International arbitration is the most preferred form of dispute resolution for cross-border disputes, including in the oil and gas industry a new study has revealed.
The study published by Queen Mary University of London (QMUL), in partnership with global law firm White & Case, reported 90% of respondents surveyed prefer international arbitration to resolve cross-border disputes. This finding shows a significant increase from QMUL’s first international arbitration survey in 2006, where the figure was 73%.
The research reflects that oil and gas companies favour international arbitration because it enables them to select arbitrators who have specialist knowledge of the industry (chosen by nearly 40% of respondents) – something which national court systems can often lack – and allows for claims to be heard in private (chosen by nearly a third of those asked).
Oil and gas companies are said to prefer this method of dispute resolution thanks to the greater enforceability and finality of arbitral awards worldwide.
Matthew Secomb, Partner at White & Case LLP, said: “Disputes are often between long-term contract partners, and companies sometimes need encouragement to comply with awards. Achieving finality is critical. This is where international arbitration is particularly useful in enabling a company to resolve an issue for good.
“What’s more, major oil and gas companies often have assets across the world and the global enforceability of this method of dispute resolution is a key advantage.”
London and Paris continue to be the preferred venues for international arbitration with Hong Kong and Singapore coming in third and fourth.
Secomb added: “With the low oil price hanging over the industry, we are expecting to see a range of issues arising – from gas and LNG pricing disputes to projects being cancelled because the economics no longer work. In this environment, Singapore and Hong Kong will likely only increase in importance as centres for international arbitration.”
When respondents were asked to choose their three preferred institutions, just over two-thirds (68%) included the International Chamber of Commerce (ICC) in their answer, and more than one-third (37%) included the London Court of International Arbitration (LCIA), mirroring the results from the 2010 International Arbitration Survey. The Hong Kong International Arbitration Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC) came in third and fourth.
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