1. DISPUTE RESOLUTION under INTERNATIONAL O&G AGREEMENTS a presentation by HEW R. DUNDAS Chartered Arbitrator DipICArb International Arbitrator & Mediator to the CEPMLP 25 th November 2005

2. OVERVIEW of PRESENTATION Introduction Oil Industry Agreements Dispute Resolution Clauses & Options Domestic/International Disputes Oil & Gas Industry – a Special Case ? A Case Study – the WRONG approach Conclusions

3. OIL INDUSTRY AGREEMENTS State/State e.g. Statfjord/Markham/JDZs State/OilCo e.g. PPL/PSC/PSA OilCo/OilCo e.g. JOA/SPA/FIA etc OilCo/Contractor e.g. drilling/construction contracts Contractor/Subcontractor

4. DISPUTE RESOLUTION OPTIONS Litigation Arbitration Domestic/International Expert Determination Mediation Other ADR Application in Oil & Gas Industry Advantages and Disadvantages

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

6. INTL. COMM. ARBITRATION (1) OVERVIEW What Is It ? International Commercial Arbitration Profusion of Laws Institutions and Tribunals Finality Enforceability

7. 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

8. 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

9. INTL. COMM. ARBITRATION (4) INSTITUTIONS UNCITRAL ICSID/NAFTA/ECT ICC/LCIA Chartered Institute of Arbitrators Regional Institutions incl. CIETAC/AAA LMAA GAFTA/FOSFA/LME/RSA Other

10. 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

11. INTL. COMM. ARBITRATION (6) PROCEEDINGS (2) Choice of Language Choice of Procedure Common vs Civil Law Cultures Communications Disclosure Ethics Tribunal Issues

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

13. 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

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

15. 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

16. 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

17. ADR (3) – MEDIATION Consensual Process Confidentiality Facilitative/Evaluative The Process The Outcome Is Art 6 ECHR an Issue ? Strengths and Weaknesses

18. ADR (4) – MEDIATION HYBRIDS US Origins Med-Arb Arb-Med MedExDet Arbitrediation Other Strengths and Weaknesses

19. ADR (5) - EXPERT DETERMINATION Origins Nature of the Process Nature of the Decision English Law (Bernhard Schulte) Other Laws Enforceability Strengths and Weaknesses Use in O&G Industry

20. ADR (6) - ADJUDICATION Origins in Construction Disputes Nature of the Process Nature of the Decision English Law HGCRA 1996 Other Laws – NZ/Singapore Contrast with Expert Determination Strengths and Weaknesses O&G Industry Excluded in UK

21. ADR (7) – DABs/DRBs Prevention of Construction Disputes Neutral/Panel of Neutrals Nature of the Process Nature of the Decision Contrast with Expert Determination Strengths and Weaknesses Project Neutral during Negotiation

22. 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

23. DISPUTE RESOLUTION in O&G AGREEMENTS (1) State/State PCJ/PCA Arbitration e.g. UNCITRAL Diplomacy State/OilCo Arbitration Conciliation/Mediation Diplomacy Good Management

24. DISPUTE RESOLUTION in O&G AGREEMENTS (2) OilCo/OilCo Litigation (……. Rules OK ?) Arbitration Expert Determination Mediation OilCo/Contractor Litigation Arbitration The Squeeze

25. SOME CURRENT ISSUES in the OIL & GAS INDUSTRY Industry Preference for Litigation Expert Determination Failure to Grasp ADR Ignorance of non-Mediation ADR Composition of Arbitral Tribunals The Lawyers Involvement Macho Management/Lawyers

26. CASE STUDY: CATS DISPUTE CATS - North Sea Gas Pipeline Capacity Reservation by 3 rd Party User Send Or Pay Obligation; £45m paid Fall In Gas Price – Contract Uneconomic High Court/CoA/House of Lords Did the Subsea valve work ? Was CATS Available ? £100m at stake; £8-12 million legal costs

27. CONCLUSIONS (1) Wide Range of Dispute Resolution Tools Lack of understanding of ADR techniques Oilmens Decisions Best for Oily Disputes Prevalence of/Preference for Litigation Dinosaurs Still Survive You Cannot Afford Macho-Man

28. CONCLUSIONS (2) Oil Industry Myth (1) - Certainty Oil Industry Myth (2) - $000,000s = Judge Judges/QC Arbitrators are NOT Engineers Judges/QC Arbitrators are NOT Oilmen Widen The Options Think outside the box Take Risks – Caution is Expensive

29. CONCLUSIONS (3) Oily Arbitrators and Expert Determiners RULE THE WORLD Or should do !!!!!! The CATS case proves the point THANK YOU for your ATTENTION