The International Centre for Energy Arbitration has launched its Initial Report on Dispute Resolution in the Energy Sector at the Global Forum on Dispute Resolution for Oil & Gas Industry in Amsterdam.
The International Centre for Energy Arbitration (ICEA) is a joint venture of the Scottish Arbitration Centre and the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee (CEPMLP). Work commenced on the project soon after the establishment of the Scottish Arbitration Centre in 2011, and the ICEA was officially launched by the then First Minister of Scotland, Alex Salmond MSP in October 2013. The object of the ICEA’s research is to identify dispute resolution preferences in the energy sector with a view to drafting dispute resolution rules tailored to the sector’s needs.
Launching the report, Prof. Peter Cameron, Co-Director of ICEA and Director of CEPMLP, said:
“The initial research phase has consisted of an online questionnaire, accompanied by debate and discussion with industry and professional figures at various events and conferences. The research has focused on the different types of dispute resolution process, and also optional features of particular kinds of dispute resolution process. The questionnaire covered initial dispute procedures such mandatory cooling off periods and mandatory high level negotiation and mandatory mediation, and whether there ought to be sanctions for failure to comply with such procedures. The focus then shifted to the choice of dispute procedure. We asked about parties’ priorities when selecting a dispute procedure and then asked parties to rank dispute procedures in order of preference. In the expectation that arbitration would be a popular choice, we looked at individual features of the arbitration process. Finally, we considered possible interfaces between traditional dispute resolution and online dispute resolution techniques.”
The Initial Report was launched at the Global Forum on Dispute Resolution for Oil & Gas Industry in Amsterdam. The Global Forum was hosted by Prospero Events Group, and speakers at the two day event included Asma Muttawa, General Legal Counsel at Organization of the Petroleum Exporting Countries (OPEC); Michelle MacPhee, Managing Counsel at BP; Alan Crain, Senior Vice President and Chief Legal and Governance Officer at Baker Hughes; and Marwan Al-Ashaal, Legal Manager at Kuwait Energy. Prof. Peter Cameron, Co-Director of ICEA, chaired day one of the Global Forum, and will also be speaker on day two along with Brandon Malone, Co-Director of the ICEA.
The launch of the Initial Report took place during the evening reception at the Global Forum, where Brandon Malone, who is also chairman of the Scottish Arbitration Centre, said:
“One of the main purposes of the initial stage of our research was to establish by means of a consultation with the consumers of arbitration themselves whether a specific set of dispute resolution rules and procedures for the energy sector are justified and necessary. Whilst it is debatable whether contracts in the energy sector are so different from other contracts that a specific dispute format is required, our preliminary view is that there are industry preferences on dispute resolution, at least within the oil and gas sector, and that these preferences are not adequately reflected in existing dispute resolution mechanisms; accordingly, an industry specific set of rules may be justified.”
Key findings in the Initial Report on Dispute Resolution in the Energy Sector include:
- Early dispute settlement
Strong support for early procedures to resolve disputes. Overall, respondents were against mandatory cooling off periods, albeit a narrow majority of in house counsel respondents were in favour. However, there was very strong support for mandatory high level negotiation, with over 80% of respondents in favour. A high number of respondents were in favour of sanctions for failure to comply with early dispute settlement procedures.
- Relative importance of procedural factors
The most important factor for parties when considering a dispute process is the expertise of the decision maker, closely followed by neutrality.
- Preferred dispute method
Arbitration by a clear margin, especially when hybrid arbitration processes are taken into account. However, mediation also ranked well. Very few respondents ranked litigation as their first choice. There was significant support for hybrid processes, such as med-arb and arbitration with a conciliation process.
- Factors when choosing a seat of arbitration
The single most important factor for most respondents was that the seat nation was a signatory of the New York Convention. The next most important first choice factor was the reputation of the local courts for probity.
- Importance of certain procedural rules
The ability to nominate arbitrators was the most important factor. This was followed closely by confidentiality. The least important factor to parties was the nationality of the arbitrators, suggesting that it is the seat, rather than the nationality of arbitrators which counts in the neutrality stakes.
Confidentiality was an important factor to respondents, with 80% of respondents favouring confidentiality in proceedings. Just under half of those favouring the kind of enhanced confidentiality and anonymity offered by certain jurisdictions.
- Tribunal fees
There was a clear preference in favour of fees being set by the administering institution.
- Hourly rate v Ad valorem
There was also a strong preference for fees being set on an hourly rate basis.
- Parallel Online Blind Bidding (POBB)
A sizeable minority responded positively to this proposition.
Andrew Mackenzie, Secretary General of the ICEA, said:
“We are delighted to be publishing our Initial Report on Dispute Resolution in the Energy Sector, and grateful to Prospero Events for hosting the launch at its Global Forum on Dispute Resolution for Oil & Gas Industry in Amsterdam. I would like to take this opportunity to thank all those working in the energy sector who completed our questionnaire, and those who have provided advice and support to us throughout the project. In the report we have outlined a set of dispute resolution principles based on our findings. In the next stage of our work, we will be seeking feedback on this report, our findings and our proposed dispute resolution principles for commercial disputes. Indeed, we welcome any comments.”
Andrew Mackenzie, Secretary General of ICEA