Legal Issues Around the Unilateral Decision of Amending or Terminating Production Sharing Contracts Concluded by the Kurdistan Regional Government of Iraq and Legal Mechanisms of Settling their Disputes: Analytical study

Arez Mohammed  Sediq; Ahmed Aziz  Hassan

doi:10.25098/5.2.21

Authors

Arez Mohammed Sediq Department of Law, College of Law, University of Sulaimani, Sulaimani, Iraq
Ahmed Aziz Hassan Department of Law, College of Law, University of Sulaimani, Sulaimani, Iraq

DOI:

https://doi.org/10.25098/5.2.21

Keywords:

Unilateral Decisions, Amendments of Contracts, English Law, Production Sharing Contracts, Arbitration, Lex Mercatoria, Doctrine of Frustration, English Case Law, Dispute Resolution

Abstract

It is not unusual that changes of circumstances may occur during the life of the petroleum contract that alter materially the parties' expectations with respect to the outcome and the desirability of the continuation of the contract. The change of circumstances may be of such magnitude that it may either render the execution of the contract fully or partially impossible, or make the performance onerous for a party to the contract. According to article 56(second) of the Federal State Budget for the Republic of Iraq No.23 for the Fiscal Year of 2021, both federal government and Kurdistan Regional Government shall review and modify their contractual relations with international oil companies for oil and gas exploration and production across Iraq in order to provide a better deal for the region toward the contractors. Despite the fact that the KRG might benefit from such modifications or early termination to the contracts, it has no absolute authority in conducting such action due to legal terms and restrictions. There are many legal issues need to be taken into consideration before making such decisions and there is certain legal mechanism to settle any disputes between contracting parties. The KRG signed a series of Production Sharing Contracts with international companies by which it is bound to respect the content of the agreements toward contractors within the legal duration. This paper seeks to answer the question of whether the KRG has legal authority to take any unilateral action toward amending or terminating the petroleum contracts? How can any disputes be settled between contracting parties, particularly if the disputes arose as a result of such unilateral actions? It argues that Kurdistan Regional Government does not have free will to conduct changes or terminate the agreements unilaterally as the rules of English Law (applicable law) do not allow this. It also explained the major dispute resolution mechanisms outlined in the signed Production Sharing Contracts including negotiation, mediation and arbitration. The research paper sheds light on the legal issues under the valid contracts and applicable rules under the Iraqi legal system and English Law.

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