed discretion and institutional intervention, gatherings are by and large allowed to pick referees, seat of mediation and administering law of assertion or lex causae. Notwithstanding, in institutional intervention, where parties neglect to concede to the decision of judges or seat of mediation or lex causae, the arbitral foundation will pick referee and the tenets of the organization will apply (Potter and Biukovic, 2011). Referees picked by gatherings are typically persons with ability in the business in opposition to judges and officers (of courts) who don’t as a matter of course have skill in the business. The guideline of gathering independence in assertion have been perceived or maintained by the courts of law, including the English instance of Jivraj v. Hashwan where the Supreme Court overruled the Court of Appeal’s choice which hosted the impact of testing the gathering independence in discretion specifically as to their opportunity to pick judges with particular capabilities.
There are several key reasons why the several parties in the oil and gas sector contact specifically prefer ADR process to litigation. There are two reasons which are thoroughly discussed in the given article on the basis of the key theories and the practice of global arbitration.
The arbitration parties select a neutral venue for the overall resolution of the key dispute, select a arbitrator who are not particularly national of the country of the host country of one of the party I dispute and share no connection with any relevant party to the dispute. Due to this several arbitration is considered be a neutral process. Party autonomy is considered to play a decisive factor in the parties which are considered to play preferred role in case of global arbitration and the overall number and key qualification of arbitrators.
Finally a key arbitration is non adversarial techniques of dispute resolution which is premised on the overall requirement for the win situation of the dispute resolution process. In this perspective, arbitration permit the parties help to manage the health relationship even after the arbitration process is completed which is considered to be important in continuity in the oil and gas operation.
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