Dispute resolution in the international energy sector: an overview

Abstract

This article provides a comprehensive and succinct review of the essentials needed to deal with the disputes encountered in the international energy sector. It begins with explaining the reasons why this sector has more disputes than any other business sector and then discusses how parties can effectively manage that risk. The article covers the kinds of disputes found in the international O&G business, the types of dispute resolution mechanisms available along with their respective advantages, and the legal framework for international arbitration. It explains how to properly draft dispute resolution clauses and what to consider in selecting counsel and in appointing arbitrators. A section is included that specifically deals with disputes involving governments. The article finishes with a discussion on the increasing time and cost of international arbitration and how to address those concerns. The article provides extensive references on each of the topics it covers, including appendices that provide details for all the important international arbitration centres and professional organizations, handy arbitration websites to source, and a complete list of the leading textbooks, articles and reference works from the world of international arbitration. The article arose from work that the author did for the Independent Petroleum Association of America and the Association of International Petroleum Negotiators. The international petroleum business invests in large, complex, capital-intensive projects that have long life spans. Circumstances, economics, governments and parties invariably change in these international oil and gas projects, which can often lead to a dispute. The petroleum sector is also a major global investor. The result is that the international energy sector, along with its associated construction projects, makes up the largest portfolio of international commercial and state investment disputes in the world as shown in Figures 1 and 2. Disputes are therefore a significant risk in any international energy project. The risk is not whether a project will have a dispute, but rather in how well a party can manage that * Tim Martin is the Principal and CEO of adr.governcance inc. in Calgary, Alberta, Canada. Tim’s peers have selected him for both the International Who’s Who of Commercial Arbitrators and the International Who’s Who of Oil & Gas Lawyers, where he has been described as the ‘go to guy for energy disputes’ and as a ‘true innovator’ in international oil & gas law. He has extensive experience as an arbitrator, mediator, expert and counsel. During his 30þ years career, Tim has been a General Counsel, Special Counsel, Country Manager, Finance Director, Commercial Manager, Corporate Director and Economist. He was the President of the Association of International Petroleum Negotiators (AIPN) and is the recipient of many awards in recognition for his contributions to the industry.