International: Revised AIPN Model Dispute Resolution Agreement

• Global

• Litigation and dispute management
• Energy and infrastructure

26-05-2017

The Association of International Petroleum Negotiators (AIPN) has recently re-drafted their Model Dispute Resolution Agreement, updating it to reflect the oil & gas industry’s best practice for disputes.

The AIPN conducted an industry-wide survey to explore why users would, or would not, look to the AIPN Model Dispute Resolution Agreement as their chosen precedent. That feedback is now reflected in the updated Model Agreement for 2017.

• The Model DR Agreement strikes a balance between the complexities of international arbitration law, with the need to provide straightforward, practical drafting which users can readily include in contracts, in the interest of reducing the time it takes to finalise a deal.
• The original AIPN Model DR Agreement was issued in 2004. The 2017 version has been updated to reflect current practices in arbitration by incorporating best practice, the latest innovations and recent changes to arbitral procedure.
• The Model Agreement emphasizes international arbitration as the primary method of dispute resolution. To offer maximum flexibility for negotiators, it provides three approaches:

i. a short and simple model arbitration clause to be inserted into international petroleum agreements, in the same form as an institutional arbitration clause;

ii. all the main elements of a bespoke arbitration agreement which can be combined as necessary; and

iii. other forms of dispute resolution to be used in a multi-step process concluding with arbitration for a binding decision.

• The AIPN drafting committee has published detailed guidance notes to assist negotiators and drafters, who are often not specialists in dispute resolution procedures.

Key changes to the 2017 Model DR Agreement

The updates to the 2017 Model DR Agreement include three notable themes: expanding the options for arbitral procedures, enhancing the efficiency of existing procedures, and acknowledging the increasing professionalism of arbitral institutions.

Expanding the options for arbitral procedures

In order to improve the arbitral process, reduce costs and improve efficiencies, AIPN have added certain updates to potential procedural choices for drafters, which reflect recent changes in arbitral practice:

Emergency Arbitration - The 2017 Model includes an option for parties to appoint an emergency arbitrator who has the power to award costs and fees, grant urgent interim measures, and impose procedures. This change affords an additional level of flexibility to users by negating the need for a party to apply to a national Court for interim relief in the event that the Tribunal is not yet formed, and reduces the need for parties to initiate multiple applications, by multiple Counsel, in multiple jurisdictions.

Consolidation of Arbitrations – while the 2004 version agreement recognised a right for parties to consolidate multiple proceedings, the 2017 Model DR Agreement goes further by offering drafters an option to refer the decision on whether consolidation is appropriate to a “Consolidation Arbitrator” (to be appointed by the nominated appointing authority). This is an innovative solution to address the procedural complexities associated with consolidation, it can be helpful to parties in complex multi-party and/or multi contract arrangements, and may reduce the possibility of conflict where an existing tribunal is asked to determine whether multiple disputes should be consolidated before that tribunal.

Joinder of parties - Most arbitral institutions now include rules dealing with the addition of parties to proceedings, to reflect the fact that the number of multi-party proceedings has in recent years grown exponentially. This is now reflected in the Model DR Agreement.

Enhancing the efficiency of procedures

The 2017 Model Agreement now includes a number of provisions to improve the efficiency of the arbitral process:

Number of arbitrators – Arbitration agreements often require three arbitrators when one may be more appropriate for the dispute. The 2017 Model includes options for selecting either one or three arbitrators, or allowing this choice to be governed by the size of the amount in dispute, or allowing the parties to discuss the number of arbitrators when a dispute is triggered. This reflects recent updates to the rules of arbitral institutions which provide that a sole arbitrator will be appointed unless it appears that the dispute requires the appointment of three arbitrators.

Expedited arbitration procedures - Many institutions now offer expedited or ‘fast track’ arbitration for parties seeking speed and efficiency in proceedings. In keeping with this trend, the 2017 Model offers such provisions. Parties may choose to rely on any expedited procedures contained in the rules of the chosen institution or they may include provision in their negotiated contract allowing for expedited arbitration in certain circumstances. The Model Agreement also contains an option for parties to specify a time limit on issuing the award (with guidance on the potential difficulties this may encounter).

Evidence - the 2017 Model Agreement introduces new options for disclosure of evidence, to streamline this process. Parties have the option to agree on a narrow regime of limited disclosure, or a more extensive form of disclosure giving them access to a wider pool of documents in the opponent’s control, or to incorporate or be guided by the IBA Guidelines on Taking of Evidence in International Arbitration.

Changes to reflect current global arbitral institutions

The 2017 Model Agreement is updated to reflect that parties now choose from a wider pool of arbitral institutions. Although the AAA/ICDR, the ICC and the LCIA remain the most recognised, established institutions preferred by the oil & gas industry generally, the 2017 Model Agreement presents a much wider range of “larger, well established and recognised” arbitral institutions to choose from. This reflects the fact that users are looking beyond the primary institutions to others in other jurisdictions, and also that all the named institutions are improving their professionalism and handling of disputes.

Although global recognition and reputation remain important factors for parties when selecting an institution, other factors such as an institution’s specialism, its regional presence, etc., are also important to parties. This is addressed in the AIPN Guidance Notes.

The 2017 Model provides an option for contractual disputes to be determined by the rules of the International Centre for Settlement of Investment Disputes (ICSID), which is targeted at host government agreements and reflects the market’s increased recognition of the role of the ICSID in resolving State-orientated disputes in the oil and gas sector.

Conclusion

The 2017 update to the Model DR Agreement incorporates the latest developments in arbitration driven by the views and comments of the users of the Model Agreement themselves. The new Model and Guidance notes can be downloaded from the AIPN website www.aipn.org.

Event: AIPN Europe-Africa Chapter – 8 June in London

Eversheds Sutherland will be hosting an AIPN workshop presented by Tim Martin, Co-chair of Drafting Committee for the Model DR Agreement, who will discuss the key changes and updates.

The workshop, which is free to attend, will take place at our London offices in St Pauls on 8 June. If you would like to register please click here.