Arbitration

In today’s oil and gas industry, the role of arbitration in resolving disputes is connected to long-term supply agreements. These agreements often involve international parties and are subject to fluctuating market conditions.

In these cases, arbitration provides:

• A channel to handle complex international issues.
• Expertise in technical matters.
• Confidentiality and privacy.
• Enforceable outcomes.
• Flexibility and efficiency.

When disagreements arise over terms in the contracts, such as pricing, delivery schedules, or compliance with regulatory standards, arbitration offers a neutral, efficient, and specialized forum for resolving these conflicts.

Arbitrators with expertise in international trade, energy markets, and specific legal frameworks can assess the complex terms of these agreements and deliver enforceable decisions, providing a practical resolution mechanism that respects the global oil and gas industry’s contractual relationships and business realities.

Arbitration laws and regulations in oil and gas disputes consist of various international and national legal frameworks. These include:

• National laws: Each country has its own arbitration laws which govern the conduct of arbitrations within its territory, impacting how oil and gas disputes are resolved domestically.

• Contractual clauses: Contracts in the oil and gas industry typically include arbitration clauses specifying the arbitration method, applicable law, and sometimes the venue, shaping how disputes will be arbitrated.

• Sector-specific regulations: Some countries have regulations specific to the oil and gas sector that might include provisions related to arbitration, particularly in areas like licensing and environmental compliance.

• Expertise and confidentiality considerations: The need for specialized knowledge in the oil and gas sector and the emphasis on confidentiality in disputes are also key considerations impacting the application of arbitration laws and regulations in this field.

Arbitration is distinct from mediation, in which parties negotiate to reach a voluntary settlement, and decisions are not binding unless all parties agree to them.

Arbitration is not the same as filing an investor complaint, in which an investor alleges wrongdoing on the part of a broker, but has no specific dispute with that broker, for which the investor seeks damages.

In practical terms, arbitration is similar to a lawsuit but may be preferable for all parties due to the lower costs and time commitments involved.

Key Takeaways

• Arbitration is not the same as filing an investor complaint.
• Arbitration could be preferable than a lawsuit due to the lower costs and time commitments for all parties involved.
• Disputes involving less than $50,000 do not require in-person hearings.
• For disputes ranging from $50,000 to $100,000, require an in-person hearing with a single arbitrator.

When an investor or broker has a specific dispute with a broker that is registered with FINRA, they may file a claim with FINRA that states the alleged misconduct and the amount of money they are seeking in damages.

FINRA will appoint a panel of three financial industry professionals who, unless the injured party requests otherwise, will not be employed in the securities industry. This is intended to eliminate bias, but if one of the parties suspects that a member of the panel is biased, they may request a change.

For disputes involving less than $50,000, in-person hearings are not considered necessary; rather, both parties submit written materials to a single arbitrator who decides the case. For disputes ranging from $50,000 to $100,000, in-person hearings with a single arbitrator are the most common.

For disputes over $100,000, in-person hearings with three arbitrators are standard. A majority of the three-arbitrator panel (that is, two people) is necessary for a decision. Arbitrators are not required to explain their decision.

Parties filing for arbitration may represent themselves, or they may hire an attorney. In general, arbitration panels are less formalistic than the court system, so investors have a reasonable chance of being successful even when representing themselves.