Dispute Resolution Planning for the Oil and Gas Industry

Question: 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. Answer: When it comes to the oil and gas industry the operations may be classified as intricate, unsafe and costly operations and they generally keep going on for quite an extended period of time. Given the nature of the work undertaken by this industry, special contracts are utilized in overseeing connections among different parties occupied with these operations. Inferable from the intricacy of operations and relations between different elements, the oil and gas industry is inclined to different sorts of disputes (Bowman, 2001). Disputes might emerge in territories, for example, worldwide maritime boundary claims; equipment-related claims; claims over jurisdiction; master determination; claims identifying with amount and nature of merchandise; insurance issues and sometimes hedging (Connerty, 2002). Thus, to ensure that none of the above reasons or more hampers the progress of oil and gas operations it is essentially important to remember that proper methods for determining such disputes a re concurred by the involved parties. It may be stated that the parties involved in oil and gas industry decide to go for agreed dispute determination (ADR) instead of alluding those disputes to national courts. ADR in some jurisdiction is known as alternate dispute resolution. ADR generally alludes to all methods for dispute settlement other than litigation which incorporates mediation, arbitration, expert determination, negotiation arrangements as well as conciliations This article is separated into three principle segments. In the principal segment the researcher talks about the two important types of arbitration. In the second segment, the components and contrasts of the significant international arbitral foundations are highlighted. The basis of the paper is the third segment which centers the discourses on the variables which make international arbitration more desirable over litigation, especially in the context of oil and gas industry disputes. The exposition infers that, the international arbitration is preferred to litigation in the oil and gas industry due its nonpartisanship, economy, simplicity in terms of implementation and time. Arbitration is likewise supported in light of the fact that it is viewed as non adversarial and it maintains all forms of confidentiality. Additionally it provides the parties the much necessary aspect of self autonomy when it comes to the determination of their dispute. Arbitration is a type of ADR which permits differences between two parties to be determined outside of the traditional court framework. In an arbitration case the parties to a dispute will allude it to one or more persons -more commonly known as the "judges" or an 'arbitral tribunal'. it is by the choice of these judges or arbitral tribunals that that parties in question involved in the dispute consent to be bound. International business arbitration can either be institutional or ad-hoc arbitration. While under the institutional arbitration process, the parties forming the dispute consent to present a dispute for the process of determination by a specific arbitral organization, the ad-hoc arbitration procedure is not administered by an establishment (Shuman-Powell, Esq., 2010). There are several advantages of institutional arbitration. First, it incorporates the accessibility of pre-built up standards and procedures which guarantee the arbitration procedures start in an opportune way. Further advantages incorporates administrative help from the foundation, which as a rule gives a secretariat or court of arbitration; a rundown of qualified mediators to browse; help with urging hesitant parties to continue with arbitration; and a set up arrangement with a demonstrated record (Martin and Anshan, 2001). Regardless of its advantages, institutional arbitration has a few negetive sides which incorporate administrative charges for governance and utilization of the offices, which can be significant if there is a substantial sum in dispute which often becomes more than the real sum in dispute. In these conditions, the organization from inside of the foundation, can lead to defers and additional expenses. Moreover the required time for the process is often considered to be unrealistic (Al-Barashdi, 2015). In ad hoc arbitration, parties to the disputes choose authorities and standards outside the built up arbitrations. One of the advantages of ad hoc arbitration is the fact that it is very cost effective (Blanke, 2008). In ad hoc arbitration there are no charges payable to arbitral establishment and charges payable to mediators are arranged specifically between the parties and judges. Likewise, ad hoc arbitration is thought to be adaptable as it permits parties to decide a few angles, for example, decision or surrounding of tenets, decision of venue and referees. Practically speaking, ad hoc arbitration is proper for settlement of disputes identifying with small claims or poor parties (Stanley, 2012). The major disadvantages of the Ad hoc form of arbitration is the it has a tendency to depend on the parties willingness to agree upon the arbitration procedures foregoing the fact that they are already in a dispute. Moreover, if the parties previously have had disagreed to the terms of arbitration before the onset of the dispute, it remains very unlikely that they would agree to the same after the onset of the dispute. Thus in such cases, the dispute resolution gets halted and the parties have no other option left but to go for litigation processes (Stanley, 2012). International arbitration is considered to be a popular method of dispute resolution especially in the oil and gas industry. Here onwards the researcher would describe the different reasons that make this procedure a more preferable method as compared to litigation. Oil and gas contracts as often as possible include parties from various national jurisdictions. In practice, it is often noticed that the contracting parties remain unwilling to be subject to the national jurisdiction of another country or party which is likely to happen if the parties were to present a dispute to the courts of the host country (Ewing, 2014). With a specific end goal to stay away from a 'nation of origin point of interest' of the other party, it is normal for parties to choose arbitration as a means of dispute resolution for the lack of bias of the forum18. Under arbitration, parties concur in the agreement or after the dispute has emerged for nonpartisan arbitrators (McArthur, 2014), unbiased arbitral institution (Bergsten and KroÃÅ'ˆll, 2011), impartial tenets and nonpartisan seat of arbitration (Lew et al., 2003). So as to guarantee the lack of bias of arbitrators, the ICC Rules requires that "in affirming or naming authorities, the Court might consider the planned mediator's nationality, home and different associations with the nations of which the parties or alternate judges are nationals." (Moses, 2008). This necessity 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 particular case (Schwarzenberger, 2012). The fundamental objective is to guarantee that the chosen arbitrators are fair-minded and autonomous in their choice. The International Bar Association (IBA) Rules of Ethics for International Arbitrators obliges judges to be free from bias (Kurkela and Snellman, 2005). These Rules go further to give components of predisposition in particular favoritism and dependence (Kyungbae, 2008). Impartiality or absence of autonomy with respect to a mediator is a ground for testing the arbitrator on the basis of public policies ( Kumar, 2014). Like all other ADR processes, Arbitration provides the involved parties with a level of autonomy. When it comes to the principle, the autonomy related to parties is considered to be the fundamental principle. International commercial Arbitration values their fundamental principle related to the party autonomy. However, in both international and national laws regarding arbitration has included the principle of party attorney in it. As per Article 19 of UNICITRAL Model law, subject to the provision of this Law, the Parties are free to agree on the procedure to be followed by arbitral tribunal in conducting the proceedings (UNCITRAL, 2007). The arbitration act of United Kingdom has recognized the issue of the freedom of parties regarding the solution through which they can easily solved their dispute. Parties have the right to choose their own arbitrators. But these rights to the parties are limited only in ad hoc arbitration and in institutional arbitration. Not only that, but the part ies are also free to choose the seat of their arbitrators and also the law of arbitration which will govern the proceedings. The governing law of arbitration is also known as lex causae (Landolt, 2006). There are cases in institutional arbitration, where the parties also failed to choose not only their arbitrator but also the seat of arbitration. However, in such instances, the arbitral institution is liable to choose the arbitrator and the seat of arbitration on behalf of their parties. The important part of this act is that the arbitrators who are being chosen are the expertise from the oil and gas industry. On the other hand, it is also not necessary that the magistrates and the judge need to be expert in the industry. Various laws are provided under national law. One of them is important where the law states that the judge will be appointed by the state and the rules which will be applicable are also be promulgated by the state. Moreover, the venue will be decided by the jurisdi ction (Weiler, 2005). Thus, where the argument arises regarding any proceedings in court litigation is considered to be formal in nature and it is also adhere to the chosen procedure of the law. However, the parties do not have any control over the litigation procedure. The case can only be controlled by some of the specific individual namely: judge, representative of the parties in oil and gas disputes. Various factors are prevailed for which the preference of arbitration is much more compare to litigation. This is because litigation is more expensive that the arbitration. Apart from the cost effectiveness, litigation also has another important disadvantage that it is very time consuming. Fees payable to the appointed advocates or may be appointed barriers are the reason of increasing the cost in case of litigation. The court process gets lengthy as there prevail various appeal proceeding. However, there is also some controversy regarding this topic. Some of the people believe and also stated that arbitration is not at all cost effective in nature compare to litigation in cases of international arbitration. Parties who are related to the gas or oil dispute always consider the time that is being taken for their legal proceedings (McArthur, 2014). This is because within the consumed time the dispute will get resolved. The time of consumption of an arbitral proceeding is less because t he discovery level is low. Moreover, all the awards are non-appealable in nature but there are also some exceptional cases for it. It is also stated by many researcher that arbitration is more advantages compare to litigation. One of the main features of ADR processes is that the proceeding related to ADR processes are kept confidential. Parties who are under the arbitration agreement always agree to keep the documents related to the proceeding including the evidences and also the orders as confidential (Mourre, 2008). Thus, this act as an advantage on the part of the arbitration compare to litigation. In case of Litigation, the documents, evidences and every other thing related to the proceeding are open to public save in most of the cases. The power is being given upon the third party regarding the privacy of the arbitration process and they has ability to access the proceedings and also the ability to disclose the facts of the arbitration proceeding (Alqurashi, 2005). However, they are not liable to take the consent of the parties before disclosing the facts to the public. The controversy arises regarding the confidentiality of the arbitration proceeding from various factors which are being already disc ussed above. But it is also true that the arbitration proceedings are not confidential because information resulted from the proceedings may become public in future. Thus from the above discussion it may be inferred that there are several different reasons because of which individuals who are party to oil and gas contracts would prefer arbitration as a means to dispute resolution as compared to opting for litigation. in a nutshell, it may be stated that arbitration helps by choosing a neutral venue for the dispute resolution process and the arbitrators are also individuals who have no connection with the host country or the disputed country. In short, neutrality is strictly maintained even in the case of the arbitrators (Martin and Anshan, 2001). Most importantly, arbitration is considered to be a non-adversarial method that helps in dispute resolution and is premised upon the need for the two parties to come to a situation that takes into account both their benefits. This helps the parties involved to maintain a good relationship with one another even after the dispute resolution process has ended. This is considered to be the most crucial issue since it ensures that the continuity in oil and gas operations is successfully maintained. References Al-Barashdi, S. (2015). The efficiency of alternative dispute resolutions in the Oil and Gas Industry. International Journal of Administrative and Business Studies, 1(2), pp.41-44. Alqurashi, Z. (2005). International oil and gas arbitration. [Place of publication not identified]: Alexander's Gas Oil Connections. Bergsten, E. and KroÃÅ'ˆll, S. (2011). International arbitration and international commercial law. Alphen aan den Rijn, The Netherlands: Kluwer Law International. Blanke, G. (2008). Institutional versus Ad Hoc Arbitration: A European Perspective. ERA Forum, 9(2), pp.275-282. Bowman, J. (2001). Dispute Resolution Planning for the Oil and Gas Industry. ICSID Review, 16(2), pp.332-407. Connerty, A. (2002). Dispute Resolution in the Oil and Gas Industries. Journal of Energy Natural Resources Law, 20(2), pp.144-171. Ewing, S. (2014). Best of the oil gas law colloquium. Mechanicsburg, Pa.: Pennsylvania Bar Institute. Kumar, L. (2014). The Independence and Impartiality of Arbitrators in International Commercial Arbitration. SSRN Electronic Journal. Kurkela, M. and Snellman, H. (2005). Due process in international commercial arbitration. Dobbs Ferry, NY: Oceana Publications, Inc. Kyungbae, K. (2008). A Study on the Impartiality and Independence of Arbitrators. journalofarbitrationstudies, 18(1), pp.31-47. Landolt, P. (2006). Modernised EC competition law in international arbitration. The Hague: Kluwer Law International. Lew, J., Mistelis, L. and KroÃÅ'ˆll, S. (2003). Comparative international commercial arbitration. The Hague: Kluwer Law International. Martin, J. and Anshan, M. (2001). Alternative dispute resolution for oil and gas practitioners. Chicago, IL: Section of Environment, Energy, and Resources. McArthur, J. (2014). Oil and gas implied covenants for the twenty-first century. New York: Juris. Moses, M. (2008). The principles and practice of international commercial arbitration. Cambridge: Cambridge University Press. Mourre, A. (2008). The Set-off Paradox in International Arbitration. Arbitration International, 24(3), pp.387-404. Newman, L. and Hill, R. (2008). The leading arbitrators' guide to international arbitration. Huntington, N.Y.: Juris Pub. Schwarzenberger, G. (2012). International law as applied by international courts and tribunals. 10th ed. London: Stevens. Shuman-Powell, Esq., R. (2010). Hamilton v. Burr: An Alternative Dispute Resolution Perspective. SSRN Electronic Journal. Stanley, C. (2012). Traps for the unwary: the pitfalls of ad hoc arbitration. Trusts Trustees, 18(4), pp.332-340. Weiler, T. (2005). International investment law and arbitration. London: Cameron May. Won-Suk Oh, and Yongil Kim, (2009). A Comparative Study on the Institutional Arbitration and Ad Hoc Arbitration. journalofarbitrationstudies, 19(1), pp.25-44. www.uncitral.org. (2007). UNITED NATIONS UNCITRAL Model Law on International Commercial Arbitration. [online] Available at: https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf [Accessed 26 Mar. 2016].