1. WHY OILMEN OPT FOR NON-LITIGIOUS DISPUTE RESOLUTION METHODS By RICHMOND OSEI-HWERE FACULTY OF LAW, KNUST

2.  Introduction  Dispute resolution methods adopted by oilmen  Why parties opt for the methods  Limitations of the methods  Are the methods adequate?

3.  In Commonwealth v Jennings Construction Ltd. (1985) VR 586 the court described dispute as follows: “a dispute arises when one party claims something, and the other party notifies the other that he rejects the claim.”  The oil and gas industry is notoriously expensive and risky, and players in their bid to safeguard their interests get entangled in disputes.

4.  The complexities of rules and contract types governing the industry also lay the ground for disagreements among parties.  Oilmen normally choose dispute resolution methods that suit their needs and commercial intuitions.  It is inevitable that those engaged in the oil and gas industry will opt for dispute resolution processes personal to their contracts or set by domestic or international instruments, rather than deferring to procedures of national courts.

5.  Oilmen normally adopt non-litigious dispute resolution methods.  Some of these methods are:  Negotiation  Mediation  Conciliation  Mini-trial

6.  Early Neutral Evaluation (ENE)  Expert determination  Arbitration

7.  Is normally the immediate recourse to the settlement of disputes  It involves:  first, discussion between parties at the operational level and  an elevation of the discussion to senior management level when the latter fails to produce an amicable settlement.

8.  Lawyers are only engaged to play an advisory role for the parties.  The process of negotiation is driven by the parties themselves who understand their contractual relationship and are better placed to resolve disputes between them.

9.  Mediation involves negotiation between disputing parties but with the assistance of a neutral third party.  The neutral third party (mediator) is appointed by the disputing parties to assist them to develop solutions which accommodate their interests.

10.  The mediator normally holds separate discussions with the parties in a bid to gain a greater understanding of the disagreement and to find a common ground.  It is a consensual way of resolving differences.

11.  The process is akin to mediation.  As in mediation, conciliation involves a neutral third party who seeks to bring the parties to a settlement albeit in a more involved manner.

12.  This involves attendance of a hearing before a neutral third party by senior executives of disputing organisations.  The process is often used in disputes between corporations.

13.  Here, a third party neutral possessing legal or other expertise hears the evidence from the parties in the case and gives a candid assessment of the strengths and weaknesses of the parties’ case.  This will inform parties on the next line of action – whether to make an amicable settlement or to travel the path of litigation.

14.  Here, parties undertake to refer their dispute to an independent third party who is an expert in the matter in contention for determination.  Technical issues including reservoir redetermination are remitted for ED.  Such determinations are usually final and binding on parties except where they have been procured by fraud or there is an apparent breach of natural justice.

15.  A neutral third party (arbitrator) appointed by the disputants determines the dispute after hearing the parties.  The disputing parties determine the procedure to be applied by the arbitrator.

16.  In foreign oil company – state disputes, parties normally rely on rules of procedure provided by international organisations such as the International Centre for Settlement of Disputes (ICSID), the London Court of International Arbitration and the Paris-based International Chamber of Commerce.  Arbitral awards are generally enforceable as it has a force of law.

17.  Maintenance of good relationships  The oil and gas industry is closely-knit with repeat players all over the world.  Faster and less expensive  The Amoco CATS case, for example, took approximately eight years from the time of inception to final resolution of the dispute by the court.  Its attendant legal cost is estimated at between eight to twelve million pounds.

18.  Confidentiality  Likelihood of disputes gaining publicity in the national courts  Confidentiality in the oil industry is very important as it ensures fair competition  Expertise  Lack of expertise on the part of judges vis-a-vis technical issues pertaining to the oil industry.  Problems associated with expert witnesses ▪ bias ▪ usurping the role of the judge in deciding the case

19.  Insurance against political risk  Oil companies which invest in developing countries are susceptible to unwarranted government interference in the form of changes in existing laws to the detriment of investors and the risk of nationalisation or expropriation  problem of lack of judicial independence  international arbitration clauses come in handy

20.  Enforcement of awards  It is noted to be easier to enforce an arbitration award in a foreign country than it is to enforce the judgement of the court in a foreign country.  Foreign oil companies can rely on international conventions such as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in the enforcement of arbitral awards.

21.  The use of the process as a precursor to litigation  The confidentiality rule tends to deprive other players of industry and the general public access to information  Renege of promise to be bound by the result of the dispute resolution process.

22.  Some of these processes may not be cheap and fast after all.  For instance, a reservoir redetermination exercise undertaken by an expert will on average keep 12 people employed for 2 years and cost two million pounds.  The process will also involve a considerable amount of management time and other financial commitments.

23.  On balance the agreed dispute resolution processes serve the needs of the oil and gas industry.  However, the afore-said methods cannot wholly substitute the role of a national court in the adjudication of disputes.

24.  Not all disputes are appropriate for the non- litigious methods adopted by oilmen.  Disputes emanating from matters of law including the issue of locus standi, interpretation of documents and statutes are best handled by the court.  The court also plays a supervisory role over the methods.

25.  The success of any non-litigious dispute resolution method depends on the parties.  As it was succinctly stated: “... ADR is a waste of time unless both parties are genuinely willing to try and resolve the dispute.”  Lack of cooperation amongst parties is a canker that defeats the purpose of any agreed dispute resolution process.