Oil and Gas Contract Law 9
Operators are usually approved by the home country in which they operate and thus take care of the compliance and governmental representation. Non-Operators instead have more financial and technological resources than the operator and thus must be respected in light of their own needs and perspectives. If these are neglected the disbalance of influence can lead to a nullification of the JOA infrastructure. This is ontologically the case as there is no joint character anymore as well as organizationally for the non-operators essential skills are unefficiently influenced by the superiority of an operator, who in fact is not qualified to deal with financial or certain technical aspects like QA. This will especially have a devestational impact if the duration of the contract is long, for it has a higher amount of integrity trust inherent on which occasion damage claims can become higher in litigation and the unmotivated non-operator remains indominant in arbitration and endangered in his existence if still an SME attached to this kind of an inefficient partnership.
The duration is a legal regime that remains disposible by the parties, but there are still certain regulations in case law societies where the contractual autonomy becomes penetrated. This is comparatively in contrast to the European Civil Law culture where a high amount of contractual autonomy is present for the parties. In light of that many International Oil Companies (IOCs) are establishing their seats at other jurisdictions to have an optimized compliance infratsructure for their own purposes.
An operator can principally not carry out such legal escape maneuvers as he is in a sensitive relations with the government on whose grounds he in a constant manner has to carry out the operations. If an operator -mostly NOCs- would like an IOC carry out such maneuvers the nature of operatorship would be liquified and there would factually be no difference between a rooted operator and a flexible non-operator.
Innovation as a tool of balance
One method to balance the interests of both parties is through a joint sub-initiative within the joint consortium which is the empowerment of innovation. This can be carried out through upscaled R&D branches of the consortium that can lead to an incorporated JV within the consortium with an own shareholder agreement. This vehicle would blossom in case any disputes are resolved through arbitrations with the purpose of generating win-win situations as in light of the fiduciary interdependencies both parties would simply have more to loose. The arbitration procedures within the R&D vehicles would in this light become even more fixed on scientific facts that can work as a basis to solve a dispute based on the parties common pre-arrangement to progress the research. Innovation is in this light an important tangible asset that can come in as an arbitrational factor to balance the interest of the parties.
Authorization for Expenditures
The operator has in the AAPL Model a defined authorization of expenditures which are paid monthly and billed by the operator for the non-operator. This is mostly carried out based on a pay as you go principle with additional optimizations in light of taxation.
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Unincorporated Associations
Unincorporated asociationships like partnerships are centrally regulated in the UK based on the partnership act and dispersely in Civil Law societies across various codes of law (f.e. §§ 705 ff. BGB, §§ 105 ff. HGB etc.).
Unincorporated associations are as the terms speaks for itself non-judicial persons meaning that they have no legal nature on their own and are thus dependant on the natural subjects of which the partnership is consistent of. There are however some legal societies like the State of Louisiana in whose Civil Code Partnerships are judicial subjects.
The benefits of a partnership over an incorporated association are especially vested in organizational policies. The decentralization of partnerships allow a high amount of flexibility that can especially be manifested in transnational operations. Furthermore no double taxations are applied in case any profits are generated. It is even possible to adjust the administration of licenses in such a decentralized manner.
However with benefits there are disadvantages of which the first is that the HR organization is not as optimal as in incorporated organizations. Partners are no employees that are underlying a holistic care with insurances etc. which might lead to the negligence of motivation. On the other hand this can be balances in case there is an ideological "vanguardist" nature within the partnership that makes the partners work over night with a certain drive. Furthermore there are no insulation of liabilities in light of the automatic creation of fiduciary duties based on general good faith. This is the reason why many JOAs have explicit provisions in which fiduciary duties are excluded.
JOA Vs. JV
Joint Ventures differ from JOAs as JVs are mostly established for single transactions as special purpose vehicles (SPVs), whereas JOAs and other partnerships are for general transactions. However the fiduciary duties are also established in JVs, where the right of shares are mostly defined.