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20 Jan

OIL AND GAS 2.6C DISPUTES (RESOLUTION MECHANISMS)

MECHANISMS FOR THE SETTLEMENT OF OIL AND GAS DISPUTES

There are various Machineries for the settlement Disputes such as Arbitration, Conciliation, Litigation, out of court settlement, and so on.

ARBITRATION: it is usual for parties to insert a clause in their agreement providing that their disputes shall be submitted to an arbitrator before going to court-US V Libya.

–           The arbitration agreement must have arisen from the mutual agreement of the parties-K.S.U.D.B V Fanz Construction Ltd.

– Arbitration is governed by the law of the place of arbitration-NNPC V Lutin Investment Property, Texaco V Libya.

–           Parties have the leverage to choose their arbitrators-Gani Fawehinmi V NBA. Usually each party appoints an arbitrator… the third arbitrator is appointed by the mutual agreement of both parties.

–           The arbitration process can be set in motion by the parties or by operation of the law-Section 7 and 8 Arbitration law of Lagos State, Kano State Oil and Allied Products ltd V Kofa Trading Co.

–           The award from arbitration has binding effect on the parties but can be reviewed by the courts-Triana Ltd V U.T.B Plc.

–           The award is subject to the domestic law of the place of arbitration (Section 11 Petroleum Act) or law of the place where the Award is sought to be recognized and enforced-Article 54 ICSID Convention.

The International Centre for Settlement of Investment Disputes (ICSID) Convention was enacted. The International Centre under the convention is a member of the World Bank Group with membership of about 159 member states. Article 25 of the Convention grants it (i.e. the ICSID) jurisdiction in respect international disputes involving investment.

“Investment” may include joint venture agreements, agreements for the transfer of petroleum technology and so on.

Article 54 of the Convention mandates member states to recognise and enforce the judgments of the ICSID. This has also been reiterated in Liberia Eastern Timber Co V Government of Liberia.

The United Nations Commission for International Trade Law also makes provisions for arbitration.

In Nigeria, the Arbitration and Conciliation Act applies throughout the federation-C.G.D.E Geophysique V Etuk. Similarly, the Nigerian Investment Promotion Commission Act[1], the Petroleum Act[2], Oil Pipelines Act, National Domestic Gas Supply and Pricing Regulation, Nigeria Liquedfied Natural Gas (Fiscal Incentives, Assurances and Guarantees) (NLNG) Act[3], Public Enterprises (Privatization and Commercialization) Act and other laws have provisions for Arbitration in the Oil and Gas Sector.

Note however that arbitration cannot erode the constitutional right of access to the courts of justice as guaranteed under Section 6(6)(b). As such, the arbitration award can be impeached in deserving circumstances-Triana Ltd V U.T.B Plc.

Arbitration has been praised for its informality, flexibility, and speedy process.

It has however been criticised for its secrecy as proceedings are not conducted in public. Also, scholars have noted that technical rules and formalities are creeping into the arbitration system and slowing the arbitration process. For example, in Yukos Universal Ltd V Russian Federation it took over 4 years to conclude and enforce an arbitration award. Undue delay was also evident in Hulley Enterprises Ltd (Cyprus) V Russian Federation. Another criticism is that litigation may follow an arbitration award in deserving circumstances… (for example where one party seeks to set it aside). This takes the parties back to the formalities of the legal system which they were avoiding in the first place-This was noted in Thames Valley V Total Gas, and the case of IPCO (Nigeria) v. Nigerian National Petroleum Corporation[4]. Shell V FBIR.

MEDIATION. Seeks to help the parties come to a compromise. A “man in the middle” helps to mediate. He does not give judgment but merely helps the parties to reach a compromise-SAPETROL V Minister of Petroleum Resources.

The UK Civil Procedure Rules 1999 encourage parties to try ADR before litigation.

LITIGATION/COMMON LAW: entails instituting a suit in the court of law. Especially where the matter relates to the interpretation of the law. Litigation has been praised for being formal, open to the public, easily enforceable within jurisdiction and for creating precedence for future cases. It is however criticised for being unduly technical and time consuming. Also noted that it has a win-loose approach which injures the relationship of the parties. In suing, parties may go by way of Negligence (as was done in Oronto Douglas V Shell B.P), nuisance (Amos V Shell BP, SPDCN V Abel Isaiah), the rule in Rylands V Fletcher (Umudje V SPDCN), and so on. Although issues like jurisdiction, failure to prove, lack of locus standi, requirement of pre-action notice and a host of legal requirements may frustrate claims.

In conclusion, the outcome of dispute settlement would depend on the facts of the case. Note that damages, injunction, specific performance, restitution, rectification, and so on may be ordered by the court. Arbitration appears to be the most utilized. Litigation should be the last resort.

 

 

[1] Section 26.

[2] Section 11.

[3] Section 22.

[4] (2005) 2 Lloyd’s Report 326.

Isochukwu

Quite eccentric really

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