SECURITY of PETROLEUM INVESTMENTS: the ROLE of DISPUTE RESOLUTION a presentation by HEW R. DUNDAS Chartered Arbitrator DipICArb International Arbitrator & Mediator President CIArb to the Cámara Industriales de Comercio Ecuatoriana-Británica 9 th July 2007

OVERVIEW of PRESENTATION  Introduction  Oil Industry Agreements  Dispute Resolution Clauses & Options  Domestic/International Disputes  Oil & Gas Industry – a Special Case ?  Conclusions

OIL INDUSTRY AGREEMENTS  State/State  Joint Development Zones  State/OilCo  e.g. PPL/PSC/PSA  OilCo/OilCo  e.g. JOA/SPA/FIA etc  OilCo/Contractor  e.g. drilling/construction contracts  Contractor/Subcontractor

DISPUTE RESOLUTION OPTIONS  Litigation  Arbitration Domestic/International  Mediation/Conciliation/Other ADR  Application in Oil & Gas Industry  Advantages and Disadvantages

LITIGATION  Difficulties of Litigating  Local Laws – are they adequate ?  Courts – Good, Bad and Ugly  Litigation against States  Timescales - long and VERY long  Finality  Enforceability  Costs

INTERNATIONAL COMMERCIAL ARBITRATION (1) - OVERVIEW  What Is It ?  Profusion of Relevant/Applicable Laws  Institutions and Tribunals  Finality  Enforceability  Security for Both Parties

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

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

INTL. COMM. ARBITRATION (4) INSTITUTIONS  UNCITRAL  ICSID/NAFTA/ECT  ICC/LCIA  CIAM  Other Regional Institutions eg CIETAC/AAA  Chartered Institute of Arbitrators  Other

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  Relevance to Security

INTL. COMM. ARBITRATION (6) PROCEEDINGS (2)  Choice of Language + Procedure  Common vs Civil Law Cultures  Communications  Disclosure  Ethics  Tribunal Issues  Relevance to Security

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

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

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

ALTERNATIVE DISPUTE RESOLUTION (1) - OVERVIEW  What is ADR ?  Why ADR ?  Relationship with Courts  Compulsory or Voluntary ?  Court Support of:  The Process  The Outcome  Qualifications and Training

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

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

CONCLUSIONS (1)  Prevalence of/Preference for Litigation  Wide Range of Dispute Resolution Tools  Arbitration Best Overall Package for Both  Oilmen’s Decisions Best for Oily Disputes  Difficulties with Judge or QC Arbitrators

CONCLUSIONS (2) Muchas Gracias for your ATTENTION this morning