By Ernest Bako WUBONTO
The regulator of upstream petroleum sector, the Ghana Petroleum Commission (PC), has emphasized the need for local upstream content firms to bolster their legal capacity to navigate complex international contractual agreements.
Given the prevalence of commercial disputes, the PC is concerned over local players being found wanting in legal disputes due to endorsement of unfavourable agreements in the first place.
The PC cautioned local players against rushing into partnerships without carefully reviewing the contracts on the clause-to-clause basis as dismissing dispute resolution clauses could be disastrous.
Additionally, by strengthening their legal capacity and adopting effective dispute-resolution strategies, local firms can better navigate international agreements and protect their interests.
The PC in a workshop to build local capacity, on dispute resolution and contracts, especially in the area of Alternative Dispute Resolution (ADR), highlighted that when Ghanaian entities are well prepared by onboarding competent legal backup, it eliminates errors and boosts capacity in negotiation with huge multinationals like Tullow, among others.
With commercial contracts regard as having binding legal implications, the PC is concern about local companies leaving the big foreign companies or partners to draft and propose all terms of engagement without any critical scrutiny to object to unfavourable terms.
Legal Consultant, for the Petroleum Commission, Grace Kuma, expressed that local companies often fall victim to pathological arbitration clauses (PACs) that conceal vital information. Explaining that these clauses can disrupt arbitration proceedings and put local partners at a disadvantage.
She emphasised in her presentation that key challenges facing local firms include a lack of legal expertise to scrutinize contracts thoroughly, inadequate understanding of dispute resolution clauses, especially alternative dispute resolution (ADR) methods, and wrongly coping clauses from other agreements or online templates.
“At the start of a new business relationship, nobody wants to anticipate a future dispute. Many parties do not take the time to discuss the dispute clauses in their agreements and may end up copying and pasting anyone they find in another agreement or from the internet. Given the prevalence of commercial disputes, dismissing dispute resolution clauses in this way can be disastrous.
“A defective arbitration clause is an ambiguously drafted arbitration agreement that, when it comes to its implementation, may lead to a clash between its effective interpretation and the parties’ intent to refer their disputes to an arbitral tribunal,” she said.
The Legal Consultant in her recommendations, advised local firms to build solid legal capacity by onboarding competent legal professionals to review contracts before endorsement. This she said would ensure deployment of ADR -utilize negotiation, mediation, and expert determination.
ADR Methods
The dispute resolution expert highlighted that to avoid potential pitfalls, local firms should adopt multi-tiered ADR methods -start with negotiation, then mediation, and arbitration as a last resort. Consider expert determination for financial or technical disputes and clear arbitration clauses that specify language, venue, and procedures.
“In the face of disputes, first use multi-tiered ADR methods. You can start with negotiation, then mediation before arbitration. You may use expert determination for instances which are likely to be financial rather than legal issues and the parties will need someone with in-depth knowledge of the subject accounting to be able to determine the dispute swiftly,” she said.
