- A Z El Chiati, “Protection of Investment in the Context of Petroleum Agreements”, 204 Hague Recueil des Cours (1987-IV), p 9, at p 48, para 34; L H Schatzl, Petroleum in Nigeria (OUP, Ibadan, 1969); A Suleiman, “The Oil Experience of the United Arab Emirates and Its Legal Framework,” 6 JERL (1988, No 1), p 1. See also K Hossain, Law and Policy in Petroleum Development (1979), at p 110; FAN Jabur, The Oil Economy of Iraq: Structure and Development Experience during the Period 1953–1974 and Future Optimal Growth within the Framework of OPEC (PhD thesis, University of Aberdeen, 1986); H Cattan, The Law of Oil Concessions in the Middle East and North Africa, Oceana Publications, Parker School of Foreign and Comparative Law, New York, 1967, pp 1 ff; J F Thynne, British Policy on Oil Resources 1936–1951, with Particular Reference to the Defence of British-Controlled Oil in Mexico, Venezuela and Parsia (PhD thesis, LSE, 1987); E Paasivirta, Participation of States in International Contracts and Abritral Settlement of Disputes (Helsinki, 1990), at pp 21–22.
- A O Adede, “The Minimum Standard in a World of Disparities”, in The Structure and Process of International Law: Essays in Legal Philosophy Doctrine and Theory (R St J Macdonald and D M Johnston, eds, 1983), Martinus Nijhoff Publishers, p 1001, at p 1019; see also A Suleiman, The Oil Experience of the United Arab Emirates and Its Legal Framework, 6 JERL (No 1, 1988), p 1, at pp 2–3.
- See C N Ely “Changing Concepts of the World's Mineral Development Laws”, in World Energy Laws, (1975) IBA, London, p 43: “The notion of a property-right vesting in a foreign company, with corresponding rights of control, had been the ‘theoretical cornerstone of the concession concept.’”; R Higgins, “The Taking of Property by the State: Recent Developments in International Law,” 176 Hague Recueil des Cours (1982-III), p 259, at p 307. Cf S K B Asante, “Restructuring Transnational Mineral Agreements”, 73 AJIL (1979), p 335, at p 362.
- The terms “contract” and “agreement” have been used in this study interchangeably without distinguishing between them. The contractual practice in the field suggests their inter- changeability.
- P O Olayiwola, Petroleum and Structural Change in a Developing Country: The Case of Nigeria (London, 1986); Y Omorogbe, “An Appraisal of Nigeria's Natural Gas Legislation,” 4 Oil & Gas Law & Tax Rev (No 2, 1985/86), p 51; W W Fitzpatrick, “Interesting Legal Aspects of the Netherlands Petroleum Regime,” 4 ibid (No 12, 1985/86), p 312; P B Stevens, International Gas: Prospects and Trends (Macmillan Press, 1986); M A F Al-Moammar, The International Aspects of the Oil and Industrial Policy of Saudi Arabia 1970–1987 (DPhil thesis, University of Oxford, 1989); K Arjunan, The Legal Regime of Petroleum Development in Malaysia (PhD thesis, Centre for Petroleum and Mineral Law Studies (hereinafter CPMLS), University of Dundee, 1985); International Petroleum Encyclopedia 1990 (Tulsa, OK, Penn Well Books, 1990); G Kojanec, “Recent Developments in the Law of State Contracts”, YBWA (1970), p 188, at pp 194–200; Main Features and Trends in Petroleum and Mining Agreements (A Technical Paper) UNCTC Study (ST/CTC/29), United Nations, New York, 1983, pp 5–8; K Hossain, “Choice of Petroleum Development Regime in Joint Development of Offshore Oil and Gas,” in Joint Development of Offshore Oil and Gas, vol 2 (H Fox, ed, 1990), p 72; A R Nizami and M S Nizami, “Petroleum Exploration and Development in Pakistan,” 5 Energy Exploration & Exploitation (1987, No 3), pp 187–197; C Jones, “A Review of Petroleum Exploitation and Production Activities in North West Europe,” ibid, pp 219–243; C D Hunt, “The Offshore Petroleum Regimes of Canada and Australia: Some Observations,” 7 Austl Mining & Petroleum Law Assoc Bull (1988, No 7), pp 103–111; W B C Walker, Mining Exploration Agreements (Montreal, Canadian Institute of Mining & Metallurgy), 1984; E Dahl, “Argentina's New Promotional Mining Regime,” Bull Argen Legal Div (1980); H Le Leuch, “Recent Evolution of Petroleum Exploration and Exploitation Agreements in Developing Countries: New Approaches to Introduce More Flexibility and Progressivity in the Contractual Terms,” 10 Natural Res Forum (1986), p 205; T E J P Dabinovic, “The New Argentine Legal Regime for the Petroleum Industry: Decree No 1443 of 6 August 1985,” 4 Oil & Gas L & Tax Rev (1985/86), p 75; H K Wang, Energy Policy in the Republic of China and Japan, 1970–1985: a Comparative Examination of Energy Politics and Policies (PhD thesis, North Texas State Univ 1987, Univ microfilm order no 87–23, 800; K I F Khan, (ed) Petroleum Resources and Development: Economics and Policy Issues for Developing Countries (1987); G W Walrond and R Kumar, Options for Developing Countries in Mining Development (1986); SEF Paris, Petroleum Agreements in Colombia (LLM thesis, CPMLS, Dundee, 1988); J Akyeampong, Foreign Investment in the Ghanian Petroleum Sector (LLM thesis, CPMLS, Dundee, 1984); F C Beveridge, “Taking Control of Foreign Investment: a Case Study of Indigenisation in Nigeria,” 40 ICLO (1991), pp 302–333; D P Grimlington, Legal Aspects of Large Scale Mineral Developments: A Case Study of Western Australia (CPMLS, Dundee, 1988); D E Fisher, “Petroleum Licensing in New Zealand,” 5 Oil & Gas Law & Tax Rev (1986/87, No 6), pp 151–157; Bondzi-Simpson, Legal Relationships between Transnational Corporations and Host States (P E London, Greenwood, 1990); P E Barrett, Onshore Oil Exploration and Exploitation in Southern England (MPhil thesis, University of Edinburgh, 1986); R W Bentham, “Recent Developments in United Kingdom Petroleum Law,” (1985/86) (CPMLS, Dundee, 1986); J B Surrey, British Oil Policy (University of Sussex, 1986).
- A Study on the Legislative Framework, Agreements and Financial Impositions Affecting Mining and Petroleum Industries in Commonwealth African Countries—Commonwealth Secretariat, Technical Assistance Group—Commonwealth Fund for Technical Co-operation, London, Commonwealth Secretariat; A G Qasem, Principles of Petroleum Legislation: The Case of a Developing Country (Graham & Trotman, 1985).
- G H Barrows, World Petroleum Arrangements (New York, 1987); G H Barrows, Basic Oil Laws and Concession Contracts (New York).
- C Oman, New Forms of International Investment in Developing Countries(1984); E Schanze, et al, “Mining Agreements in Developing Countries,” 12 JWTL (1978), p 135; H S Zakariya, “New Directions in the Search for and Development of Petroleum Resources in Developing Countries,” 9 Vanderbelt JTL (1976), p 545; J Devaux-Charbonnel, Principes et Applications du droit Minier des Hydrocarbures (1975, Editions Technip, Paris); Main Features and Trends in Petroleum and Mining Agreements (1983, UNCTC, NY); P Miller, “Alternative Forms of Petroleum Agreements for Exploration and Production Operations,” in Energy Law, IBA, London, 2, 41; Blitzer, Cavoulacos & Lessard, “Contract Efficiency and Natural Resource Investment in Developing Countries,” 19 Colum J World Bus (1984), p 10; M M Leitao Marques & V Moreira, “The Angolan Law on Foreign Investment in Petroleum Activities,” 10 JERL (No 3, 1992), p 292; C A Webb, “Indian Oil and Gas: Control, Regulation and Responsibilities,” 26 Alberta L Rev (No 1, 1987), p 77; J Touscoz, “Les nouveaux contrats d'exploration—production pétrolière,” Journal des affaires internationales (No 2, 1985), pp 151 ff; G Ndi, “The Contractual and Legal Framework for Petroleum Exploration and Production in Cameroon,” 10 JERL (No 3, 1992), p 267; K W Blinn, et al, International Petroleum Exploration and Exploitation Agreements Legal, Economic and Policy Aspects) (1986); K Hossain, op cit (1979), at pp 100–181; Kirchner, et al, Mining Venture in Developing Countries (Part I): Interests, Bargaining Process, Legal Concepts (English version by W J Mahoney) Vol I, Studies in Transnational Law of Natural Resources (STLNR) (Kluwer, 1979); Schanze, et al, Mining Ventures in Developing Countries (Part 2): Analysis of Project Agreements (Translated by G M Friedman), vol II (STLNR) (Kluwer, 1981); J Kuusi, The Host State and Transnational Corporation: Analysis of Legal Relationships (Saxon House, 1979).
- “As far as the developing countries are concerned, the joint venture system was first introduced into the Middle East in February 1957, in an agreement concluded between the Italian ENI and two Egyptian state companies.” See H Zakariya, “New Directions in the Search for and Development of Petroleum Resources in the Developing Countries”, 9 Vand J Trans Law (1976), p 545, at p 556; see also Joint Ventures (by Linklaters & Paines with C Nightingale), (1st ed, Longman, 1991); E Herzfeld, Joint Ventures (2nd ed, Jordans, 1989); K Hober, Joint Ventures in the Soviet Union (New York, 1989); R H Carpenter, Jr, “Soviet Joint Enterprise With Capitalist Firms and Other Joint Ventures between East and West: The Western Point of View”, 222 Hague recueil des cours (1990-III), p 365; L N Orlov, “Soviet Joint Enterprises With Capitalist Firms and Other Joint Ventures Between East and West,” 221 Hague Recueil des Cours (1990-II), p 371; L Aulin, Establishing Joint Ventures in the USSR (Kluwer Law & Taxman Pubs, 1990); B E Hawk, “Joint Ventures Under EEC Law”, Fordham International Law Journal (1992); D S Nova, “The Policy of the EEC on Concentrative Joint Ventures”, 5 LJIL (1992), p 53; I F I Shihata, The Other Face of OPEC: Financial Assistance to the Third World (Energy Resources and Policies of the Middle East and North Africa), (1982), esp Chap 11; W G Friedmann and G Kaimanoff (eds), Joint International Business Ventures (Columbia Univ Press, 1961); F Giuliani, “Joint Ventures in the USSR: Legal Personality, Enterprise and Ownership”, [1990] 1 International Company and Commercial Law Rev, p 16; A F Kassem, “Joint Venturing in Kuwait: Company Law Explained”, Arab Law Quarterly (1986), p 432; J Buhart (ed), Joint Ventures in East Asia: Legal Issues (IBA Series), Graham & Trotman and IBA (1992); H Adler, Jr, “Application of United States Anti-trust Laws to Mergers and Joint Ventures Involving Foreign Firms, Part I”, (1992) 13 BLR, 135, and Part II in 3 EBLR (1992), p 167; A S Gutterman, “A Legal Due Diligence Framework for Inbound Transfer of Foreign Technology Rights”, 24 Int'l Lawyer (1990), p 976, at pp 1001–1002; D N Goldsweig and R H Cummings (eds), International Joint Ventures: A Practical Approach to Working with Foreign Investors in the US and Abroad (A Case Study with Sample Documents), 2nd ed, 1990; E G Warner, Mixed International Joint Ventures in the Exploration, Development, and Production of Petroleum (MS thesis, Sloan School of MIT, USA, June 1972); M Sornarajah, Law of International Joint Ventures (Longman, 1992). E P Eichmann, “Legal Aspects of Doing Business in Hungary”, 24 Int'l Lawyer (1990), P 957, at pp 960–968; M Nicolazzi, “Petroleum Law and Petroleum Joint Ventures in Italy,” 8 JERL (1990, No 1), P 30; R Ramlogan, “State Participation in Joint Ventures: The Republic of Trinidad and Tobago Experience”, 10 JERL (1992, No 3), p 279; F R Vicuña, Antarctic Mineral Exploitation: the Emerging Legal Framework (Cambridge, 1988), at pp 231–234; S Ougley, “Joint Ventures and Fiduciary Obligations,” 22 Victoria U Wellington L Rev (October, No 4, 1992), p 265; H Worboys, “Joint Venture Agreements Onshore in the UK,” (Paper presented at the CPMLS, Summer Course, University of Dundee, 13 September, 1988); Guide to Joint Ventures in the USSR: Laws, Regulations, Mode! Documents and Practical Information (ICC USSR Chamber of Commerce and Industry, ICC pub SA 1988, No 456; L Aulin, Establishing Joint Ventures in the USSR (Deventer, Kluwer, 1990); H J F Bloomfield, “Legal Aspects of Joint Ventures in China,” 14 Int'l Bus Lawyer (1986, No 9), pp 327–32; M M Pearson, Joint Ventures in the People's Republic of China: The Control of Foreign Direct Investment under Socialism (Princeton UP, 1992); Regulations of the People's Republic of China on the Exploitation of Offshore Petroleum Resources in Co-operation with Foreign Enterprises (Adopted by the Executive Meeting of the State Council on 12 January 1982 and promulgated by the State Council on 30 January 1982), reprinted in J Greenfield, China's Practice in the Law of the Sea (Oxford UP, 1992), Appendix 6, pp 244–249; F Fesharahi & D G Fridley, China's Petroleum Industry in the International Context (Westview Press, 1986); S Beharreil, “Joint Ventures between Foreign Companies and Host Governments: the Choice of Law and Related Issues,” 4 Oil & Gas L & Tax Rev (1985/86, No 11), pp 282–85; A Gardner, “Fiduciary Obligations of Joint Ventures,” (Paper presented to 2nd Annual AMPLA (WA Branch) State Conference, Perth, October 1988).
- M Crommelin, “The Mineral and Petroleum Joint Venture in Australia”, 4 JERL (1986), p 65; see also G N Lewis, “Comment, the Joint Operating Agreement: Partnership or not”, ibid, at p 80; G L J Ryan, “Joint Venture Agreements” (1982) 4 AMPLJ 101; J D Merrals, “Mining and Petroleum Joint Ventures in Australia: Some Basic Legal Concepts” (1981) 3 AMPLJ 1; R A Landbury, “Mining Joint Ventures” (1984) 12 ABLR 312; P Rose, “Resources Joint Ventures and the Trade Practices Act 1974”, 9 JERL (1991), p 95; R McKern, Multinational Enterprise and Natural Resources: A Study of Foreign Direct Investment in the Australian Minerals Industry (unpublished doctoral dissertation, Harvard Business School, Feb 1972).
- For a provision defining commercial quantity or discovery, see Iran-NIOC-AGIP Joint Venture Agreement, 14 August 1957 (Petroleum Legislation, vol 1): “The yield capacity of a petroleum field in a commercial quantity will under prevailing conditions be estimated when the amount of oil extraction reasonably foreseeable is such that when the cost price of delivery to seaboard, calculated on the basis of production costs plus transport and handling charges and an additional 12.50 per cent of the posted price payable as a fflinimum for tax and duties to the Iranian government is deducted from the posted prices, of a similar kind of petroleum, would leave a reasonable margin of profit.”
- Cf the EGPC/Philips Agreement of 1963 (Egypt) and the Lipetco/Auxirap Agreement of 1968 (Libya), under these agreements the national company was actually exempted from bearing any part of the exploration expenses, even in the event of commercial discovery. See H Zakariya, op cit, at p 558.
- Equity joint venture: Under this approach, the host State (or usually its national enterprise) and the foreign entity form a partnership whereby they establish an operating company in which each owns 50 per cent of the shares. The earliest joint ventures were those established by ENI, the Italian State Oil Corporation and certain Egyptian concerns and by Agip Mineraria, an ENI subsidiary, and NIOC of Iran, both in 1957, (see Kenneth W Dam, Oil Resources: Who Gets What Howl (1976), at p 14; see also M M Leitao Marques and V Moreira, “The Angolan Law on Foreign Investment in Petroleum Activities,” 10 JERL (No 3, 1992), p 292).
- The operating company established as such is in the form of a joint stock company. It is established under the local laws of the host country to conduct, as a corporate body, all aspects of the operations, including the marketing of oil. Although ownership of any petroleum discovered was joint and the operating company is to be jointly owned, the entire risk capital for exploration is to be furnished by the foreign partner. The composition of its management board is usually equally divided. It is essentially a profit-making company, the net profit of which being shared, after the payment of income tax, by the national and foreign partners in equal parts, or according to their share in the equity of the enterprise in the case of non-parity partnership.
- Contractual joint venture: Under this approach, the joint venture does not assume a separate corporate identity as the partnership is not constituted into a joint stock company. For example, joint ventures established by the agreement between the National Iranian Oil Company and Pan American Oil Company of 24 April 1958 and that between NIOC, AGIP, Philips and the Oil and National Gas Commission of India. See W G Friedmann and J P Béguin, Joint International Business Ventures in Developing Countries (1971), pp 38–51. The type of contractual joint venture may be found in Columbia, Norway and the United Kingdom—[See UNCTC Study on Alternative Arrangements for Petroleum Development (ST/CTC/43), United Nations, New York (1982) at p 50].
- However, the operating company created as such is non-profit making in nature, and acts in the phases of development and production as an agent for both the foreign and national enterprises. The relations between the parties are governed by the terms of the partnership contract. The capital is contributed on an equal basis. The Board of Directors is represented on a parity basis by both the national enterprise and the foreign enterprise. As the operating company is created to be responsible for production, management and accounting without being entitled to any separate legal identity, it does not own any equipment, machinery or other property obtained for the production and makes no decisions independently. All funds required for the operations are supplied by the national and foreign enterprises on an equal basis and production is handed over in kind to each of the partners in equal shares. The two partners have a common right and undivided interest, in accordance with their share in the venture, in all property, equipment, machinery, and assets obtained for the joint venture.
- C R Dechert, Ente Nazionale Idrocarburi—Profile of a State Corporation (1963), p 66.
- The ratio of proportions sometimes varies considerably, and it need not be in the ratio 50: 50. It may vary according to the level of production, for example the split in Libya is 81:19 in favour of the government—see P D Cameron, op cit(1984), at p 11.
- In Indonesia PSC was first used for agriculture contracts [see Y Omorogbe, “Contractual Forms in the Oil Industry: The Nigerian Experience with Production-Sharing Contracts.” JWT (1986), p 342, at p 343]
- The essential features of standard Indonesian Production-sharing contracts have been described as:
- “1. The transnational corporation, acting as a general contractor, undertakes to provide all financial and technical assistance required for the petroleum operations and bears the risks of the necessary operating costs.
- 2. These costs are recoverable out of 40 per cent of the crude oil produced per annum. If the expenses exceed the stipulated 40 per cent, any recoverable excess is to be regained in succeeding years. Of the remaining 60 per cent of the production, Pertamina (the national petroleum agency of Indonesia, formerly known as Permina) is entitled to 65 per cent and the contractor to 35 per cent.
- 3. Title to the contractor's share of the production passes at the point of export. The contractor acquires no title to the surface area. Equipment purchased by the contractor ultimately becomes the property of Pertamina.
- 4. A highly significant feature of these contracts is that Pertamina is entrusted with responsibility for the management of the operations. It is expressly provided that the contractor will be responsible to Pertamina for executing the petroleum operations; the contractor is accordingly designated as the exclusive operator. Notwithstanding its managerial powers. Pertamina is required to assist and consult with the contractor periodically “with a view to the fact that the contractor is given the responsibility of carrying out the work programme.” [SKB Asante, “Restructuring Transnational Mineral Agreements”, 73 AJIL (1979), p 335, at p 364].
- Production-sharing contracts have been extensively adopted by Libya, Egypt, Syria, Malaysia, the Philippines. Peru, Bangladesh, India, Trinidad and Tobago, (See K Hossain, op cit, pp 138–158; See also Y Omorogbe, “The Legal Framework for the Production of Petroleum in Nigeria”, (1987) 5 JERL p 273 at pp 279–281).
- However, amongst the production-sharing contracts (PSCs) concluded by Trinidad-Tobago. Libya, India, Bangladesh, Malaysia and Egypt with foreign oil companies there were certain improved types of PSCs. These included certain mechanisms which were not contained in the standard PSC. Among some improved PSCs may be mentioned as—the Trinidad-Tobago Model Production Sharing Contract of 1974; Libya-Mobil Agreement of 1974; The Indian ONGC-Reading & Bates Agreement of 24 May 1974; the Bangladesh Agreements with ARCO, Union Oil of California and four other companies of September 1974; the Malaysian Agreements with Shell of 30 November 1976, and with Exxon of 8 December 1976; The Egyptian EGPC-ESSO Agreement of 14 December 1974, and EGPC-Amco Agreement of 24 February 1976 (see for an excellent account of these agreements: K Hossain, op cit, (1979) at pp 149 158).
- See also the note by A Kumar on Indian Petroleum-Licensing (fourth round), 1991 in 10 JERL (1992. No 2). pp 210–212.
- A Z El Chiati, op cit, at p 54.
- S K B Asante, op cit, at p 364; D N Smith and L Wells, Negotiating Third- World Mineral Agreements (1975), at p 49, “the distinction between service contracts and production-sharing contracts had become one of small technicalities as they had evolved by 1975.”
- S K B Asante, id.
- K W Blinn, et al, op cit (1986), p 73.
- F Fabrikant, “Production Sharing Contracts in the Indonesian Petroleum Industry” 16 Harv Int'L LJ (1975), p 303, at p 340. However, certain anomalies have been noted by Fabrikant regarding such a clause as in the contract which requires the contractors to supply the domestic market with crude oil for which it is paid a price (albeit substantially lower than the export price). The questions are raised: if the titel to the oil does not pass to the contractor till the point of export, then how could it be entitled to receive a price for the oil supplied by it to the domestic market? Or, how could Pertamina return the full price differential of “cost” oil to contractors who are unable to match Pertamina's marketing price? Another question also arose as to whether the contractors, which were US oil companies, could claim the federal depletion allowance in a case where they did not own the petroleum, or have an equity interest in the petroleum operations. This issue was, however, resolved in favour of the companies by a ruling from the Inland Revenue Service, which is said to have relied on a clause in the contract which stated: “The contractor shall carry the risk of operating costs required in carrying out operations and should therefore have an economic interest in the development of petroleum operations in the contract area.” (See Fabrikant, id, pp 340–341).
- The Indonesian claim that title to the crude oil does not vest in the contractor prior to the point of export is based on article 33 of the 1945 constitution which states that “natural riches shall be controlled by the State.” id.
- In contrast to the Indonesian agreements, the PSC agreement between Nigerian National Petroleum Corporation (NNPC) and Ashland Oil (Nigeria) Ltd (of 12 June 1973) provides that “title to available crude oil allocated to each party shall pass at the wellhead.” See SKB Asante, op cit (1979), at p 366; Y Omorogbe, op cit, (1986), pp 342–349; and also in 5 JERL (1987), p 273, at pp 279–281; P D Cameron, op cit (1983), p 19.
- See also Hunt v Coastal States Gas Producing Co et al, US Supreme Court of Texas, 13 June 1979, 66 ILR, p 361.
- In Argentina alone, YPF (the national oil company of Argentina) signed 76 exploration (service) contracts within the Houston plan between 1985 and 1990—see R N Maciel, “Argentina: Privatisation of the National Gas Industry,” 10 JERL (No 4, 1992), p 371, at p 372. See also J Wolfgang, et al, “The Evolution of Petroleum Contracts in Argentina—Issues of the Foreign Investor's Legal Petroleum,” 7 JERL (No 3, 1989), p 189.
- H Zakariya, op cit, (1976), at p 564. With regard to the relative advantages accruing to the host State, service contracts may be classified as early service contracts and advanced service contracts (K Hossain, op cit, at pp 158–172). The early service contracts may be exemplified by the Venezuelan service contracts formulated in the sixties and the Enterprise de Recherches et d'Activités Pétrolières, (ERAP) French State agency) contracts with National Iranian Oil Company (NIOC) in Iran (1966) and Iraqi National Oil Company (INOC) in Iraq (1968). (See K Hossain, id).
- Since 1973 certain governments with strong bargaining power concluded advanced forms of service contracts the aim of which was to achieve more advantages than the early service contracts. Among such advanced forms the following are noteworthy: (a) Burma—Service contracts proposed by Myanma Oil Corporation (1973); (b) Iran—NIOC Service Contracts with Deminex, CFP, Ultramar and others (1974); (c) Brazil—the Model Service Contract proposed by Petrobras (1976)—id.
- Those contracts concluded for hard minerals in Indonesia were also called “service contracts”.
- For practices in Saudi Arabia, Venezuela, Abu Dhabi, see in Blinn et al, op cit, p 97.
- In view of the ERAP contracts (described as “agency-type contract”), as mentioned earlier, comparisons have been made to a concession thus:
- “Comparisons can be made on the economic and legal levels. In the legal field the difference can be summed up in two particular points: the ownership of the oil and installations which in concession-type contracts belong to the company, has been recovered from the operator in the agency-type contract…. From the economic point of view the differences are more notable because each system starts from a completely different conception. In the concession-type contract the company is a contractor in the broad sense of the word, which finances, produces and sells for its own account and only owes to the state the taxes applicable to its activities. By contrast, in the agency-type contracts, the general contractor is separately a financier who loans capital, a broker who sells a part of the production at the market price, and an operator who is paid in part at cost price for his services and in part by means of a right to buy a proportion of the oil produced at an agreed price.”—J Montel, “Concession versus Contract” in? Mikdashi, S Cleland and I Seymour, Continuity and Change in the World Oil Industry (Beirut: Middle East Research and Publications Centre, 1970), pp 108–109;
- Cf S K B Asante, op cit, (1979), P 355.—In view of the contract between the Government of Indonesia and P T Barlien Valley Minerals, an Indonesian company organised by a consortium of transnational corporations, Asante commented that “as regards all substantive matters such as control, management, marketing, duration and fiscal regime, this contract of work was more like a variant of a concession than a service contract.” He also observed that “the service or work contracts concluded by Indonesia for the development of its hard mineral resources are hardly distinguishable from a concession, beyond the designation of the transnational corporation as the contractor” (see pp 361–362).
- Ibid, at pp 82–83.
- Ibid, at p 97.
- See also W A Wood, “Legal Aspects of Foreign Investment in Oil and Gas Exploration and Development in Brazil,” 7 JERL (No 4, 1989), p 265; C C Borromeu de Andrade, “Some Key Aspects of the Brazilian Legal Framework on Energy and Mineral Resources,” 7 JERL (No 3, 1989), p 231; W J Müller and T G Stern, “The Evolution of Petroleum Contracts in Argentina—Issues of the Foreign Investor's Legal Protection,” 7 JERL (No 3, 1989), p 189;
- A Z El Chiati, op cit, para 29, p 46.
- G F Edwards, “The Frondizi Contracts and Petroleum Self-Sufficiency in Argentina”, in R F Mikesell, Foreign Investment in the Petroleum and Mineral Industries (Baltimore: Johns Hopkins Press, 1971).
- Indonesia concluded certain contracts of work with Shell, Stanvac and Caltex on 25 September 1963. The characteristic features of such contracts of work have been described thus: “They included an undertaking by the contractor to explore and develop diligently, backed by minimum exploration investment commitments, and mandatory relinquishment of 25 per cent of the area after five years of exploration and another 25 per cent after ten years. A 60–40 profit split in favour of Indonesia was also provided with both a signature bonus and production bonus of $5 million each for the new areas. The ‘realised price’ concept was retained and there was provision for a value committee in the event of dispute as to price. The foreign contractor was appointed as the exclusive sales agent to market the State enterprise's oil, but the State enterprise reserved the right to elect to take 20 per cent of aggregate production in kind. Management control was retained by the foreign contractor…. The contracts also provided for the sale of all Shell's and Stanvac's refineries and the domestic marketing and distribution assets of all three companies. Refining facilities would be sold over a period to begin in 10 years and end in 15 years… The companies also agreed to supply the Indonesian domestic market with crude oil and refined products at cost plus fixed fees.” (emphasis added)—[A Bartlett, Pertamina, Indonesia National Oil (Djkarta: Amerasian, 1972), at p 194].
- Thus, while the oil company under these contracts undertook “to return all of its rights to mine mineral oil and gas in Indonesia,” it was appointed as “the sole contractor” for a designated State enterprise “to accept the rights and obligations to conduct mineral oil and gas mining operations… to provide all financing… and technical skills required for the operation… (and would) have effective control and management of the operations… and full responsibility therefor and assume all risks thereof.”
- A Z El Chiati, op cit, para 29.
- D N Smith & L Wells, op cit, (1975), at p 47.
- S K B Asante, op cit, (1979), at p 367.
- On 26 September 1972 the Sar Chesmeh Copper Mine Company, a national mining company of Iran concluded such a typical technical assistance agreement with Anaconda Iran, a wholly owned subsidiary of the Anaconda Company, the distinctive features of which may be summarised as follows:
- The foreign entity does not assume any financial risks whatsoever in respect of the project which in fact exclusively lies with the host government.
- The foreign entity provides technical services in the form of data and assistance in all aspects of the execution of the project, which includes the mining, geological, engineering, metallurgical, and design aspects, as well as data processing, operating and maintenance procedures, training programmes, personnel recruitment procedure, inventions and other proprietary information, and a plan for implementing the various phases of the project.
- As to the management of the project, the governing board of the national mining agency, acting through its managing director, assumes “full power, authority and responsibility of the project.” However, the foreign entity seconds its own technical staff to run the project under a general manager designated by the corporation and appointed by the national agency.
- The foreign entity is paid fees for its services in stipulated amounts before the production begins. It is also paid for a stated period afterward a prescribed percentage of the sales value of the output.
- The entire ownership of the natural resources, the total production and the capital such as equipment and other facilities relating to the project vest in the host State.
- Eg Bechtet's Programme Management Services Agreement with the Royal Commission for Jubail and Yanbu, 1976, Saudi Arabia. For related cases see, La SEDITEX Engineering Beratungsgesellschaft fur die Textilindustrie mbH v Government of the Democratic Republic of Madagascar (ICSID Case No CONC/82/1) (Concerning management contract for the operation of a cotton mill).
- See also M Z Brooke, Selling Management Services Contracts in International Business (London, NY, 1985); Hegstal and Newport, Management Contracts: Main Features and Design Issues (World Bank, 1987); Darfoor, “The Concept of Management Contracts in Mine Rehabilitation: The Case of the State Gold Mining Corporation in Ghana,” 6 Raw Materials Rep (1989), pp 199–207.
- Cf Smith and Wells, (1975) pp 45 et seq. For a discussion of the transfer problem, see Gabriel, The International Transfer of Corporate Skills, Management Contracts in Less Developed Countries, (Boston, 1967), pp 81, et seq.
- The purposes behind management contracts have been described thus: “The host-country- owned facilities promise a productive operation which can be competitive in the world market only if the corresponding technical and administrative management personnel are present to guarantee a continual transfer and implementation of know-how and modern work skills. Moreover, where the host State shares in the capital formation and possesses rights of control, it can only protect its managerial and supervisory interests through personnel which match the capacity of its foreign partners.” Christian Kirchner, et al, Mining Ventures in Developing Countries (1979) (English version by W J Mahoney) at p 186.
- An example of the use of management contract may be found in Zambia. The 1969 agreement between the government of Zambia and Roan Selection Trust (RST) made provision for shared ownership between the parties, ie the former was to acquire 51 per cent equity interest in RST's subsidiary operating in Zambia. Under the provision for separate management and consultancy contracts—see for detailed discussions on these contracts in Economic Independence and Zambian Copper: A Case Study of Foreign Investment (M Bostock and Charels Harvey, eds) 1972 (New York: Praeger) p 229; see also Gosta Westing, “Aspects of International Management Contracts”, International Contract, Law and Finance Rev (September 1980); Ellison, “Management Contracts”, Multinational Business 21 (March 1979); Management Contracts in Developing Countries: An Analysis of their Substantive Provisions (A Technical Paper), UNCTC Study (ST/CTC/27), New York, 1983.
- RST was to provide: (1) technical services (including preparing progress reports, long-term plan reports, capital expenditure estimates, advice on operating problems); (2) general services (including advice on preparation of company reports and financial statements, development and processing of minerals); and specialised services (including engineering consultancy services, staff, recruitment).
- In 1967 the Congo (now Zaire) government entered into a similar management contract with the Belgian-owned Union Miniere du Haut Katanga under which the latter was to provide management assistance on a fee basis.
- Thus, with regard to the use of management contracts it has been observed: “In the industrial sector, developing countries have shown a preference for management services for state-owned companies in sectors such as mining, steel-making and heavy engineering. Management contracts can be relevant not only to the industrial sector but also to the management of public utilities which are responsible for medical care, power supply, forestry, telecommunications, transport and port management, just to mention a few examples. It will be understood from these examples that management contracts tend to become particularly relevant in those cases where a public sector company or agency wishes to improve the standard of its own performance.
- Management contracts are also quite common in one particular area where buyers may be either private or public, namely, the tourism sector and especially in the management of hotels and similar facilities.”—Gosta Westring, “Construction and Management Contracts”, The Transnational Law of International Commercial Transaction, (N Horn & C M Schmitthoff, eds), p 175, at p 184.
- In some, remuneration has been based on sales volume and expenses incurred. Others have turned to a share of profits, with a hope that the managing firm would have an incentive to increase efficiency whatever the basis of compensation, the interest of foreign firms in management contracts has generally been limited, unless they have some equity ownership or another form of access to a significant portion of profits.
- See Klöckner Industrie-Anlagen GmbH, Klöckner Belge, SA and Klöckner Handelmaatschapij Camerounaise des Engrais (SOCAME) (ICSID Case No ARB/81 /2), (Award of 21 October 1983, (Concerning the construction of a chemical plant under a turnkey contract), 10 Y B Com Arb 71 (1985).
- The different aspects of a turnkey project have been described thus: “In the modern contractual practice, the individual steps of the turnkey project are often handled by separate arrangements. Besides the basic agreement for delivery of a completed facility, there are commonly special contracts for the various aspects of construction. The purchase agreement (for technology, know-how, experience, and services) may be supplemented by an agreement for erection and start-up services. The contractual practice further distinguishes between lump sum or cost-plus-fee arrangements. If patented or otherwise protectable processes or products come into question, the turnkey agreements may also involve licence agreements.” Christian Kirchner, et al, op cit, at p 186.
- In the international practice, the ECE conditions as drafted by the OECD (1957); see also UN Guide for Use in Drawing Up Contracts Relating to the International Transfer of Know-how in the Engineering Industry, UN Doc TRADE/222/Rev 1 (1970); Guide on Drawing Up Contracts for Large Industrial Works, UN Doc ECE/TRADE/117 (1973); UNCITRAL Legal Guide on Drawing up International Contracts for the Construction of Industrial Works (United Nations, New York, A/CN9/SER B/12), 1988; Contract Planning and Organisation, UN Doc 10/117 (1974); International Contracts: Formation of Contracts and Precontractual Liability (ICC, Institute of International Business & Practice, 1990).
- Thomas W Wälde, “Mineral Investment Policies in the Late 1980s from Restriction back to Business.” Feb 1986 (unpublished paper, received from the author), also “Investment Policies and Investment Promotion in the Mineral Industries”, 6 ICSID Rev-FILJ (1991), p 94.
- D N Smith and L Wells Jr, op cit, at p 52; see also in “Mineral Agreements in Developing Countries: Structures and Substance”, 69 AJIL (1975), p 560, at p 589; P D Cameron, Property Rights and Sovereign Rights: The Case of North Sea Oil (1983), at pp 10–21.
- Smith & Wells,ibid. Although the various new forms of agreements have their respective goals, virtually all of them contain certain basic features in common which have been noted as follows:
- “(a) The risk of exploration is borne by the oil company, that is, exploration costs are borne by the company, and are not recorded, unless there is a commercial discovery.
- The exploration phase is distinguished from the exploitation or production phase, so that if there is no commercially significant discovery within a stipulated period, the company does not acquire the right to exploit and in fact is obliged to surrender the area concerned.
- The company commits itself to a minimum expenditure obligation and in some case also to a minimum work obligation.
- The company assumes the obligation to furnish data and information to the government or the national company.
- The company assumes the obligation to develop, contingent on a discovery being appraised as ‘commercially significant’.
- The marketing of oil is generally undertaken by the company, subject to provisions regarding pricing.
- Provisions are made for division of the financial returns which are generated.
- Provision is made for training of nationals and utilisation of nationally produced goods and services rendered by nationals.” See also T J Farer, “Economic Development Agreements: A Functional Analysis”, 10 CJTL (1971), p 200.
- D N Smith and L Wells, op cit, at p 47.
- For instance, the service or work contracts concluded by Indonesia between 1966 and 1973 for the development of its hard mineral resources (ie, copper, nickel and tin) were quite similar to the traditional concession except for the title to the ore which remained with the government until it was extracted. As regards all substantive matters such as control, management, marketing, duration, and fiscal regime, this contract or work was more like a variant of a concession than a service contract.” [SKB Asante, op cit, (1979), pp 361–2]. It is said, “the Indonesian contracts of work are camouflaged concession”—C Leben, “Les investissements miniers internationaux dans les pays en développement: Réflexions sur la décennie écoulée (1976-1986), in Clunet (1986), p 936, note 137.
- D N Smith and L Smith, op cit, at p 47; S K B Asante, op cit, at pp 361–2.
- P D Cameron, Petroleum Licensing (1984), at p 6.
- Cited by Leben, op cit, at p 945, (note 151); See (about the Argentine “contracts of work” concluded between 1958 and 1961 which were said to be characterised as camouflaged concessions), G F Edwards, “The Frondizi Contracts and Petroleum Self-sufficiency in Argentina”, in R F Mikesell, loe cit; see also W J Müller and T G Stern, op cit (1989), pp 189 ff.
- A Z El Chiati, op cit, at para 55.
- Peter Cameron, Petroleum Licensing: A comparative Study (1984) (Financial Times Business Information (London), at p 13.
- Tomislavo, E J P Dabinovic, “Petroleum Service Contracts in Argentina, Brazil, and Colombia: Issues Arising from their Legal Nature”, 5 JERL No 1 (1987), p 15, at p 20; Peter Fischer, Die internationale Konzession (Springer-Verlag, 1974), p 179 et seq.
- See S K B Asante, 73 AJIL (1979), p 335; Smith & Wells Jr, 69 AJIL (1975), p 560—for considerations from the functional point of view.
- See generally, D Berlin, Le régime juridique international des accords entre Etats et ressortissants d'autres Etats,” (Thèse, Paris, 1981).
- B G Taverne, “Concession and new types of Exploration/Production contracts” Proceedings of the Energy Seminar Organised by the IBA, 29 September—4 October 1979, Cambridge, England. “… the real difference between a concession agreement and a service agreement is of a legal nature, ie the holding of the mining rights and the title to production. From that point of view a production-sharing agreement is definitely a service contract whereby the IOC (International Oil Company) operates with the legal status of a contractor to the mining-rights holder who is either a HC (Host Country) or its national oil company. It then follows that the share of production received by an IOC under a PSA (Petroleum Sharing Agreement) is, from a legal standpoint, a payment or a compensation effected by the HC to its contractor.” Blinn et al, International Petroleum Exploration and Exploitation Agreements, Legal, Economic and Policy Aspect (London, 1986), at p 70.
- S Zorn, “Permanent Sovereignty over Natural Resources: Recent Developments in the Petroleum Sector”, 7 Natural Resources Forum (1983), p 321, at p 324, “In the typical production-sharing/service contract of the 1970s (eg the model contracts published by Brazil, Nigeria or the Philippines), the question of ownership of oil in the ground is clearly settled in favour of the host country, which also retains formal ownership of all facilities and equipment and retains control of all policy aspects of oil development.”
- See also Zakariya, “Sovereignty over natural resources and the search for a new international economic order” 4 Natural Resources Forum (1980), at pp 75–84; M Kassim-Momodu, “Legal Aspects of Ownership of Natural Gas in Nigeria”, 6 JERL (No 4, 1988), p 268. On the question of importance of ownership, see P D Cameron, op cit. (1983), at pp 19–21.
- A Z El Chiati, op cit, at para 48, p 58.
- K Hossain, op cit, at p 120; see also M Kassim-Moraodu, “The Duration of Oil Mining Leases in Nigeria,” 6 JERL (1988, No 2), pp 103–104.
- For example, Jordan, Qatar, Congo, Zaire, Madagascar, and many others.
- p Fischer, Die International Konzession (1974), at p 551, also in Encyclopedia of Public International Law, vol 8, at p 100: “a concession in the wider sense may be defined as a synallagmatic act by which a State transfers the exercise of rights or functions proper to itself to a private person, State-owned enterprise or a consortium which in turn, participates in the performance of public functions and thus gains a privileged position vis-à-vis other private law subjects within the jurisdiction of the State concerned.”
- p Fischer, ibid, (1974), at pp 553–554.
- P D Cameron, Petroleum Licensing (1984), at p 6.
- P Weil, “Le Droit International des Contrat”, Etudes et Documents, Conseil d'Etat, n 23, 1971, p 15, as translated and quoted by Professor M Flory in his Legal Opinion to the Government of Kuwait in Kuwait v Aminoil arbitration case, see the Memorial of the Government of Kuwait, the Pleadings are available in the Squire Law Library, University of Cambridge, England.
- See also G R Delaume, “ICSID Arbitration in Practice”, 2 International Tax and Business Lawyer (No 1, 1984), p 58, at p 65; A Pellet, Le Droit International du Développement (1978); K S Carlston, “International Role of Concession Agreements”, 52 Nw U L Rev (1957–58), at pp 629–34.
- See J N Hyde, “Permanent Sovereignty over Natural Wealth and Resources,” 50 AJIL (1956), p 854, at p 862.
- See generally, S I Pogany, “Economic Development Agreements”, 7 ICSID Rev-FILJ (No 1, 1992), pp 1 ff.
- Lord A McNair, “The General Principles of Law Recognised by Civilised Nations”, 33 BYBIL (1957), at p 1.
- R Geiger, “The Unilateral Change of Economic Development Agreements,” 23 ICLQ (1974), p 73, at p 74.
- E I Nwogugu, The Legal Problems of Foreign Investment in Developing Countries (1965), at pp 180–86.
- See P Fischer, op cit (1974), at p 551; I D Lupis, Finance and Protection of Investments in Developing Countries (1987), at pp 42–43.
- See generally, J D Lambert & F Fesharaki (eds), Economic and Political Incentives to Petroleum Exploration Developments in the Asia-Pacific Region (Washington International Law Institute, 1990).
- See, for example, El Kosheri, “Le régime juridique créé par les accords de participation dans le domaine pétrolier”, 147 Hague Recueil des Cours (1975-IV), p 246.
- A Z El Chiati, op cit, paras 27–33, 49–71; see also K W Blinn, et al, op cit, pp 69–81.
- Id, at para 51.
- Id, at p 19.
- See JSC Neto, “Risk-Bearing Service Contracts in Brazil” 3 JERL (1985) p 114 at pp 114–117; see also W A Wood, “Legal Aspects of Foreign Investment in Oil and Gas Exploration and Development in Brazil”, 7 JERL (1989) pp 265 ff; Blinn et al, op cit at 82;
- S K B Asante, op cit, (1979), p 335, at pp 360–364; Smith and Wells, op cit, pp 47–49; K Hossain, op cit, pp 158–172.
- Under the 1972 Bolivian general law relating to hydrocarbons, Yacimientos Petroliferes Fiscales Bolivianos (YPFB), the Bolivian State Oil enterprise concluded ‘operation contracts’ under which the contractor had to initially bear all the costs and risk of exploration and exploitation. In Venezuela a service contract for oil in South Lake Maracaibo was concluded between Corporacio Venezuela de Petroles and Shell is another example under which the financing was to be provided by Shell, the contractor (See Smith & Wells, op cit, at pp 48–49); “Operation or risk contracts in Latin America substantially followed the basic structure of the Middle Eastern service contracts. Under the operation contract concluded in Peru in 1971 between Petroles del Peru, a State agency (PETROPERU), and Occidental Petroleum Corporation of Peru, a US-owned private enterprise, Occidental undertook to provide the risk capital all necessary funds for exploration and development, and all necessary technical services. The corporation was to act as a general contractor and was entrusted with exclusive responsibility for all the operations. However, the Peruvian model has been substantially followed in operation contracts concluded by national petroleum or mineral agencies in Panama, Uruguay, Guatemala, Bolivia and Brazil”—(SKB Asante, op cit, at p 361); see also JSC Neto, “Risk-bearing Service Contracts in Brazil,” 3 JERL (No 2, 1985), p 114; C R Blitzer, D R Lessard & J L Paddock, “Risk-bearing and the Choice of Contract Forms for Oil Exploration and Development,” 5 The Energy Journal (1984), p 1.
- Smith & Wells, id; Asante, id.
- T Honoré, “Ownership” in Oxford Essays in Jurisprudence (A G Guest, ed, Oxford, 1961), pp 104–47; W N Hoffheld, Fundamental Ilegal Conceptions as Applied in Judicial Reasonings (1919); S R Munzer, A Theory of Property (CUP, 1990), pp 22 if.
- See also R Higgins, “The Taking of Property by the State: Recent Developments in International Law,” 176 Hague Recueil des Cours (1982-III), p 259, at pp 267–278; J Waldron, The Right to Private Property (Oxford UP, 1988); C Nino (ed), Rights (The International Library of Essays in Law and Legal Theory, Schools 8), Dartmouth, 1992; Fr V Kruse, The Right of Property Vol I (1939), Vol II (1953), Oxford.
- A Z El Chiati, op cit, at para 49.
- See generally, Salmond on Jurisprudence (P J Fitzgerald ed, 12th ed 1966), at pp 235–241.
- Blinn et al, op cit, at p 71.
- “From that point of view a production-sharing agreement is definitely a service contract whereby the IOC (International Oil Co) operates with the legal status of a contractor to the mining-rights holder who is either a HC (Host Country) or its national oil company. It then follows that the share of production received by an IOC under a PSA (Production-Sharing Agreement) is, from a legal standpoint, a payment or a compensation effected by the HC to its contractor”—id.
- For example, under a service contract, the service the transnational oil company performs will normally be paid for in cash and not in crude oil. In this sense there is a clear difference from the production-sharing agreement where the parties receive their benefits in kind, not in cash. The service contract shares the same features of duration, relinquishment and work obligations, as the production-sharing contract and the petroleum licence”—Asante, op cit, p 364.
- T W Wälde, “Recent Developments In Negotiating International Petroleum Agreements,” Energy Law (Special Supplement, July 1992), p 3.
- K Hossain, op cit (1979), at p 175.
- See P Leboulanger, Les contrats entre états et enterprises étrangères (Paris, 1985) at pp 105–107.
- See SKB Asante, “Restructuring Transnational Mineral Agreements,” 73 AJIL (1979), p 335; D N Smith and L Wells, Jr, Negotiating Third World Mineral Agreements: Promise as Prologue (1975); R Fabrikant, Oil Discovery and Technical Change in Southeast Asia—Legal Aspects of Production Sharing Contracts in the Indonesian Petroleum Industry (Institute of South Asia Studies, Singapore, 1973).
- See K Hossain, “Choice of Petroleum Development Regime in Joint Development of Offshore Oil and Gas,” in Joint Development of Offshore Oil and Gas (H Fox, ed, 1990), vol II, p 72, at p 74: “In terms of government ‘take’ and financial benefits, while it is theoretically correct that the same economic results can be achieved under a concession (tax-cum-royalty system) as under a PSC (Production-Sharing Contract), experience shows that in countries where the tax administration is weak, and lacks experience of petroleum accounting, it is more difficult to realise tax, than to secure for the government a stipulated share of production under a PSC.” See also D N Smith and L T Wells Jr, in 69 AJIL (1975), at p 572: “A country with a weak income tax administration or without a sophisticated governmental body to police an agreement might well prefer a traditional agreement, which raises minimal administrative problems, to one which is so complex that the governmental machinery simply cannot cope with its administration. Government income might well be higher when complex, though purportedly more favourable, financial arrangements are avoided.”
- See generally, J E Zahary, Managing Business-Government Relations in the Petroleum Industry in Western Europe (MPhil thesis, University of Oxford, 1989).
- Asante, loe cit, at pp 357–358; see also P D Cameron, Property Rights and Sovereign Rights: The Case of North Sea Oil (1983), pp 19–21.
- See generally, R W Bentham and W G R Smith, “State Petroleum Corporations: Corporate Forms, Powers and Control” (A Report Compiled for the United Nations Organisation), CPMLS, Dundee, 1987).
- See E Selvig, “State Oil Companies: What Was the Purpose When Creating Them and Has This Purpose Been Achieved?” in Proceedings of the Regional Energy Law Seminar, the Section on Energy and Natural Resources Law, IBA in conjunction with the Scandinavian Institute of Maritime Law, University of Oslo, Norway 8–9 May 1984; A Lucas, “State Petroleum Corporations: The Legal Relationship with the State,” ibid., J Staffeldt, “State Oil Companies: What Was the Purpose When Creating Them and Has This Purpose Been Achieved?” ibid., J S Middelthon, “State Oil Companies,” ibid. See also generally, H L Lax, States and Companies: Political Risks in the International Oil Industry (PhD thesis, City University of New York 1987, University Microfilms order no 87–08, 299).
- See generally, R Vernon (ed), The Promise of Privatisation (1988); P D Cameron, “Recent Developments: Privatisation (European Communities, Argentina, Canada, Germany, Portugal, Spain and Thailand)”, 10 JERL (No 1, 1992), pp 116–135; A J Black, “Canadian Natural Gas Deregulation: Contractual Impediments and Discriminatory Consequences,” 7 JERL (No 1, 1989), p 42; R N Maciel, “Argentina: Privatisation of the Natural Gas Industry,” 10 JERL (No 4, 1992), p 371. See also J Vickers and V Wright (eds), Politics of Privatisation in Western Europe (London, F Cass, 1989); R Bailey, “Gas Privatisation and the Energy Strategy,” National Westminster Bank Quarterly Rev (August, 1986, No 12), pp 2–12; M M Dobek, “Privatisation as a Political Priority: The British Experience,” XLI Political Studies (March, 1993), pp 24–40.
- T W Wälde, “Restructuring and Privatisation: Viable Strategies for State Enterprises in Developing Countries?” (1991); T W Wälde, “Recent Developments In Negotiating International Petroleum Agreements” (July 1992), 1 Energy Law (Special Supplement). See also generally, G Majone (ed), Deregulation or Re-regulation? Regulatory Reform in Europe and the United States (1990); A R Madigan, et al, “Regulation and Deregulation of the Natural Gas Industry in the United States,” 25 Alberta L Rev (No 1, 1986), p 2; M S Klan, Oil Leasing Policies for the Outer Continental Shelf: Some Exploration and Production Implications (PhD thesis, University of Texas, 1984).
- T W Wälde, “Recent Developments In Negotiating International Agreements,” (July 1992), at pp 3–4; see also L A Erize, “Argentina's Exploration Plan: The Return of Exploration Permits and Exploitation Concessions,” ÍO JERL (No 3, 1992), p 233; R N Maciel, “Argentina: Privatisation of the National Gas Industry,” 10 JERL (No 4, 1992), p 371; M P Dabinovic and S Albarracin, “Argentina: A New Trend in the Energy Sector,” 10 JERL (No 1, 1992), p 118; P D Cameron, “Recent Developments: Privatisation”, 10 JERL (No 1, 1992), p 116.
- See T Daintith, “The Petroleum Production Licence in the United Kingdom,” in T Daintith, The Legal Character of Petroleum Licences: A Comparative Study (1981), p 200, at p 204.
- P D Cameron, op cit (1983), at pp 50–51. See also the Convention on the Law of the Sea, Annex III, Article 1. In the case of the deep sea-bed regime under Part XI of the Law of the Sea Convention, title similarly passes upon recovery.
- A W Baker and D H Daniel, “BNOC and Privatisation—the Past and the Future,” 1 JERL (1983), p 149; V Applewhite, State Participation in the British Oil Industry: the BNOC (LLM thesis, CPMLS, University of Dundee, 1982); R D Vock, “Government Participation UK Style: Some Legal Aspects,” in Proceedings of the Petroleum Law Seminar I, paper 18, IBA, London; J C Woodliffe, “State Participation in the Development of United Kingdom Offshore Petroleum Resources,” Public Law (1977), pp 249–271; Development of the Oil and Gas Resources of the United Kingdom (HMSO, London, 1981), Department of Energy; Rowan-Robinson, “Planning Control of Onshore Oil and Gas Development in the United Kingdom,” 8 Oil & Gas & Tax Rev (No 5,1990), p 132. See also R Higgins, “Ten Years of State Involvement in the Petroleum Industry: UK,” in Energy Law Seminar, IBA, London, 2, Paper RI.
- P D Cameron, op cit (1983), at p 169. See generally, D A Fee, Petroleum Exploitation Strategies: A Cross-Sectional Evaluation (PhD thesis, University College, Dublin, 1987), also Petroleum Exploitation Strategy (Belhaven Press, London, NY, 1988).
- See R Higgins, “The Taking of Property by the State: Recent Developments in International Law,” 176 Hague Recueil des Cours (1982-III), P 259, at P 307; P D Cameron, ibid, at p 51. See also Saudi Arabia v Aramco, 27 lLR p 117, at p 161.
- On the “new property” theory in the context of the petroleum production licence, see P D Cameron, ibid, at pp 56–62.
- See A Hill, “Joint Operating Agreements,” in Proceedings of the Petroleum Law Seminar (1978), IBA, London, I, paper 14; A Hill, “Operating Agreements: Current Developments in the North Sea,” in Energy Law (1981), IBA, Banff, 2, paper 1; G D M Willoughby, “Forfeiture of Interests in Joint Operating Agreements,” 3 JERL (No 4, 1985), p 256.
- SC 1991, c 10, Bill C-84, Royal assent, 1 February 1991.
- H S Campbell, “Investment Canada and the Canadian Oil and Gas Industry,” 8 Oil and Gas Law & Taxation Rev (No 9, 1990), pp 299–303; C D Hunt, “The Offshore Petroleum Regimes of Canada and Australia,” (Calgary, Canadian Institute of Resources Law, 1989); M E Bruton, et al, “International Oil and Gas Developments: A Canadian Perspective,” 29 Alberta Law Rev (No 1, 1991), p 138.
- Canada: Report of the Senate Standing Committee on Energy and Natural Resources at 7 Ottawa: The Committee, 1990.
- Ibid, at p 63.
- Senate Committee Report, at p 8.
- P D Cameron, “Recent Developments: Privatisation,” 10 JERL (No 1, 1992), p 116, at pp 120–125.
- Ibid.
- See generally, S J Roberts, The Depletion of Oil Resources: A Comparison of Saudi and British Policies (Oxford UP, 1989); A A Hassan, The Depletion Theory of Exhaustible Resources: A Case Study of Saudi Arabia (PhD thesis, Leicester University 1987).
- T W Wälde, “Recent Developments in Negotiating International Petroleum Agreements,” (July 1992), at p 3.
- See generally, P D Cameron, op cit (1983), esp 56–62.
- Ibid, at p 62.
- F O Vicuña, op cit (1988), at p 237; see also T Daintith, op cit (1981), at p 10.
- See T W Wälde, “Investment Policies and Investment Promotion in the Mineral Industries,” 6 ICSID Rev-FILJ (No 1, 1991), p 94, at p 104; see also P D Cameron, op cit (1984), p 8.
- T Daintith, “The Petroleum Production Licences in the United Kingdom,” in T Daintith, op cit. (1981), p 200, at p 202.
- GA Res 1803, 17 UN GAOR, Supp (No 17) 15, UN Doc A/5217 (1962).
- GA Res 3201 (S-IV) and 3202 (S-VI), 6 Spec Sess. UN GAOR, Supp (No 1) 3, UN Doc A/9559 (1974).
- GA Res 3281 (XXIX), 29 UN GAOR, Supp (No 31) 50, UN Doc A/9631. See also other relevant documents, viz, GA Res 2158, 21 UN GAOR, Supp (No 16) 29, UN Doc A/6316 (1966); GA Res 2386, 23 UN GAOR, Supp (No 18) 24, UN Doc A/7218 (1968); GA Res 2692, 25 UN GAOR, Supp (No 28) 63, UN Doc A/8028 (1970); GA Res 3016, 27 UN GAOR, Supp (No 30) 48, UN Doc A/8730 (1972); GA Res 3171, 28 UN GAOR, Supp (No 30) 52, UN Doc A/9030 (1973).
- Id, at pp 1020–21, “These modern contracts emphasise a balancing of the legitimate development aspirations and goals of the host countries with the equally legitimate business interests of the investing companies, differing significantly from the old concessions, under which foreign companies gave little or no attention to the interests and needs of the host countries.”
- It should be borne in mind that we keep aside the US legal system under which the minerals in place, in situ, belong (in many states) to the owner of the land—see p H Martin and J L Yeats, “Louisiana and Texas Oil & Gas Law: An Overview of the Differences”, 52 Louisiana L Rev (March 1992, No 4), p 769. Here we take the proposition that all minerals belong to the State. It is justified in most common law countries as well as civil law countries whose legal systems are inspired by the French law, especially those Francophone African countries. Though the French law does not expressly state that the deposits belong to the State, it is now generally held that minerals and “mines” are the property of the State.
- Texaco v Libya 53 ILR p 393, at pp 438–39; See also the Anglo-Iranian Case (1952) ICJ Reports, p 93, at pp 111–112, “The Lena Goldfields ease” 36 Corn LQ (1950), p 31; 52 RCDIP (1963), p 273, at p 312; 27 ILR. (1963), p 117, at p 164; M Cohen-Jonathan, Les Concessions en Droit International Public, thèse, Paris 1966, at pp 133–134; F A Mann, “Contrats entre états et personnes privée étrangères: The Theoretical Approach towards the Law Governing Contracts between States and Private Persons”, 11 Rev Beige. DI(1975), p 562, at p 564.
- There are certain aspects of a concession agreement which fall within the domain of public law because of the nature of its subject matter. Along with the contractual clauses, statutory or regulatory clauses which are embodied in mining laws and regulations and other statutes purporting to regulate the public law aspects of a concession agreement constitute as a whole the legal regime of the agreement as such. Among the public law aspects one may thus enumerate:(i)the competitive grant of a concession (ii) the form and conditions of the agreement (iii) the grant to the concessionaire of special powers, privileges and facilities and (iv) the legislative approval of the concession—Henry Cattan, op cit, at p 21.
- See also A Frihagen, “The Legal Characteristics of Resource Interests: Does It Matter?”, in Energy Law ′88 (Proceedings of the advanced seminar on petroleum, minerals & energy resources law organised by the IBA's Section on Energy & Natural Resources Law) (hereinafter Energy Law ′88), p 345, at p 351, “(t)he basis for holding that at least parts of these resource exploitation arrangements are of public order nature, may be deduced from several factors: Most often the arrangements involve joint activities with a State body or preferred host State companies. Furthermore, State or national interests will normally be emphasised in the set conditions. Finally, the legislative framework will usually place the arrangements in the realm of administrative or public law.
- “Among the more usual public order elements licence or co-operative arrangements in use today contain, are aspects of profit sharing and of risks placed mainly on the foreign oil company:
- (i)Carried interest arrangements regarding State oil company costs—either final or return only out of possible production.
- (ii) Work contracts with payment only out of possible production.
- (iii) Joint venture agreements with privileges for the host State's oil company.” (emphasis added).
- From the vantage point of private law, a concession agreement is apparently a contract. Many of the substantive contents of such an agreement are creatures of private law and contractual in nature. Like most contracts concession contracts are concluded after extensive bargaining and negotiations; they may be preceded by letters of intention, heads of agreements, agreements in principle and they may consist of more than one document. Partly because of the respective bargaining and negotiating powers of the contracting parties contractual terms are found with great differences between instruments. Substantially, the contractual terms or clauses define the respective rights and obligations of the parties. Many contractual clauses are concerned with the economic and financial aspects of the agreement, ie all the terms, conditions and factors which taken together form the components used for projecting the ‘economics’ of a specific venture.
- They include:
- • Strictly financial terms: taxes, royalty, bonuses, custom duties, etc;
- • expenditure and work commitments;
- • other factors which impact on the economics such as costs of exploration, relinquishment, development terms, rate of recovery of costs and retention of proceeds of crude oil abroad;
- • pricing of petroleum for royalty, income tax purposes and recovery of costs in production sharing agreements;
- • duration of the concession.
- As the foregoing matters are negotiated by the parties, they are contractual in nature.
- It cannot be denied that in some concessions the contracting parties also reach agreement on the law applicable to the interpretation and execution of the contract and in many concessions the parties stipulate arbitration as the method for the settlement of disputes. Stipulations by the parties to a concession concerning law or jurisdiction constitute additional elements of private law which are consistent with the contractual character of the transaction.
- Thus, the above mentioned elements together with others are the result of a meeting of the wills of the parties purporting to produce legal effects and as such are binding on the parties.—see A Z El Chiati, op cit, at pp 36–39, paras 15–17.
- See Talmage, “Regulatory Fiscal and Contractual Components of Mineral Law Regimes”, UNTCD, Seminar Paper, December 1989, at pp 409–425; Gault, “Petroleum Development Offshore: Legal and Contractual Issues,” in Petroleum Investment Policies in Developing Countries (Beredjick & Wälde, eds, 1988), at pp 101–65; Fortin, “Substantive Criteria to Assess the Fiscal and Regulatory Environment for a Mining Investment in Developing Countries,” UNDTCD Technical Paper, February 1990. See also Saudi Arabia p Aramco 27 ILR p 117, at pp 162–164, passim.
- R Higgins, “The Taking of Property by the State: Recent Developments in International Law”, 176 Hague Recueil de Cours (1982-III), at p 306; see also T Daintith, op cit (1981), at pp 219–225.
- For example, in Denmark the vast majority of provisions of the “Model Licence for Exploration for and Production of Hydrocarbons, First Round” are not subject to negotiations with the applying oil companies, and therefore might be called standard terms. These include those concerning the amount of duties to be paid to the State, access for supervision of the activities, liability provisions, and the right of the State to regulate the disposition of the produced hydrocarbons—See Anita Ronne and M Budtz, “The Legal Framework for Exploration for and Production of Oil and Natural Gas in Denmark”, 3 JERL (1985), p 153, at p 158; see also T E J P Dabinovic, “Petroleum Service Contracts in Argentina, Brazil and Colombia: Issues Arising from their Legal Nature”, 5 JERL (1987), p 15; G Kuehne, “Oil and Gas Licensing: Some Comparative United Kingdom—German Aspects”, 4 JERL (1986), p 150. See also A Boggiano, International Standard Contracts: The Price of Fairness (Graham & Trotman/Martinus Nijhoff, Dordrecht/Boston/London, 1991).
- T Daintith (ed), The Legal Character of Petroleum Licences, a Comparative Study (1981), at p 217; R W Bentham (ed), Recent Developments in United Kingdom Petroleum Law (CPMLS, University of Dundee, 1984); Cf H Cattan, op cit, (1967), at p 28.
- Daintith and Willoughby, United Kingdom Oil and Gas Law, ( 1977), at p 26: “The licence arrangements retain a strongly regulatory flavour, both by reason of the formal rule for the issue of licences laid down at the instigation of Parliament, and by reason of the content of the licences themselves, which must normally accord with model clauses regulating such matters as working methods, safety, pollution and reserving to the Minister considerable powers of direction of the licensee's activity. Indeed, with the unilateral alteration of clauses in existing licences by the Petroleum and Submarine Pipelines Act 1975 one might be tempted to say that the contractual character of the licences was pure fiction…. It is suggested that if British Courts were to follow the French example and treat the clauses in licences corresponding to the model clauses as regulatory in character, their decisions would more accurately reflect the relationship between the parties than if they simply implied the rules appropriate to ordinary contracts.” (emphasis added). (Id, pp 26–27).
- F o vicuña, Antarctic Mineral Exploitation: The Emerging Legal Framework (1988), at pp 236–238.
- F Dalgaard-Knudsen, “Exploitation Concessions: Contracts or Permits? Contributions from the Norwegian Phillips/Ekofisk Case”, 5 JERL (1987), 165, 172, with regard to the Norwegian Supreme Court's view about the nature of the petroleum exploitation or production licences in the Phillips/Ekofisk case [Judgment of 19 December 1985 in 1 no 171/1985 (per Judge Holmoy)], the author said: “It appears reasonable to suppose that the Supreme Court implicitly shared the Phillips group's (the Claimants/the Plaintiffs) point of view, that “the correct characterisation probably is to regard extraction permits as a cross-breed, as expressed in characterisations like ‘act of administration with contractual elements’ or ‘concession agreement.’” (emphasis added), (ibid, at p 179). It should be noted that the Supreme Court did not expressly rule on the legal nature of the licences. And this state of affair raised many speculations on the issue. See ibid, at pp 179–181.
- See also A Frihagen, “The Ekofisk Royalty Case”, 3 JERL (1985), 121; Herlitz, Elements of Nordic Public Law (1969), p 211; Rein, “The Legal Character of Petroleum Production Licences in Norway,” in The Legal Character of Petroleum Licences: A Comparative Study (T Daintith, ed, 1981), Ch 7, p 187, at p 191–192; A Ronne & M Budtz, “The Legal Framework for Exploration for and Production of Oil and Natural Gas in Denmark”, 3 JERL (1985), 153, pp 155–158, 167–168. See also Knudsen, Mineral Law and Mining Agreements in Greenland (PhD thesis, 1991, Euro U Inst)
- See F Dalgaard-Knudsen, op cit, at p 165: “The Nordic concessions, permits, agreements or contracts concerning the exploitation of raw materials from the subsoil have so far largely been treated as belonging to the sphere of public and administrative law….”
- See also Poul Andersen, Densk Forvaltningsret (5th ed); Ola Mestad, “The Ekofisk Royalty Case: Construction of Regulation to Avoid Retroactivity” 2 ICSID Rev-FILJ (1987), 139, 148, “In Norway,… it is probably more appropriate to characterise the petroleum production licence as regulatory or statutory, but the constitutional protection also covers such rights, at least in principle.”
- See also Lindseth, “Petroleum Policy and Legal and Contractual Frameworks—the Norwegian Case”, International Bar Association, Energy Law Seminar (1984) 757, at p 764, Petroleum licence is a one-way document in the sense that it is not considered a contract between the State and the Licensee, because the licence contains clauses of a policy nature and because it serves as an individualised supplement to the legislation.
- See also Rein, ibid, “By regarding the licence as a contract it does not follow automatically that it is governed by the rules of contract in the narrow sense. And vice versa, by stressing the public law aspect of the licence one does not automatically rule out the possibility that rules of private contract law may be applicable in certain aspects.
- In Norwegian legal tradition there is an apparently clear cut distinction between private and public law. Private law is the set of rules governing legal relationships between private parties, typically the law of contracts. Public law, on the other hand, is the law governing the exercise of authority by public bodies.
- It is often assumed that a certain legal problem or complex of problems must be governed by either public or private law. Thus, if the legal relationship arising out of a production licence is by its nature governed by public law, the provisions applicable to similar private relationships are by necessity irrelevant for the resolution of the problem—and vice versa.
- However, the assumption of an absolute distinction between private and public rules of law is in itself clearly untenable….
- Certain relationships are legal bastards in the sense that both public and private law are applicable, but to different aspects of the relationship. Here, the petroleum production licence provides a good example.”
- Cf T Daintith, op cit (1981), pp 26, 185–199.
- It should be noted that since 31 March 1992 the Menem Government of Argentina has launched a new oil and gas exploratory programme towards gradual privatisation. Before that date, YPF (the national oil company of Argentina) was engaged in risk, exploitation and service contracts with foreign companies. Now the existing agreements are being converted into concession contracts and new operations are subject to a sequence of exploration permit followed by exploitation concession—see L A Erize, “Argentina's Exploration Plan: The Return of Exploration Permits and Exploitation Concessions,” 10 JERL (No 3, 1992), p 223.
- T E J P Dabinovic, op cit, (1987), at pp 17–18 (footnotes omitted); T E J P Dabinovic, “The Restated Version of the Argentine Model Contract,” 6 Oil & Gas L Tax Rev (1987/88), pp 142 ff; E Dahl, “Argentine's System of Foreign Investment,” 6 Fordham Int'l L J (1982), p 33. See also K S Rosenn, Foreign Investment in Brazil (San Francisco: Westview Press, 1991).
- As quoted, id., at p 19. See also about the administrative nature of petroleum service contracts in Colombian law and Argentine Law, Id, at pp 19–21.
- M Nicolazzi, “Petroleum Law and Petroleum Joint Ventures in Italy”, 8 JERL (1990), p 30, at pp 31–32.
- Support for such a view may also be found in recent writings of eminent jurists. See, for example, D W Bowett, “State Contracts with Aliens: Contemporary Developments on Compensation for Termination or Breach”, LVIX BYBIL (1988), p 49. See also International Encyclopedia of Comparative Law, vol 2, Contracts in General, chapter 4, “Public Contracts”.
- See generally, B Audit, Transnational Arbitration and State Contracts: Findings and Prospects (1987), The Hague Academy Centre for Studies and Research in International Law and International Relations; M Sornarajah, International Commercial Arbitration (1990); R Geiger, op cit (1974), p 73.
- See J D B Mitchell, The Contracts of Public Authority (1954).
- (ICSID Award of 21 November 1984, ILM, 24 (1985), p 1022 at p 1029. The award was annulled by an ad hoc committee on 16 May 1986, but the annulment was based upon what was perceived as an erroneous valuation of Amco's investment, and not on the point adverted to above: see 25 ibid (1986), p 1439.
- It seems that Professor O'Connell had in mind precisely such a harmonious co-existence between the two types of legal norms applicable to relationships of predominantly ‘public nature’ when he stated: “Since the State's own constitutional power to regulate the concession is implicit in the contract, and since the actual operation of the concession is to a substantial extent determined by the local law, the rights of the concessionaire are in part the creation of public law, and in part that of private law, and in legal systems where the distinction is important it may be desirable to fix with precision just which elements of the contract are subject to ordinary contractual law, and which are governed by constitutional and administrative law”—O'Connell, International Law, vol 2, 993 (2nd ed), 1970.
- See 8 ICLQ (1959), 320, at p 333 (the Aising case was reported by S Schwebel).
- For descriptions of the different types of public concessions, see the Aramco Award, 27 ILR, p 117, at pp 160–161.
- Id, at p 158.
- R Higgins, op cit, (1982), at p 307.
- See Kuwait v Aminoil, 66 ILR, para 50, at pp 572–73; see also Middle East Economic Survey, Vol XVIII, No 8, 13 December 1974 (as noted by the Tribunal).
- Eg Manufacturing and Sales Agreement between Raytheon Manufacturing Company and Fabbrica Italiana Raddrizzatori Apparecchi Radiologici, Italy (18 July 1952), (For the most recent case relating to this agreement decided by the ICJ between USA v Italy (the Case concerning Elettronica Siculo SPA (Elsi) (ICJ Judgment of 20 July 1989), see the US Memorial submitted to the ICJ on 15 May 1987; The Sugar Agreement between the Democratic Republic of the Sudan and Lonrho Ltd (English Co), 1972 (Joint venture); For related cases see, Société Ltd Benvenuti & Bonfant Srl p Government of the People's Republic of the Congo (ICSID Case No ARB/77/2) (Concerning Production of Plastic bottles for domestic consumption) (Award of 8 August 1980), 21 ILM 740 (1982)/ 67 ILR 345 (1984); Klöckner Industrie-Anlagen GmbH, Klöckner Belge, SA and Klöckner Handelmaatschapij Camerounaise des Engrais (SOCAME) (ICSID Case No ARB/81/2, (Award of 21 October 1983, and the decision annulling the Award signed by the ad hoc Committee on 3 May 1985) (Concerning construction of a chemical plant), 10 Y p Com Arb 71 (1985) and for the ad hoc Committee decision see, 1 ICSID Rev FILJ 89 (1986); Atlantic Triton Company Limited? People's Revolutionary Republic of Guinea (ICSID Case No ARB/84/1) (Award of 21 April 1986) (Concerning contract for the conversion of vessels into fishing vessels and the training of crews), 11 Y p Comm Arb 215 (1986); Colt Industries Operating Corp, Firearms Divisions? Government of the Republic of Korea (ICSID Case No ARB/84/2) (Concerning technical and licensing agreements for the manufacturing of weapons); Mobil Oil Corporation, Mobil Petroleum Company Inc and Mobil Oil New Zealand Limited? New Zealand Government (ICSID Case No ARB/87/2) (Concerning synthetic fuels project); See generally, Kalmanolf, “Manufacturing in Developing Countries”, 10 Colum J Transn L (1971), 303.
- Eg Rahad Irrigation Project, Supply Contracts between the Democratic Republic of the Sudan and Sir Malcolm MacDonald & Partners, Cambridge, 1976; Contract between the Saudi Ministry of Agriculture and Water (Riyadh Additional Water Supply), and Sir Malcolm MacDonald Partners, Cambridge. For related cases see, The Liberian Easter Timber Corporation (LETCO), Letco Lumber Industry Corporation (LLICJ v Government of the Republic of Liberia (ICSID Case No ARB/83/2). (Concerning forestry exploitation) (Award of 31 March 1986), 26 ILM 647 (1987); Asian Agriculture Products Limited v Democratic Socialist Republic of Sri Lanka (ICSID Case No ARB/87/3) (Concerning shrimp farming joint venture); Société Adriano Gardella Spa v Government of Cote d'Ivoire (ICSID Case No ARB/74/1) (Concerning production of fibres for export) (Award of 29 August 1977).
- It has been said about international transfer of technology contracts entered into by States and foreign parties that no juridical category for such contracts exists. Transfer of technology may appear as an element in investment contracts. “LDCs have chosen a more dirigistic way, when dealing with transfer of technology (TOT) problems. Since they consider TOT as a process affecting nearly every aspect of economic and social change, they want to make sure that they will obtain the appropriate technology in order to satisfy their needs under optional conditions. Given the insufficiency of the classical law of contracts to govern the relationship between parties with an unequal level of development, they decided to submit TOT contracts to administrative control. This policy has two perspectives: first, a defensive one, aiming at equitable and just conditions for TOT agreements as well as at enforcing economic and social progress; second, a dynamic one, aiming at justifying the acquisition of technologies apt to strengthen technological capabilities within the range of priorities set forth in the national development plan” Dr iur Alexander Catranis, “Transfer of Technology to Developing Countries,” Revue Héllenique de droit international (1985–86) pp 67–70, 72; see also K Khan, “The Transfer of Technology and Petroleum Development in Developing Countries: With Special Reference to Trinidad and Tobago”, 4 JERL (1986), 10; H S Zakariya, “Transfer of Technology Under Petroleum Development Contracts”, 16 JWTL (1982), 207; Y Omorogbe, “The Legal Framework and Policy for Technology Development in Nigeria,” 3 RADIC (1991), p 156; G Cabanellas jr, “Applicable Law under International Transfer of Technology Regulations”, International Review of Industrial Property and Copyright Law (1984), p 39 et seq\ Kokkini-Iatridou, “Contracts for the Transfer of Technology”, an unpublished report for the Hague Zagreb Colloquium (1985), pp 31–76; C W Hyun, “Legal Aspects of Technology Licensing in the Republic of Korea”, 27 Colum J Transnat'l L 53 (1988); M Blakeney, Legal Aspects of the Transfer of Technology to Developing Countries (Oxford, ESC Publishing, 1989).
- The developing countries importing technology may for various reasons strictly regulate the licensing arrangements. As Professor Vagts has recently noted, importing nations “superimpose complicated regulations and bureaucratic approval requirements on top of the private relationship. The stage is set for litigation, some of which will have a distinctly public law overtone even if the State is not a party to it”—D F Vagts, Dispute-Resolution Mechanisms in International Business”, 203 Hague Recueil des Cours (1987-III), p 17 at p 27.
- I Brownlie, Principles of Public International Law (4th ed, 1990), at p 547; But see Sohn and Baxter in 55 AJIL (1961), pp 566–7; F A Mann in 54 AJIL (1960), at pp 589–90.
- A A Fatouros, Government Guarantees to Foreign Investors (1962), at p 235.
- Id.
- Aramco v Saudi Arabia 27 ILR, p 117 at p 161. But see the French Decree no 81–374 du 15 avril 1981 approuvant le cahier des charges types des concessions de mines d'hydrocarbures liquides ou gazeux, Journal Officiel du 18 avril 1981, pp 1111–1114.
- Pound, “Public Law and Private Law”, 24 Cornell L Q 469 (1939).
- See I A meo Asia vIndonesia [1988] LAR, p 24, at pp 27–29. See also The German Federal Republic Administration Procedure Act dated 25 May 1976, BGB 1976 1, p 1253, entered into force on 1 January 1977.
- A A Fatouros, op cit (1962), at pp 196, 197.
- See A F M Maniruzzaman, “State Contracts with Aliens—The Question of Unilateral Change by the State in Contemporary International Law,” 9 J Int'l Arb (1992, No 4), pp 141–171; J D B Mitchell, The Contracts of Public Authorities (1954).
- A F M Maniruzzaman, ibid.
- S K B Asante, “Stability of Contractual Relations in the Transnational Investment Process”, 28 ICLQ (1979), p 401, at pp 403–404; see also T Daintith, “The Petroleum Production Licence in the United Kingdom,” in T Daintith, The Character of Petroleum Licences—A Comparative Study (1981), p 200, at p 215.
- Mitchell, op cit, at p 8; see also I Amco Asia Corp p Indonesia [1988] LAR, p 24, at pp 27–30. But see p Fischer, Die International Konzession (1974), at pp 438–454, 559.
- Turpin, “Public Contracts”, sec 52.
- Id, at p 40.
- W Friedmann, The Changing Structure of International Law (1964), pp 200–202.
- L Sohn, in 54 Am Coc Int'l L Proc (1960) 117. See also A F M Maniruzzaman, (1992), loe cit.
- See, eg I A meo Asia Corp v Indonesia [1988] LAR, p 24, at p 30. See also the Aminoil Award and the Amoco International Finance Award.
- See A F M Maniruzzaman (1992), loe cit.
- See D W Bowett, “State Contracts with Aliens: Contemporary Developments on Compensation for Termination or Breach”, 59 BYBIL (1988), p 49; D W Bowett, “Claims between States and Private Entities: The Twilight Zone of International Law”, Catholic Univ L Rev vol 35, (summer 1986, No 4), at p 932. Cf Commonwealth Aluminium Corporation Ltd v Attorney General (Queensland), 1976 Qd R 231; Perpetual Executors Association v Commissioner of Taxation (1948) 55 Argus Law Reports, vol 2, p 448 per Latham CJ); Harrison, “The Legal Character of Petroleum Production Licences in Canada”, in The Legal Character of Petroleum Licences: A Comparative Study (T Daintith, ed, 1981), 223; see also A R Lucas, “State Petroleum Corporations: the Legal Relationship with the State”, 3 JERL (1985), 81, 87, “There is well-established authority to the effect that parliament on the basis of its sovereign powers can take private rights without compensation,” Florence Mining Co Ltd v Cobalt Lake Mining Co Ltd (1909) 18 OLR 275, 279; aff'd (1918) 43 OLR 474 (PC); Canadian Charter of Rights and Freedoms (1982); Canada Oil and Gas Act, sec 27.
- See Ola Mestad, “The Ekofisk Royalty Case: Construction of Regulations to Avoid Retroactivity”, 2 ICSID Rev-FILJ 139 (1987), 144; Sogn, Krohn, Kaasen and Lund, Norwegian Petroleum Law 2-59, Oslo: Scandinavian Institute of Maritime Law, 1978.
- See Petroleum and Submarine Pipelines Act 1975 (UK); Oil and Gas (Enterprise) Act 1982; also T C Daintith and I Gault, “Pacta Sunt Servanda and the Licensing and Taxation of North Sea Oil Production” 8 Cambrian L Rev. (1977) p 28 ff; P D Cameron, op cit. (1984), at p 183.
- But see P D Cameron, Property Rights and Sovereign Rights: The Case of North Sea Oil (1983), pp 107, 125–26).
- See also A A Agyemang, “Protecting Natural Resource Contracts from National Measures in Africa: Some Comparisons with the Australian Experience,” XXV CILSA (No 3, Nov 1992), p 273.
- “Nowadays, issues of foreign policy, environment, regional development, taxation, are only a few of those that have a bearing on energy policy. And I suspect that these interrelationships will increase rather than diminish in the future. It is most important for energy companies to recognise and adjust to such an evolution. That evolution should be seen as further evidence that the priorities and objectives of host governments are not of the same order as those of the international oil companies.” The Hon Marc Lalonde PC, QC, “Energy Companies and Their Host Governments: To Each his Own,” in Energy Law ′90: Changing Energy Markets—the Legal Consequences, (9th Advanced Seminar on Petroleum, Mineral and Energy Resources Law Proceedings, IBA Section on Energy & Natural Resources Law, 1990), p 40, at p 47; T W Wälde, “Environmental Policies Towards Mining in Developing Countries,” 10 JERL (No 4, 1992), p 327; M Nicolazzi, op cit (1990), p 37.
- See generally, R Higgins, “The Taking of Property by the State: Recent Developments in International Law”, 176 Hague Recueil de Cours (1982-III), at p 306; H Sedigh, “State Responsibility: the Contribution of the Jurisprudence of the Iran-US Claims Tribunal in Respect of the Taking of Foreign Property,” (CPMLS, University of Dundee, 1990).
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Original Articles
The New Generation of Energy and Natural Resource Development Agreements: Some Reflections
A F M Maniruzzaman LLB (Hons.), LLM, M Int'l Law (ANU), PhD (Cantab). Of Darwin College and Visiting Scholar, Centre of International Studies, University of Cambridge, England. Advocate, the Supreme Court of Bangladesh. The author is grateful to Professor Thomas W Wälde, Executive Director, Centre for Petroleum & Mineral Law & Policy, University of Dundee, Scotland for his comments on an earlier draft of this article
Pages 207-247
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Published online: 08 Jun 2015
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