Arbitration preferred method of dispute settlement – Conclusions from LCIA’s debate at Oil and Gas Sector Symposium in Cairo 27 October 2016 Arbitration remains the preferred mechanism for dispute settlement in the oil and gas sector according to speakers and delegates at LCIA’s one-day symposium, Gas Price Related Disputes, held in Cairo this quarter. The event led with an informative discussion looking at recent developments in the sector’s contracts and disputes while a second session explored wide-ranging implications for evaluation, pricing and damages. A final debate considered the sector’s many emerging issues. The event was hosted by the LCIA Arabs Users’ Council with the support of the Cairo Regional Centre for International Commercial Arbitration (the “CRCICA”). Special guest, His Excellency Eng. Tarek El-Molla, Minister of Petroleum and Mineral Resources, delivered the keynote address looking at foreign investments into Egypt’s oil and gas sectors. He stressed the “crucial importance of the energy sector in boosting Egypt’s economic growth” and highlighted the special relationship between the State and oil and gas investors calling for “equilibrium in order to satisfy and protect mutual interests of all parties.” Dr Jacomijn van Haersolte-van Hof, Director General of the LCIA, said “When it comes to debate and discussion at this level there is no substitute for gathering the very best experts, in this case for oil and gas, on the ground in a region at the heart of a sector. Working with our Users’ Councils across the world, this is where we excel. It was a landmark debate at a crucial moment in the sector’s history.” Other speakers included Dr. Mohamed Abdel Raouf (Director of the CRCICA) and Professor Dr. Mohamed S. Abdel Wahab, President of the LCIA Arab Users’ Council. Over 90 delegates, including sector in-house counsel, private practice lawyers and government advisers, attended the event on 10th October at The Four Seasons Hotel, Nile Plaza. Session highlights Session 1 – Contracts and Disputes Speakers focused on the triggering events of the “price review mechanism” under long-term gas sales agreements. Key messages; Uncertain geopolitical situations and rapidly evolving markets are usually at the core of the triggering events that induce the parties to sit around the negotiation table to the contractual “equilibrium” through price review mechanisms. The applicable law appears to play a major role, as it determines the entitlement of a party to claim for a price review under what it would qualify as “change in circumstances” that affects the “contract dynamics”. More generally, the cases relating to gas price review in arbitration have recently increased. The distinctive features of arbitration in settling gas pricing related disputes were more specifically addressed. These include: difference in the nature of the dispute itself, difference in the scope of the arbitrators’ authority and role, issues related to the interpretation of gas price review clauses, the critical role of experts in the arbitration, and finally the importance of confidentiality. Maximising certainty in gas pricing and the mitigation of the risks of unpredictable results was also addressed and analysed. Session 2 – Economic and Financial considerations and legal implications: Evaluation, Pricing and Damages The evolution of the global energy market and the constant change in the economic circumstances has triggered multiple gas pricing disputes. Emphasis was placed on the fact that the agreed gas price formulae, against a backdrop of quickly changing markets, make it almost unavoidable to have disagreements between the buyer and the seller of the gas on whether and how this price formula should be reviewed and adjusted. Economists and experts have explained the extent of the needed technical assistance that experts can provide to arbitrators in these disputes. The role of the expert is taking on an even larger scale. The Middle East constitutes a greenfield for gas pricing disputes, where the energy market is being gradually liberalised. Experts are often challenged by distinctive problems when reviewing and evaluating the pricing, such as, for example: the structural change in supply and demand, the lack of price transparency, but also the change of oil price on which gas price is indexed. In a final discussion on compensation and interest three methodologies emerged for determining the appropriate level of compensation; 1) the income-based approach 2) the market-based approach and 3) the asset-based approach. For more information please contact Professor Dr Mohamed Abdel Wahab at: [email protected] Many thanks to our sponsors