Originially from: World Arbitration and Mediation Review (WAMR)

Fifth Circuit Affirms the Arbitrability
of Pennzoil Ramco Azerbaijani Oil and Natural
Gas Development Rights Dispute
The U.S. Court of Appeals for the Fifth Circuit affirmed a district court
determination that the dispute between Pennzoil Exploration and
Production Company (Pennzoil) and Ramco Hazar Energy Limited
(Ramco) over oil and natural gas development rights in the Azerbaijani
Karabakh Prospect of the Caspian Sea was arbitrable under the terms of a
"Joint Operating Agreement" (which contained a "broad" arbitration
clause) signed by Pennzoil, Ramco, and other energy development
companies in November 1994, rather than a nonarbitrable dispute under a
June 1993 "letter agreement" between Pennzoil and Ramco (which did not
contain any arbitration clause). Pennzoil Exploration and Production Co.
v. Ramco Energy Ltd., 139 F.3d 1061 (5th Cir. May 13, 1998).
Beginning in 1992, Pennzoil and Ramco entered into a series of
agreements with respect to the development of oil and natural gas
resources in the Apsheron Trend of the Caspian Sea. Some of these
agreements were solely between Pennzoil and Ramco; others were
between Pennzoil, Ramco, and the Azerbaijani Government oil/gas
negotiating body or between Pennzoil, Ramco, and other energy
development companies; yet others were between Pennzoil, Ramco, other
energy development companies, and the Azerbaijani Government oil/gas
negotiating body; one agreement was between Pennzoil and the State Oil
Company of the Azerbaijan Republic (SOCAR) (the current oil/gas
negotiating body of the Azerbaijani Government) where Pennzoil signed
the agreement for itself and on behalf of Ramco; and one agreement was
solely
In February 1992, Pennzoil and Ramco signed a "Letter of Intent,"
under which they agreed to "conduct a feasibility study for the
development of the Guneshli [April] and Chirag [Kaverochkin] Fields" of
the Aspheron Trend. The companies also established a "financial
relationship and allocated any potential development rights the Azerbaijan
Government may award the parties in the two fields." This agreement did
not contain an arbitration clause.
In May 1992, Pennzoil, Ramco, and Kaspmorneftegas (KMNG) (at that
time the oil/gas negotiating arm of the Azerbaijani Government) signed an
"Agreement To Construct A Geological Model of the Guneshli Field in
the Azerbaijan Sector of the Caspian Sea." This agreement contained an
arbitration clause which provided that "any disputes between the parties
will be settled, exclusively and finally, by arbitration." In August 1992,
after they constructed the geological model, Pennzoil and Ramco entered
into a second "letter agreement." This agreement "amended the parties'