Petroleum Arbitration: Applicable Law and Appropriate Arbitral Forum (A Study of Petroleum Disputes in Arab Countries)

Abstract

Petroleum maintains a primary role in the world energy market as well as in the daily life and livelihood of Arab petroleum countries, since these countries are highly dependent upon revenues from the exploitation and export of this resource. Therefore, the petroleum industry is fraught with conflicts of interests, primarily between developing petroleum exporting countries and petroleum companies sustained by their home states, most of which are developed countries. The majority of disputes have been settled by arbitration, most of which have been controversial. The question of the applicable law to the merits of a dispute is intimately related to the controversies surrounding arbitral tribunals. The prevailing perspective of western scholars during the 20`h century, and still to an extent today, was that host state law was inadequate, and host state courts were partial. Therefore, these scholars held any dispute arising between a host state and a petroleum company should be dealt with as an international dispute and should be settled far away from the host state's court and governed by laws or rules other than that of the host state. This thesis examines the past and present of petroleum arbitration, the perceptions and the practice, and aims to suggest a modified method of determining the applicable law to petroleum disputes. It argues that contrary to the previous allegations, the legal infrastructure of host states has developed over the years and today offers an adequate law to govern the merits of petroleum disputes. It further suggests a semi-localisation approach. The thesis focuses only on arbitration as a method of resolving such disputes, and limits itself to Arab petroleum countries. The thesis argues that petroleum contracts have their own characteristics and therefore should not automatically be subject to the ICSID Convention or to other principles of investment arbitration. The time is ripe for the establishment of a specialised institution to undertake the settlement of disputes arising out of petroleum transactions.