Arbitration of oil and gas disputes in the upstream petroleum sector in Kenya: a critical appraisal

Abstract

Arbitration is a private mechanism for dispute resolution that is selected and controlled by parties and the final determination made by an arbitral tribunal is final and binding. Upstream petroleum operations are regulated by petroleum contracts that contain dispute resolution clauses which outline the arbitral system that guides the arbitral process. This study was a critical appraisal on arbitration as a way of settling oil and gas disputes in the upstream petroleum sector in Kenya. The study was guided by two main objectives namely: to examine the suitability of the arbitration provisions provided in the Model Petroleum Agreement in the settlement of upstream petroleum disputes in Kenya and to interrogate the effectiveness of arbitration provisions in international instruments in resolving upstream petroleum disputes in Kenya. The data reviewed was journal articles, Kenyan laws the provisions of the UNCITRAL Arbitration Rules, the ICSID Arbitration Rules, New York Convention and notable international case law on arbitration. The study was aimed at providing important pointers that will help stakeholders better understand the suitability of the arbitration provisions contained in the model petroleum agreement anchored in the Kenyan Petroleum Act. This study has found that international law is suitable for the settlement of upstream petroleum disputes because they anchor the cardinal principle of party autonomy and thus promote mutual acceptance and cooperation between parties. The study has also found that arbitration may not be tenable in resolving differences and disputes that include third parties to a petroleum agreement. The study recommends that a policy should be developed by the Kenyan Government to guide negotiations between the state and an investor in petroleum agreements.