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17 February 2020
On 3 February, the Oil and Gas Authority ("OGA") launched a year-long 'UKCS Mediation Pilot' which aims to test the extent to which mediation can assist in resolving disputes involving licences in the UK Continental Shelf ("UKCS").
Its experience to date has led the OGA to the view that certain disputes between oil and gas licensees, operators, and infrastructure owners are caused by a breakdown of communication or entrenched licensee behaviours. It goes without saying that disputes can not only be time consuming and costly for the parties involved but, in the OGA's view, these can also jeopardise the delivery of the Maximising Economic Recovery Strategy for the UK.
Under sections 19 to 26 of the Energy Act 2016 (the "Act"), the OGA has a series of powers in relation to dispute resolution (which permit it to consider certain qualifying disputes, gather information in relation to them and ultimately issue a recommendation as to how they should be resolved). However, the OGA has consistently emphasised that it would prefer to exercise its 'influencing' rather than its 'regulatory' role in trying to assist the industry in achieving MER UK. It sees mediation as a potentially helpful option that may better address some issues without recourse to those regulatory powers.
The aim of mediation is to encourage parties to resolve the dispute themselves, rather than bringing the dispute before a judge (or the OGA) for a decision. Mediation provides a confidential 'safe space' for parties to explore potential routes to resolution of a dispute on a 'without prejudice' basis, assisted by an independent third party (the mediator) who will facilitate those discussions with a view to assisting the parties identify and agree their own resolution. The mediator is entirely unconnected to the dispute and, unlike a judge or arbitrator, will not reach any conclusions on the dispute or provide a decision to the parties. Instead, discussions between the parties are facilitated by the mediator, both in 'all party' discussions and in confidential 'one to one' sessions between the mediator and one or other of the parties. The basis of any resolution remains within the parties' control and can include matters or arrangements (for example, in relation to their future relationship) that could not be dealt with by way of a judicial or arbitral decision.
During the UKCS Mediation Pilot, the OGA has indicated it may request that parties involved in a dispute proceed with mediation, and that it may do so at any point in relation to a dispute of which it is aware – so that there is no 'threshold' test to be met before a dispute will potentially fall within the scope of the Pilot. If the parties agree to mediate, the OGA will refer the parties to the Centre for Effective Dispute Resolution ("CEDR"), a third-party service provider, who will facilitate the mediation. The mediation request is not binding; the OGA has not indicated what the consequence of a party's refusal to mediate might be nor whether or to what extent it may examine any resolution achieved through this process.
If the parties remain in dispute following mediation, the OGA may exercise its powers to issue a non-binding recommendation as to how it should be resolved, either by 'calling in' the dispute on its own initiative or at the request of one of the parties.
The OGA intends to review the effectiveness of the UKCS Mediation Pilot after the one year trial period is complete.
For further information on this topic please contact Valerie Allan or Judith Aldersey-Williams at CMS Cameron McKenna Nabarro Olswang LLP by telephone (+44 1224 62 20 02) or email (firstname.lastname@example.org or email@example.com). The CMS Cameron McKenna Nabarro Olswang LLP website can be accessed at cms.law.
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