THE SETTLEMENT OF DISPUTES UNDER PETROLEUM Agreements

THE SETTLEMENT OF DISPUTES UNDER PETROLEUM Agreements

legal principles applicable to the construction of modern commercial instruments.”  According to the arbitrator the agreement called”for the application of principles rooted in the good sense and common practice of the generality of civilized nations-  a sort of modern law of nature,”  In the view of Lord Asquith,  although English municipal law was inapplicable as such some of its rules were”so firmly grounded in reason as to form part of this broad part of jurisprudence-this modern law of nature,,14 Decision:  The arbitrator found that the contract included the subsoil of the territorial waters of Abu Dhabi,  but not the subsoil of the continental shelf Ruler of Qatar vs.  International Marine Oil Company Ltd.,  1953 A concession agreement was signed on August 5,  1949 between the Ruler of Qatar the father of the claimant agents of the and respondent.  Under the terms of the agreement,  the company was to pay annually an agreed amount of money.

Object of the Claim:  The crucial question in this arbitration was whether the proper law to be applied in the construction of the principal agreement was Islamic law or the principles of natural justice and equity.  The tribunal observed that there was nothing in he principal or supplemental agreements which shed”clear light upon the intention of the parties on this the view of the referee,  all considerations pointed to the application of Islamic law being the law administered in Qatar).

However,  the refer concluded,  based on the Abu Dhabi award,  that there was”no settled body of legal principles in Qatar applicable to the construction of modem commercial instruments.”  The arbitrator observed that if Islamic law was applicable,  certain parts of the contract would then be”open to the criticism of being invalid.”  In this respect,  the referee added: “I cannot think that the ruler intended Islamic law to apply to a contract upon which he was to receive considerable sums of money,  although Islamic declare that the transaction was wholly or partially void law win held that neither party”intended Islamic law to apply,”  and therefore the agreement was to be governed by the”principles of justice,  16 equity and good conscience Decision:  on the question of whether the fixed annual pa were payable in arrears or in advance,  Sir Alfred Bu held th”they were payable in arrears and subject to the right of die Company to terminate its liability in respect thereof Waller three months’  notice.”

Saudi Arabia vs.  Arabian American Oil Company(Aramco),  1958 On May 29,  1933,  a concession agreement was signed between th Government of the Kingdom of Saudi Arabia and Standard oil Company of California(SOCAL,  later Aramco).  On January 20 1954,  a different agreement was signed between the Government of the Kingdom of Saudi Arabia and Mr.  A.S.  Onassis,  whereby the Saudi Arabian Maritime Tankers Company Ltd.  was to have a right of priority for the transport of oil.  Shortly after Aramco advised that the Saudi tankers would have priority over its tankers for loading Saudi petroleum.  Aramco claimed that the agreement with Mr.  Onassis violated the 1933 concession.  the object of the claim:  The arbitration was to determine whether 1933 concession agreement entitled the company to de preference or priority to national tankers and whether the agreement between the Government the Kingdom of Saudi Arabia and Onassis was in conflict with the Aramco concession No were damages was Legal Issues:  The tribunal observed that Saudi Arabian matters chosen by the as the applicable law”in so far as within the jurisdiction of Saudi Arabia.”

concessions in the Arab producing countries

concessions in the Arab producing countries

Iraq in 1925 represented a slight improvement on concession.  Article 40 of the agreement stipulated arbitrators failed upon a referee they were to request to agree  Justic the President of the Permanent Court .

 

Cases successfully Referred to Arbitration Despite the frequent use of arbitration clauses in oil concessions the Middle East,  in practice only a very small number of dspdad have been settled by arbitration.  Differences arising bere countries and concessionaires have usually been negotiations.  In fact,  until the late 1970s,  arbitration pro

ENTITLEMENT DISPUTES UNDER PETROLEUM Agreements THE concessions in the Arab producing countries of the area had been in only four cases,  between:  the Ruler of and Petroleum Development(Qatar),  Ltd.  in 1950;  the eut r on of Sheikh of Abu Dhabi and Petroleum Development (Trucial Coast)  an Co Ltd.

in 1951:  the Ruler of Qatar and the International Marine oil Company Ltd.  in 1953:  and the Government of Saudi Arabia and f the two the Arabian American oil Company(Aramco)  in 1958.  In the on would early 1980s there was also an arbitration case involving the e(con government of Kuwait and the American Independent oil ointment Company(AMINOIL) (1982)  For a complete picture of oil arbitration in the Arab world,  one cle 42)  must include the arbitration cases which were filed against the ination to Libyan government by the oil companies that were nationalized by 1963,  the Libya in the 1970s.

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the trend in modern petroleum agreements towards the adoption of institutional arbitration

From the review of the arbitration clauses in the petroleum agreements referred to above particularly agreements one sees that those clauses were generally ad hoe arbitration clauses(as opposed to institutional arbitration).

How there is a trend now in modern petroleum agreements towards the adoption of institutional arbitration.  In the words of one author:  With the growth and refinement of arbitration systems drafters now have available various comprehensive sets of arbitration rules and arbitral institutions that have stood the test time.

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