Dispute Settlement in the Oil and Gas Industry: Why is International Arbitration Important?

Abstract

Merchants and investors have used International Arbitration (IA) for centuries in settling disputes. IA has become a benchmark for resolving disputes in certain industries such as energy, construction, commodities, shipping and insurance. Over the last five decades or so, the international community has adopted IA as an alternative dispute resolution mechanism. As of October 1, 2009, 142 of the 192 United Nations Member States have adopted the New York Convention. Currently, about 144 countries have ratified the New York Convention. International arbitration is one of the Alternative Dispute Resolution (ADR) mechanisms in settling contractual disputes and it is considered as a fair and efficient way of mitigating risk associated with international business transactions and investments. In 2007, the International Centre for Settlement of Investment Disputes (ICSID) indicated that out of 123 cases listed as pending, forty-six (representing 37%) of such cases were energy related disputes. On June 2007, the top fifty arbitration cases listed again by The American Lawyer, nineteen (representing 38%) of these were related to energy and the majority were oil and gas issues.  This paper examines why IA is important in resolving disputes in the oil and gas industry using secondary sources such as books, articles, journals to do comparative and qualitative analysis. It also describes the types, rules, procedure, and limitations of IA. The paper recommends that, to improve our attitude towards arbitration, there should be a bold move to include arbitration courses in the curriculum of our legal education programs so that the academic training will acquaint the new law students and alike with the fundamental principles of international treaties and conventions and general code of international practice.

Keywords: Disputes; Settlement; International; Arbitration