Distinguishing the categories of «start date» of a production sharing agreement from «effective date»

The basis of the disagreements between the state and the investor, regarding the reimbursement of costs, is the different applications of legal categories in the production sharing agreement, namely the «start date» and the «effective date» of the production sharing agreement.

According to the legal glossary, the «commencement date» is the date on which the investor’s obligations arise.

The commencement date of the production sharing agreement shall also be deemed to be the date specified in the notification by which the commencement conditions have been fully met by the state.

The meaning of the «commencement date» is interrelated with other sections of the production sharing agreement, under which the rights and obligations of the investor arise on the date of commencement of the production sharing agreement.

At the same time, the «effective date» of the agreement is explained in the agreement as the date of state registration after its signing.

That is, the production sharing agreement differentiates the procedure for the parties' actions based on the «start date» and «effective date», including the fulfillment of obligations under suspensive circumstances.

That is, the production sharing agreement differentiates the procedure for the parties' actions based on the «start date» and «effective date», including the fulfillment of obligations under suspensive circumstances.

The state is obliged to fulfill all the conditions of commencement as soon as it becomes practically possible after the date of entry into force, but no later than 12 months, with the possibility of extending the specified period.

The term of a production sharing agreement is the time during which the obligations of the parties arising from this agreement exist.

By concluding a production sharing agreement with a suspensive condition, its parties link the emergence of rights and obligations under such an agreement to a later date.

A suspensive circumstance may consist of actions as one of the parties to the agreement, which must cause the occurrence (change) of the relevant rights and relevant obligations for both parties to the agreement, and not just one of them.

Typically, the conditions for the commencement of a production sharing agreement for the state are associated with:

1) state registration of the investment agreement and its registration with the tax authorities.

2) granting a special permit to the investor within several months, provided that the investor pays the cost of such a permit.

3) appointment by the state of an authorized body to conduct a production sharing agreement.

4) transfer to the investor for use primary and secondary geological information owned by the state.

5) at the request of the investor, assist in obtaining rights to land plots.

From the moment the state fulfills its obligations regarding the start-up conditions, the investor acquires the ability to fulfill the obligations imposed on it.

In the future, during the execution of the production sharing agreement, the corresponding right of one party will correspond to the obligation of the other, and vice versa.

Thus, in matters of consideration and interpretation of clauses, subclauses, sections and subsections of the production sharing agreement in the part regarding compensation of costs, the investor must be guided by the «counting» of obligations precisely from the «start date» of the production sharing agreement.