A Development Agreement:
A. Oil Concession Agreement
1. In what ways does this concession agreement differ from the classic concession agreements described at the start of this Problem?
2. What rights with respect to oil and gas, before and after extraction, are conveyed to the foreign party?
3. What financial rewards does the government derive from being a party to this contract? How do variations in the price of oil affect the ‘government’s take’ as the aggregate of the state’s compensation is termed?
How much is the government affected by variations in the volume of hydrocarbons produced? How are prices and production quantities determined?
4. Suppose that you are a new member of the government and in your education have picked up sensitivities to environmental concerns, to the way in which the work force (and various subgroups of it) are treated, and to the country’s need for educational development. Does this agreement give you anything to work with in advancing these concerns?
5. Suppose that the company needs a new road to a site where it is exploring for oil or a new port facility either to export its products or to bring in materials that it needs. Who is responsible for the construction of that facility?
6. Suppose that the company urgently needs a specialized petrochemical expert who happens to belong to a religious faith not approved in Abu Dhabi? Is the company entitled to employ him? If the company is told not to and complies with that instruction is it in trouble with the U.S. law?
B. Legal Aspects in Development Agreements
1. Paragraph 8(2) of the Argentina-France BIT contains a so-called ‘fork in the road’ provision, stating that an investor’s choice of domestic courts or international arbitration is final. If the investor in Vivendi had submitted its dispute with the provincial authorities over tariffs, say, to the courts of Tucuman, would it have been precluded from bringing a claim under the BIT? Does the answer depend on how one contrues the phrase ‘(a)ny dispute relating to investments made under this Agreement’ in Article 8(1)?
2. If you were negotiating the terms of the Oil Concession Agreement between Abu Dhabi and Amerada Hess today, what mechanism would you choose to resolve dispute? The United States has no BIT with the United Arab Emirates, but both countries are parties to the New York and ICSID Conventions.
C. Choice of Law in Development Agreements
1. What disadvantages do you see in Article 35(G)`s choice of general principles of law? Do you any of the alternatives discussed above seem preferable?
D. Stablization Clauses
1. Consider Article 18 of the Abu Dhabi Oil Concession Agreement. Could it be characterized as a stabilization clause?
2. Do stabilization clauses benefit only the foreign investor? If so, then why have host countries enacted laws to encourage them?