4.12 Summary

The lex arbitri or law of the place where the arbitration is held (sometime called the seat) will govern the procedures of the arbitration. This includes the admissibility of evidence, security for costs, judgment and confidentiality orders, appeal ability, and the enforceability of an award against assets in New York Convention countries. From a practical point of view, it is best to choose the governing law of a country in which there is a probability that the legal profession and judges have some knowledge of the law relating to oil, gas, and mining.

Institutional or ad hoc arbitration? The parties may choose to have the arbitration conducted through an international arbitral institution or on an ad hoc basis. These are sometimes called administered and nonadministered arbitration, respectively. An institutional form of arbitration sets timetables and procedures to be followed when establishing the arbitral tribunal for the conduct of the arbitration. An ad hoc arbitration is conducted under rules agreed by the parties or set by the arbitration tribunal. There are a growing number of options in institutional arbitration. The most popular forums for arbitral disputes are institutions such as the ICSID, the ICC, and the London Court of International Arbitration (Brower, Brower, and Sharpe 2003; Paulsson 1995). There are also a number of regional arbitration centers that are available to assist in resolving disputes, such as the Singapore International Arbitration Centre and the Arbitration Centre of the Stockholm Chamber of Commerce.

The advantages of an institutional approach are usually thought to include the following: it provides a wealth of arbitral experience, including that of the arbitrators themselves; it ensures that the arbitral tribunal is appointed and deals with any challenges to arbitrators; it has rules that are a known quantity; it sometimes has sufficient prestige to persuade a reluctant party to arbitrate and comply with the award; and it can be particularly useful when parties have different levels of sophistication or different languages and cultures. In an ad hoc arbitration, parties may designate the rules in their contract or they may adopt a preexisting set of rules, such as the rules of the United Nations Commission on International Trade Law (UNCITRAL).75 They are designed to provide a comprehensive set of procedural rules on which the parties may agree for the conduct of arbitrations arising out of their commercial relationships. This freedom of the parties to customize the arbitration is thought to be the main advantage of the ad hoc approach, inviting comparisons between a tailor-made suit and one bought off the rack. The first chevron in the EI Value Chain contains two key elements that shape the subject matter of chapter 4: property rights and the contract. In almost all countries, extractive resources when in the ground are owned by the state, and exploration and development of those resources is carried out under contract or license by corporate entities, usually foreign ones, often with the state as a partner. Decisions on the award of rights follow from the kind of property rights and contract/license regime they establish. Together with the fiscal terms, discussed in chapter 6, they establish what we may call a first pillar of governance for the extractives sector. It plays a crucial role in conferring legitimacy on the terms and conditions on which investments are made. If flawed, the long-term stability of these arrangements is unlikely to prove enduring.

Finding 1: Knowledge of the fundamentals of extractive industry legal and regulatory frameworks is readily available. Supply is abundant. Much of it has been assembled in the Sourcebook. Understanding the form and content of basic oil, gas, and mining laws, contracts and licenses, regulations, and methods of award is facilitated by the large number of well-established model forms available to governments, legislatures, and civil society.

Finding 2: Application of this knowledge is difficult because of four distinct sources of dynamism.

1. First, and most obviously, every country context is unique.

Each contains specific features of a social, cultural, political, geological, and economic nature that require some adaptation of this body of knowledge before it can become operational. As a result, there can be no such thing as a

“model” for a government to follow, lifted from another country context. However, this chapter shows that there are different ways of combining established legal forms and instruments. The question for the country becomes,

What is the right combination of established instruments for our particular context at this time? 2. Second, legacy matters. Only in very rare cases will an extractives policy be developed from a blank slate. For oil and mining (rather than gas), it will have to absorb or build on a legacy of policy, laws, and contracts, usually developed when less knowledge was available and in less propitious circumstances. In East Africa, for example, the legislation developed when there was little oil or gas discovered has been found to be incomplete when addressing the complexities of hydrocarbon production from very large discoveries. The question becomes, Given this

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