Energy dispute resolution preferences revealed by ICEA survey
The specialist Scottish centre focusing on dispute resolution in the energy sector has launched the report of its survey of preferred approaches to dispute resolution, at the Global Forum on Dispute Resolution for Oil & Gas Industry in Amsterdam.
The International Centre for Energy Arbitration (ICEA), a joint venture of the Scottish Arbitration Centre and the Centre for Energy, Petroleum & Mineral Law & Policy at the University of Dundee (CEPMLP), undertook the research with a view to drafting dispute resolution rules tailored to the sector’s needs.
Key findings in the Initial Report on Dispute Resolution in the Energy Sector include:
- strong support for early procedures to resolve disputes: while there were mixed views about mandatory cooling off periods, there was very strong support for mandatory high level negotiation, with sanctions for failure to comply with early dispute settlement procedures;
- expertise of the decision maker was the most important factor for parties when considering a dispute process, closely followed by neutrality;
- arbitration was the preferred resolution method, by a clear margin, but mediation also ranked well, and there was significant support for hybrid processes, such as med-arb and arbitration with a conciliation process. Very few respondents ranked litigation as their first choice;
- the single most important factor in choosing a seat was that the seat nation was a signatory of the New York Convention, followed by the reputation of the local courts for probity;
- the ability to nominate arbitrators was the most important procedural factor, followed closely by confidentiality;
- there was also a strong preference for fees being set on an hourly rate basis rather than ad valorem.
Launching the report, Brandon Malone, chairman of the 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.”
Andrew Mackenzie, secretary general of the ICEA, added: "I would like to take this opportunity to thank all those working in the energy sector who completed our questionnaire, and those who have provided advice and support to us throughout the project. 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.”