Alternative Dispute Resolution in the Oil and Gas Sector:

Abstract

Alternative dispute resolution (ADR) is the determination of a dispute by one or more independent third parties rather than by a court. Effectively, the determinants of ADR which make it preferred for dispute resolution are its contribution to public interest doctrine of sovereignty and globalization among others. Whereas many forms of dispute resolution exist under ADR, accuracy is required in making choice of the best method to adopt. This research discusses the different forms of ADR with special emphasis on International Arbitration, highlighting their strengths and merits in adopting each. The complexity of international petroleum practice calls for special regulatory framework in drafting the clauses on ADR in petroleum agreements. This is especially heightened in cases where ADR is in respect of a matter of national economic importance like natural resource exploitation. A further complexity arises due to the unequal power relations between multinationals and the smaller authorities, who are predominantly in least developed countries. This is further compounded by the complex nature of these agreements and their novelty in as far as lingua and legalese are concerned in the negotiation. A significant feature of ADR is the fact that a number of legal systems may be relevant in the disputes. The project of developing Oil and Gas is principally and most commonly between the International Oil Companies and the State that owns the resource. It is however not the only avenue for dispute to arise. Regardless, the State and the IOC can have a dispute arise in between them. These disagreements between the government and International Oil Companies are usually in relation to agreements for petroleum exploration, development and production which are

commonly known as Production Sharing Agreements (PSAs). Disputes between International Oil Companies and host governments can arise from several issues but more often if there are regulatory revisions that threaten to dilute the value of the project as earlier evaluated, for example resulting from changes to the tax and fiscal regime. The disputes arising from such PSAs require first of all discovering what the appropriate forum is for ADR in Uganda that the latter can adopt in such circumstances. This research addresses the effectiveness of alternative dispute resolution mechanism in the oil and gas sector and from this, one can conclude on the most appropriate method to adopt in any case. Alternative Dispute resolution is an essential part of a functioning constitutional legal system It is well known that the traditional formal dispute resolution mechanisms are riddled with a number of inefficiencies, and in most cases, there is need for a more effective means of resolving disputes in particular contexts hence the birth of alternative dispute resolution mechanisms. One genus of international dispute that has not received much attention is the resolution of international petroleum disputes hence this research.