The oil company begins negotiations with government official

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The ChevTex Oil Company has been operating successfully offshore West Africa for many years. They recently made a large offshore oil discovery that extends into the area of the state of Cabinda, which is part of the country of Angola. The oil company begins negotiations with government officials from both Angola and Cabinda. The Angola officials are primarily concerned about tax rates and the generation of maximum amounts of government revenue from the oil project. The Cabinda officials are primarily concerned about the creation of local jobs for their citizens from the oil project, and the limitations on use and abuse of their land and harbors. As ChevTex's lawyers and executives begin drafting the Production Agreement, they agree with the Angola and Cabinda government officials that the contract will be governed by Angola/Cabinda Laws, but any dispute will be resolved in the London Court of Commercial Arbitration rather than a local court. This is common terms in West African Oil and Gas Agreements. Why do international oil companies insist on Arbitration Clauses in production agreements? Why do local governments usually agree to these Arbitration Clauses in such contracts? (

Reference no: EM13714298

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