Jurisdictional distinction in production sharing agreements

In production sharing agreements, the parties agree on procedures for arbitration and judicial review of disputed issues.

Moreover, pre-arbitration discussions can manifest themselves both in the form of claim settlement, provided for by the terms of production sharing agreements, and in the right of the parties to choose an institution or person as an expert, whose decision can be appealed by one of the parties to an arbitration court, as an appeal to the form of an independent arbitration appeal.

However, production sharing agreements may contain provisions for some kind of (combined) national and arbitration court appeal substrate, both for the state and the investor.

We believe that the specified dispute resolution model is justified in terms of initiating a lawsuit by any party to challenge the rules of jurisdiction established by the production sharing agreement itself.

Options for submitting a dispute to a national court of the state as a party to the production sharing agreement:

1) an investor’s appeal for the assessment of value added tax amounts in connection with the purchase or production of goods/works/services.

2) an investor’s appeal of the state’s refusal to recognize a tax credit.

3) an investor’s appeal of the state’s refusal to recognize income from sources originating in the state.

4) claims of third parties against the investor to challenge intentional unlawful actions in relation to measures to eliminate extraordinary circumstances.

5) claims of third parties against the investor to recover any losses and damage caused to the environment, if it has been proven that such losses or damage were caused by the investor's intent.

6) claims of the state for violation by the investor of any legislation of the state.

7) claims or actions of third parties arising from losses or damage, if it has been proven that such losses or damage were caused by the investor's intent.

8) a claim by the state regarding the transferee's violation of legislation in the field of legalization (laundering) of proceeds from crime, or financing of terrorism or financing of the proliferation of weapons of mass destruction.

The transfer of a dispute for resolution by a national court of the state, as a party to the production sharing agreement, may be preceded by an administrative appeal on the initiative and at the request of the investor.

Options for submitting a dispute for resolution by a national court of the state, as a party to the production sharing agreement, to an arbitration/arbitration institution:

1) claims for the collection of penalties or claims for compensation for damage caused by the investor to third parties caused by the investor’s intentional breach of its contractual obligations.

2) claims for damage caused by the Investor to the environment, if it was caused of the investor’s intent.

3) claims by third parties for compensation for breach of confidentiality.

Options for submitting a dispute to arbitration/arbitration institution/arbitral tribunal:

1) appeal of the actions or inaction of the investor by the state.

2) claims by the state or the investor for the recovery of costs incurred in resolving the dispute.

3) the state's challenge of the investor's intentional unlawful actions in relation to measures to eliminate extraordinary circumstances.

4) claims of the state against the investor regarding measures to protect life, health, the environment and property to eliminate emergency situations, if it has been proven that such emergency situations were the result of the investor's intent.

5) state claims compensation for breach of confidentiality.

6) investor claims to challenge refusal to grant consent to the investor's transfer of rights and obligations under a production sharing agreement.