The Settlement of Disputes under Petroleum Agreements general rule
Oil concessions in the Middle East dictate that s a disputes between the and the producing country which cannot be settled by negotiation or mutual agreement should be resolved by a This provision appeared in the text of the first oil concession granted in the Middle East in 1901 to the D’Arcy Exploration Company by the Persian government and has appeared in most concession agreements concluded since. Arbitration is more attractive to its proponents in the business community including in domestic disputes than other methods of dispute resolution(e.g., judicial litigation) as it can be quicker cheaper, less formal and offer more privacy than litigation.
It also allows the parties to control the course of the proceedings and to choose the law which is to be applied, based on the particular characteristics of the dispute. In cases of disputes that include an international element, the is yet another advantage arbitration secures a neutral venue for the settlement of disputes and a rally appointed tribunal, independent from the national court of either party tribunal, As a result of this requirement of neutrality of venue and assumes even greater significance when a company has entered into a relationship a foreign as in an oil Concession with gov a state in that party which lodges a claim against state’s own courts may fear that the ruling will not be .
Likewise, states are generally reluctant to agree to in courts of countries other than their own the c 0 concessionaire’s country) Fuad Rouhani, the first Secretary-General of oPEC, explains reasons behind the adoption of the arbitrator concept in oil concession Lijn general, there is considerable international support for the opinion that for the settlement of trade disputes arbitration is preferable to judicial procedure even where domestic differences are concerned, for reasons which seem to be universally recognized; arbitration is less rigid, less costly, and less dilatory than the normal judicial procedure.
Furthermore, persons who invest capital on a large scale in a foreign country feel more secure having an assurance that, if a dispute arose between them and the host country, they would not be subject to the strict legal system of the country of which they are often ignorant and which they may fear may be applied with less than complete impartiality in cases involving foreigners well known that petroleum investments require large amounts of capital and advanced technology and that the element of risk, which is usually borne by the foreign oil company, is very high.
On the other hand, petroleum resources and their development are of vital importance to the economic growth of the country, often representing the cornerstone of the i country’s economic development. Furthermore, petroleum strategically important for both consuming and pro countries, which explains why Petroleum Agreements general rule have often beef politically charged in the past. Collectively, these indicate that international arbitration is the most appropriate method for the settlement of disputes which arise government of a producing country national oil company(or its and a foreign oil concessionaire.