1 introduction

Sometime in June 2007, petroleum was discovered in commercial quantities off the West Coast of Ghana, referred to as the Jubilee Fields. However, the first production of oil in the Jubilee fields occurred in December 2010. The Jubilee Field is estimated to have about 80 million barrels of proven reserves and upside potential of about 3 billion barrels of oil². It has also been said that when considered as a proportion of Ghana’s annual income, production from the Jubilee Field at its peak is estimated to generate up to 30% of the government’s income, if pegged at a price of US$75/barrel.³ Ghana’s oil reserves can be said to be relatively small on a global scale as its potential three billion barrels are significantly below those of major oil producers such as Saudi Arabia with 265 billion, Canada with 175 billion, Venezuela with 95 billion and Nigeria with 38 billion.

Prior to the discovery, various petroleum agreements were executed between the Republic of Ghana and the International Oil Companies (IOCs) containing the terms and conditions for the exploration, development and production of petroleum in the country. One of such agreements is the Petroleum Agreement between the Republic of Ghana, Ghana National Petroleum Corporation, Kosmos Energy Ghana, H.C and the E.O. Group. One of the fundamental provisions of the agreement is article 24 which deals with dispute resolution mechanisms adopted by the parties to the agreement. It is provided under the said article that where the parties fail to resolve a dispute arising from the agreement amicably, the dispute shall be resolved through international arbitration in London.

Some commentators and stakeholders have expressed their disapproval of the practice where resource-endowed but poor countries consent to a provision in agreements for the extraction of natural resources in such countries that any disputes arising from the agreement shall be resolved by international arbitration.

Disputes relating to petroleum activities may border on matters such as:⁶

1. 
   International Maritime Boundary Disputes, for example the Bukasso
   

(b) Equipment

(c) Jurisdiction Disputes

(d) Oil Trading Contracts

(e) Gas Contracts

(f) Redetermination

(g) Quality Disputes

(h) Hedging

It is significant to state that nearly all transactions in the petroleum industry, especially in developing petroleum resource-rich countries are international in nature. The proponents for the resolution of disputes ensuing from the extraction of natural resources by way of international arbitration argue, quite strongly, that in most developing resource-rich countries, such as Ghana, nearly all the companies engaged in the extraction of petroleum and also minerals on a large scale are international companies, in the sense that their “owners,” controllers or investors are foreigners, even though they may set up subsidiaries to engage in the extraction of natural resources in Ghana and therefore in their view disputes between such companies and the host state ought to be settled by international adjudicating bodies.
The huge capital-intensive nature of the extraction of natural resources, especially petroleum and minerals coupled with the rather derogatory argument that the Courts in the developing resource-rich countries like Ghana cannot be either trusted or lack the capacity and the know-how to adjudicate disputes relating to natural resources, have also been some of the reasons given by the IOCs for the provision of international arbitration in petroleum agreements.
In recent times, some commentators⁷ have strongly argued against the submission of an oil-rich country, (especially developing Countries) to international Arbitration and other foreign dispute resolution centres. They make the point that the insertion in a contract between the State and the international Oil Company (IOCs) for reference and submission to international dispute resolution Centers outside the jurisdiction of the host State is an affront to the sovereignty of the people who are the owners of the oil and gas reserves and resources. Others have also argued that in view of the fact that such international dispute resolution avenues consider only the commercial aspect of the contract without necessarily considering and addressing other important issues like human rights abuse, environmental rights and even political issues does not make International Arbitration Centers the ideal avenues for settlement of such disputes, as far as developing Countries are concerned.

2.2.0. TYPES OF DISPUTE RESOLUTION MECHANISM

2.2.1. LITIGATION

Generally, unless a contract includes provisions requiring the parties to use an arbitration process, the dispute would usually be settled through the courts of the host country. However, despite the increasing use of international commercial arbitration, litigation in the host nation courts is said to be “probably… the major international dispute resolution process in use.”⁸

Dispute relating to technical aspects of the contract, for example whether specification of a particular product has been met; whether a specific test service is required; issues about cost of particular operations; the value of crude and dispute about fiscal policies are best resolved through expert determination. Normally the expert is a disinterested third party with special expertise in the subject of dispute. It is also faster and less costly than arbitration.

This method allows the senior executives to try and resolve a dispute at a meeting. The meeting is usually facilitated by a Conciliator or Mediator. It enables the parties to assess the strength and weakness of their respective cases. In the event that settlement fails, either party can proceed to another intermediate dispute resolution step.

In recent time, the concept of dispute management is also becoming popular in the oil and gas industry in particular. This concept involves collaboration and negotiation, assisted consensual non-binding processes in addition to the process whereby the parties may turn a blind-eye to the occurrence of the dispute and expect the perpetrator to rectify the cause and or the consequences of the breach giving rise to dispute.⁹ Additionally, some countries such the UK have established

1. 
   Lack of impartiality of the local Courts and adjudicating bodies. Many commentators, mostly from the developed resource-rich countries have supported the assertion by the IOCs that the local courts lack independence and thus cannot be trusted to render an impartial decision in favour of the host state. According to Rudolf et al, “In many countries, an independent judiciary cannot be taken for granted and executive interventions in court proceedings or a sense of judicial loyalty to the forum state are likely to influence the outcome of proceedings…particularly where large amounts are involved.”²⁰ Thus, for most of the IOCs, the local courts may have the propensity to exhibit xenophobic tendencies against a foreign company.²¹ This claim is said to have led Chevron to have instituted an arbitration proceeding against Equador based on Chevron’s claim that”…Equador’s judicial system is incapable of functioning independently of political influence…”
   

2. 
   In addition, submission of disputes ensuing from oil and gas transactions, especially in resource-rich developing countries to international adjudicating bodies is justified by some commentators and the OICs on the ground that “domestic courts may be bound to apply domestic law even if it is at odds with international legal rules protecting legal rights of investors.”²²
   

3. 
   It has also been said that the local courts ought not be the venue for the resolution of settlement of disputes arising from oil and gas transactions in oil-rich developing countries because such courts…” lack the expertise to deal with the sometimes highly technical questions of international investment law.”²³
   

4. 
   Another reason assigned for the preference of international adjudicating bodies over local adjudicating tribunals is the claim that the local courts may resort to some legal principles such as the act-of-state doctrine which “enjoins courts from examining the legality of official acts of foreign states in their own territory.”²⁴
   

Indeed not only the competence and impartiality of the local courts are discounted by the IOCs, but also local dispute resolution mechanisms like arbitration and mediation systems. For instance, it has been said that in most of the oil-rich underdeveloped countries, there is “non-existence of a pool of skilled and qualified persons to act as neutrals…”²⁵

In addition, the Alternative Dispute Resolution Act,³¹ also attests to the recognition by Ghana, that with the exception of the under-listed matters, not every dispute can be settled by ADR to achieve justice by all concerned. The said matters³² include;

1. 
   The national or public interest
   
2. 
   The environment
   
3. 
   The enforcement and interpretation of the Constitution.
   

This implies that any other matter which has not been excluded by law for settlement by way of ADR may be settled by the process of ADR. The Act defines³³ Alternative Dispute Resolution to mean description of methods of resolving collective description of disputes otherwise than through the normal trial process. Significantly, under the Act³⁴, parties to an agreement and litigating in a dispute in Court can consent to a stay of proceedings and to resolve the matter by way of arbitration in accordance with the agreement. In the same vein, the Court can refer the matter to Arbitration with the consent of the parties even, though no such agreement between the parties. Again, the establishment of an Alternative Dispute Resolution Centre under the Act³⁵ is also commendable. This is because, as already indicated, parties to a matter, especially foreign investors have cited the non-existence of a formidable Centre for resolution of investment issues which involve huge capital or other resources, to justify their choice of foreign Arbitration and other Dispute resolution Centre for the settlement of disputes that may arise between them and the State or individuals.