The Dundee-based International Centre for Energy Arbitration (ICEA) 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 ICEA is a joint venture of the Scottish Arbitration Centre and the University of Dundee Centre for Energy, Petroleum and Mineral Law and Policy (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.
Brandon Malone, Chairman, 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.”
The report showed strong support for early procedures to resolve disputes, and 80% of respondents favoured confidentiality in proceedings.
Andrew Mackenzie, Secretary General, 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.
“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.”
The Initial Report on Dispute Resolution in the Energy Sector findings include:
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.
The most important factor for parties when considering a dispute process is the expertise of the decision maker, closely followed by neutrality.
Arbitration by a clear margin, especially when hybrid arbitration processes are taken into account, is important. 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.
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 is also an 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.
There was a clear preference in favour of fees being set with the agreement of the parties and for fees being set on an hourly-rate basis.