Drafting Dispute Resolution Provisions for International Oil & Gas Contracts - Chapter 21 - Leading Practitioners’ Guide to International Oil & Gas Arbitration

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Jennifer L. Price

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62 pages

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August, 2015

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I. ARBITRATION IN INTERNATIONAL ENERGY

CONTRACTS

A. The Value of Arbitration for International Energy Projects

If the premise that international energy contracts should include

enforceable, effective arbitration agreements is not yet axiomatic, it is

at least widely accepted.1 More importantly, it is true. If arbitration

did not already exist as an alternative to local court systems, it would

have had to be invented for international energy projects to thrive.

International energy contracts, by their very nature, frequently

involve very substantial, long-term, immobile capital investments in

foreign jurisdictions, sometimes with developing or unreliable legal

systems. Local counterparties frequently include powerful Stateowned

and State-controlled enterprises and agencies, or the State

itself. International energy companies can provide measures of

protection for their international projects through a variety of means,

including by organizing an investment to take advantage of

investment treaty protections and through contractual provisions to

finally resolve disputes through international arbitration.

International arbitration allows the parties to remove themselves

from the local court system and submit their disputes to a neutral

forum within a well-established legal framework, enforceable (if

planned correctly) pursuant to treaty.2 This mechanism encourages

contract performance and good faith between the parties by

depriving either side of a home court advantage and promising a

mechanism for fair redress of wrongs.

The significance of international arbitration to international

energy projects is apparent in the number of important arbitrations

and arbitral awards involving oil and gas projects. Of the

approximately 489 investment arbitrations administered by the

International Centre for Settlement of Investment Disputes

(“ICSID”) through third-quarter 2014, at least 94 involved disputes

related to oil and gas investments, with at least 59 more related to

power projects.3 An untold number of substantial energy-related

arbitrations are conducted under commercial and investment
arbitration regimes outside of ICSID.4 Many of the largest