TABLE OF CONTENTS

CONTENTS PAGE

INTRODUCTION 4

LITERATURE REVIEW 6

DISPUTES IN THE OIL AND GAS INDUSTRY 9

i. State versus International Oil Companies 9

ii. State versus State Disputes 11

iii. International Oil Companies and Company Disputes 12

iv. Individual versus International Oil Companies 12

MODES OF DISPUTE RESOLUTION 14

i. Litigation 14

ii. Arbitration 15

iii. Mediation 17

iv. Negotiation 18

v. Conciliation 20

vi. Inquiry/Minitrials/ Early Neutral/ Expert Evaluations 21

COMPARISON OF DISPUTE RESOLUTION CLAUSES IN PSAs 22

i. The Guyana and Exxon PSA 2016 22

ii. Trinidad & Tobago PSA, 2012 24

iii. Uganda Model PSA 2018 25

CONVENTION ON THE SETTLEMENT OF INVESTMENT

DISPUTES BETWEEN STATES AND NATIONALS OF OTHER
STATES (CSID) 26

CONCLUSION 27

BIBLIOGRAPHY 28

Page 1 of 7
INTRODUCTION

A dispute is defined as a disagreement, argument, or controversy which often give rise to a legal

proceeding.1 Arrangements in the oil and gas sector are often governed by contracts, and when

disagreements or controversy arise between parties to the contract, contractual provisions or

litigation are effected. In the oil and gas industry disputes take a number of forms and can

include various stakeholders.

A stakeholder can be defined as a party who has an interest and might be affected by the

performance and outcome of a business entity, project or enterprise. 2 In the oil and gas sector,

stakeholders refer to individuals, groups or organizations with interests in a venture and

influences or can be influenced by activities associated with the venture. For the purposes of this

paper, they are categorized as direct (primary) stakeholders or indirect (secondary) stakeholders.

Primary stakeholders refer to bodies that have a visible and active role in a particular venture

and/ or are impacted by it, including oil and gas companies, host communities, governments,

financial institutions, investors, regulatory authorities and citizens of the host oil producing

country.

Secondary stakeholders on the other hand, refers to those who are not actively involved in the

venture but have an interest in it and are inclined to monitor its progress, including non-

governmental organizations, academies, media and foreign governments. Therefore, parties

involved in disputes in relation to the oil and gas industry may include the State, International

Oil Companies (IOCs), local companies/ subcontractors and individuals/ citizens.

1
Cornell Law School, ‘Dispute’ (2021) Retrieved from Cornell Law School: Legal Information Institute:
<https://www.law.cornell.edu/wex/dispute#:~:text=A%20dispute%20is%20a%20disagreement,dispute%20is
%20the%20corresponding%20verb>
2
Cornell Law School, ‘Stakeholder’ (2021) from Cornell Law School: Legal Information Institute: <stakeholder | Wex
| US Law | LII / Legal Information Institute (cornell.edu)>

Page 2 of 7
Having regards to the gravamen of the stakes involved in the oil and gas industry, disagreements

can be detrimental the parties. Unresolved disputes can derail oil and gas project resulting in

significant economic loss for parties involved. Therefore, it is pertinent to have robust and clear

strategies in place to resolve disputes. The process of resolving disagreements, arguments or

controversies between parties is referred to as dispute resolution. Traditionally, in relation to

disputes arising out of contracts, litigation, is often the most thought about method to resolve

disputes. However, there are multiple other forms of dispute resolutions employed in extractive

industries which are often provided for in the contractual agreements between the relevant

parties. These other forms are referred to as “Alternative Dispute Resolution” (ADR). Many of

these alternative dispute resolutions used domestically and internationally include arbitration,

mediation, negotiation, conciliation and facilitation.

This paper aims to explore the various modes of dispute resolution, their importance and how

they are utilized by various stakeholders in the oil and gas industry.

Page 3 of 7
LITERATURE REVIEW

Moore and Pierce posit that dispute resolution techniques can either be decisional or non-

decisional. Decisional techniques are designed to take the final decision-making process out of

the control of the parties. Non-decisional techniques on the other hand allow the decision-making

process to remain under the control of the parties involved with the goal of “facilitating” a

resolution of the dispute by the parties.3 Chapter VI of the United Nations Charter prescribes a

number of dispute resolution to be used by state members. These types of resolution include

negotiation, enquiry, mediation, conciliation, arbitration and, adjudication via the International

Court of Justice. The charter recognizes both litigation and alternative dispute resolution

mechanisms as a means of resolving disputes.

Over the years, ADR mechanisms, have been increasingly adopted and utilized by many

countries and parties, the oil and gas sector, is no exception. ADR is widely considered to be a

logical and practical solution in resolving disputes in a discrete, timely, civil and cost-effective

manner.4 Relationships are preserved and prolonged traditional litigations are avoided. 5 ADR,

can be defined as, “a broad spectrum of structured processes, including mediation and

conciliation, which does not include litigation though it may be linked to or integrated with

litigation, and which involves the assistance of a neutral third party, and which empowers

parties to resolve their own disputes.”6

3
Loretta Moore and David Pierce, ‘A Structural Model for Arbitrating Disputes Under the Oil and Gas Lease’
(Regents University of New Mexico 1997) p 409
4
Guyana Chronicle, ‘ADR is the way forward,’ (Guyana Chronicle October 31, 2011).
5
Nicholas Hammond, ‘The Difference Between Arbitration and Litigation’ (2019). Retrieved from LEXOLOGY:
<https://www.lexology.com/library/detail.aspx?g=a947e053-535b-417c-8498-2e8cc9c6cd1>
6
Law Reform Commission, ‘Alternative Dispute Resolution: Mediation and Conciliation’ (Law Reform
Commission Report, 2010) p 98

Page 4 of 7
A significant distinguishing factor in ADR is the utilization of the neutral third party and the

consequences of the Agreement made thereunder.

Additionally, many stakeholders, particularly, investors in the oil and gas sector utilizes Investor

State Dispute Settlement (ISDS) mechanisms embedded in investment treaties. These ISDS are

preferred by investors because they enable protection of their investment whenever a dispute

arises and those disputes could potentially result in significant financial loss to them. 7

They ISDS challenge a range of the host state actions and interactions that would potentially

have a negative impact on their investments. 8 Many ISDS stipulates that dispute arising out of

the treaties are to be dealt with through various stipulated ADR mechanisms. 9 The rationale for

choosing ADR is to ensure impartial adjudication of disputes through the application of the terns

of the contractual agreement, objective legal principles, and neutral procedural rules. 10 Moreover,

many ISDS stipulates that only investors or stakeholders covered by the treaties are able to bring

a claim against the states. States are prohibited from initiating ISDS claims against investors. 11

Many of these ISDS and contractual agreements that contain resolution stipulates adopt a

multitiered clause approach.12 This approach was also sanction by Moore and Pierce who

stipulates that parties must first exhaust one or two non-decisional techniques before they can

pursue arbitration.13

7
Lise Johnson and Jesse Coleman, ‘International Investment Law and the Extractive Industries Sector’ (Columbia
Center on Sustainable Investment) p 1
8
Johnson and Coleman (n 7) p 3
9
‘International Investment Law and The Extractive Industries’ (Columbia Center on Sustainable Investment July
2022)
10
Gary Born, A New Generation of International Adjudication’ (Duke University School of Law January 2012) p 828
11
Johnson and Coleman (n 7) p 6
12
Mohammad Alramahi, ‘Dispute Resolution in Oil and Gas Contracts’ (IELR 2011) p 85
13
Moore and Pierce (n 3) p 410

Page 5 of 7
Moreover, dispute resolution clauses with these agreements are enforceable as was seen in the

American cases of DeValk Lincoln Mercury, Inc. v. Ford Motor Co. No. 811 F.2d 326 and

Haertel Wolff Parker Inc. v Howard S. Wright Constructions Co (unreported, 4 December,

1989, WL 151765). Further in the English case of Channel Tunnel Group v Balfour Beatty

Construction Ltd., Lord Mustill posited:

“I believe that it is in accordance, not only with the presumption exemplified in

the English cases cited above that those who make agreements for the resolution

of disputes must show good reasons for departing from them, but also with the

interests of the orderly regulation of international commerce, that having

promised to take their complaints to the experts and if necessary to the

arbitrators, that is where the appellants should go.”14

Additionally, Born, posits that certain dispute resolution Convention such as Convention on the

Settlement of Investment Disputes Between States and Nationals of other States (CSID),

stipulates that arbitration awards and conciliation decisions are to be enforced by local courts of

contracting parties.15 This wholistic approach from stipulating how disputes are to be settled,

selecting a dispute resolution mechanisms and enforceability of these dispute resolution

mechanisms demonstrates how significant the various types or resolutions are to stakeholders in

the oil and gas industry.

14
[1993] UKHL J0121-3
15
Born (n 10) p 836

Page 6 of 7