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ОглавлениеThe JOA will record the date upon which it is signed by the authorised representatives of the parties, and will also define the date upon which it actually becomes effective and binding between the parties (which might be later than the date of signature in certain circumstances).
The JOA will have a duration that principally tracks the duration of the underlying concession, although the JOA can precede and go beyond the existence of the concession in certain circumstances. The JOA will also be capable of being terminated by or in respect of a party in a number of circumstances. Certain of the terms of the JOA might also be declared to have continuing existence notwithstanding the termination of the JOA.
This chapter begins with consideration of an agreement between the parties that could regulate their relationship prior to the JOA coming into existence.
This section considers the possibility of an agreement between the parties that regulates their relationship prior to the JOA coming into existence – the joint study and bid agreement (JSBA). A number of issues should be considered which relate to either side of the JSBA relationship and the content of the JSBA.
(a)Proceeding without a JSBA
A JOA could, in theory, be applied to govern the relationship between the parties in applying for the award of the concession but the JOA would need some modification from its standard form and would contain many provisions which simply would be redundant for the task of preparing a joint bid. Consequently, a bespoke JSBA is preferable but there is always the possibility that very early entry into a fully termed JOA might be used as a vehicle to govern the terms of a concession application rather than to place reliance on a JSBA. This could happen most obviously where the parties to the proposed joint bid already have an extensive history of working together, know the concession and the area to which it relates, and have a form of JOA that suits their purposes and which they would be happy to continue to apply to the concession if they were successful in their application. In these circumstances the required modifications to the JOA would be to the scope (see 6.1) in order to recite the joint bid provisions and to include a specific event of termination of the JOA if the application for the grant of the concession was unsuccessful.
The JOA might provide that the parties expressly ratify all of the actions of the appointed operator that were undertaken in the period prior to execution of the JOA, and additionally the JOA might award a measure of compensation to that operator retrospectively in order to cover the costs incurred by the operator in the negotiation of the concession and the preparation of the JOA. Such a provision is useful where there has been a hiatus between the grant of the concession and entry into the JOA.
Where there is a period of time between the decision of a group of parties to form a joint venture and the JOA for that joint venture becoming effective – such as where a party farms out a 100% interest to one or more incoming parties, and the effectiveness of the required JOA is suspended pending state approval of that farm-out and/or the terms of the JOA but, in the meantime, activities still have to take place that are necessary to further the petroleum project – then in the absence of the JOA, there will need to be a vehicle by which any costs that are necessarily incurred by the parties (not only the operator, but also the non-operating parties) in the furtherance of the intended joint operations can be disbursed between the parties, according to whatever cost-sharing basis is agreed between them.
Because the JOA is not yet effective, the associated accounting procedure (see 9.1) will not operate in order to allow such costs to be distributed between the parties. Consequently, some form of interim cost-sharing agreement could be entered into between the parties. This agreement will describe the nature of the costs incurred by a party that are to be shared, control the manner in which those costs are incurred (typically by reference to a requirement that such costs be pre-approved by all of the parties, up to a defined monetary value) and recite the manner in which the costs are to be shared between the parties.
A conventional accounting procedure would allow only the operator to recover the costs that it had incurred, and would not typically operate so as to allow a non-operating party to recharge to all of the parties the costs that it had incurred. Therefore, such an interim cost-sharing agreement would represent something of a departure from the conventional accounting principles of the JOA.
The remedy available to the other parties for the failure of a party to pay its share of the costs so incurred will also need to be considered. Because the JOA has yet to come into existence, the conventional forfeiture remedy (see 18.7) will not be capable of application (unless that default was to be carried forward into the effectiveness of the JOA and treated as an immediate default thereunder). However, a failure of a party to pay its share of the costs under such an interim cost-sharing agreement would still stand as a debt due and owing by the defaulting party, and would be subject to recovery in the customary manner. It could also lead to the loss of the right of the defaulting party to become party to the concession and the JOA – hardly an auspicious start to the relationship that the JOA seeks to create.
The interim cost-sharing agreement could be recited within the terms of a farm-out agreement (see Appendix 1) or could be a standalone arrangement.
(b)Pre-JSBA issues
Prior to the commencement of the negotiation of a JSBA, the parties should assess what they each offer to the consortium (and also what they expect each of the others to offer). These discussions invariably involve the disclosure of commercially sensitive information, thus necessitating the entry by the parties into a confidentiality agreement before the making of detailed disclosures. It may be that a certain party brings significantly more value to the consortium than the others if it is in sole possession of certain high value information. In order for that party to disclose such information to the consortium it may seek more comfort in respect of the maintenance of its confidentiality than is the norm in a standard confidentiality agreement (by, for example, greatly limiting the circumstances in which permitted disclosures can be made and applying indemnity, consequential loss liability and account of profit provisions for losses arising from a proven breach). The parties should therefore consider that there may be some debate in the negotiation of the confidentiality agreement, and the parties with less (or no) confidential information to share will accordingly be less concerned about the confidentiality aspects of their relationship.
Additionally, the parties should be aware that there could be area of mutual interest agreements (AMIAs) (see 1.6) already in existence which bind potential consortium members. The effect of these pre-existing arrangements on the composition of the intended consortium will need to be considered carefully.
(c)The content and effect of the JSBA
The ostensible sequence of events is that the JSBA acts as a precursor to the fully termed JOA in that it governs the relationship of the parties prior to the award of a concession, while the JOA governs the relationship of the parties after the award (assuming that the application is successful). It is common for the JSBA to set out the terms which will govern the behaviour of the consortium running up to the award of the concession. Agreeing those terms in the JSBA allows possible contentions between the consortium members to be identified early on and addressed before the concession is awarded. Investing time in settling the content of the JSBA helps avoid a fractious consortium and costly inefficiencies later if a JOA is subsequently required.
The content of a JSBA is always a product of the time available prior to the submission of the concession application. The JSBA is typically drafted with a premature finish line in mind – the concession award. Instead, the parties should agree in the JSBA sufficient detail such that it can be used to operate the joint venture between the consortium members until when the JOA is agreed and becomes effective. It is not uncommon that due to time pressures, while still negotiating the JSBA, a consortium could find itself at the point of making a concession application without the agreed JSBA in place. In this circumstance there is the risk that a party might not act in the spirit of what the parties are attempting to agree in the JSBA, for example, by focusing its resources on another potential application in the concession award round, or by not taking certain actions prior to an intended deadline. This will waste time and deflect attention from the matters in hand. In reality there is no substitute for agreeing the JSBA as soon as possible.
Although the JSBA appears to be a straightforward, short-term agreement,1 the importance of its content and purpose should not be underestimated. Several considerations will be key.
The JSBA is essentially a simple form of a joint venture agreement, the purpose of which is to govern the joint application of the parties for the grant of a concession (whether that concession is to be awarded as part of a regular concession award round or on an ad hoc basis). Consequently, the JSBA will identify items such as the parties, the particular concession (or concessions) which they plan to apply for, the proportions in which the costs of the bidding exercise will be allocated between the parties (which could entail reciting participating interests in the JSBA), the mechanics of how the actual bidding for the concession will be managed between the parties and how the parties will structure the resultant joint venture if the concession application is successful.
The JSBA will typically appoint one of the consortium members to act as the operator for the purposes of the JSBA, including applying provisions for invoicing the parties for their respective shares of the costs of performing the JSBA and giving those parties rights of audit in respect of those costs, and limiting the liability of the party selected to act as the operator for acting as such.
The JSBA might also recite mutual confidentiality undertakings between the parties where they have agreed to exchange data as part of their study exercise, unless a standalone confidentiality agreement has already been entered into. The JSBA should also contain boilerplate provisions relating to governing law, dispute resolution, notices, control of public announcements and other essential operational matters.
(d)Migration to a JOA
The JSBA will cease to apply if the parties elect not to make a bid for a concession or if they do make a bid but they are unsuccessful in their endeavour, and will most obviously cease to apply if the parties’ bid for the award of the concession is successful and a JOA subsequently comes into force between the parties.
Because of the nature of its content, and in light of the purpose for which it is principally intended, the JSBA is generally regarded as being insufficient to act as the resultant JOA over the long term if the parties are successful in their application for the award of the concession. The JSBA is properly intended to apply to the business of securing, rather than of managing, the concession. Nevertheless, some commentators suggest that if the parties are unable to agree the form of the JOA then the terms of the JSBA might be adequate to regulate the relationship between the parties going forward. This approach is adopted in part in the AIPN model form JSBA, where the JSBA will continue to apply as an interim measure so as to govern the relationship between the parties pending finalisation of the JOA. This philosophy may have some merit if the JSBA contains sufficient detail to be able to govern the joint operations but the more realistic expectation is that, despite the many similarities of broad principle between the terms of the JSBA and the JOA, for the longer term the parties will need to put in place a JOA which will govern their relationship after the award of the concession.
Conceptually, as the precursor to the JOA, the JSBA is a short-term agreement which is intended to operate in the period between the concession being awarded and the JOA being finalised. However, it is not uncommon for the negotiation of the JOA to take considerable time and for it to be subject to lengthy contention, particularly if the parties are from different jurisdictions and have varying degrees of experience in dealing with the jurisdiction in which the concession is to be awarded. A prolonged negotiation of the JOA will result in extending the duration of the reliance of the consortium on the JSBA as the vehicle for governing their joint venture. This can be an alarming proposition for the consortium if the JSBA does not anticipate this possibility.
The text of a fully termed JOA might be appended as a schedule to the JSBA, with that JOA to be executed by the parties if they are successful in their application and are awarded the concession. This is the best way to go in the interests of promoting certainty, but it is typically the case that the practicalities of assembling a consortium to apply for a concession do not allow sufficient time also to prepare that JOA in any great detail. The parties might also be reluctant to commit resources to negotiating the JOA for fear that their application for the concession will be unsuccessful and so the effort will be wasted. In practice, the effort which the parties might be inclined to devote towards negotiating the terms of their intended JOA will be linked to the confidence which those parties have about the chances of success which they think their concession application is likely to enjoy.
Alternatively, therefore, and more commonly, the JSBA might oblige the parties to negotiate the JOA (within a specified time frame) only if their application for the concession proves to be successful. To assist in this process, the JSBA might identify a model form JOA that the parties agree to use as the basis for their subsequent negotiations. This approach is taken in the AIPN model form JSBA, wherein if the parties are successful in their application for the award of a concession they will endeavour to sign a JOA within an agreed number of days after the concession becomes effective. Thus, the JSBA will continue to govern the relationship of the parties pending execution of the JOA. The AIPN model form JSBA suggests that the parties will use the AIPN JOA as the basis for their negotiations, but beyond that no guidance is given as to the content of the JOA.
Another alternative to consider, if a fully termed JOA is not appended to the JSBA, is that the JSBA will be supplemented by a term sheet which recites an outline agreement between the parties of the essential commercial elements of their prospective JOA relationship (such as the identification of which party will be the operator, the respective participating interests of the parties, a procedure for accounting between the parties and provisions relating to the ability of a party to transfer its interests to a third party). These provisions will be part of the JOA, but can also be expressed to apply in the interim in governing the relationship of the parties through the currency of the JSBA.
A further formulation which sometimes appears, where the parties have been awarded a concession and are awaiting state approval of the terms of the JOA as a condition of the concession is one whereby the parties will attach a fully termed draft JOA to a head agreement which they execute, and under the terms of that head agreement the parties agree, for that interim period, to comply with all terms of the draft JOA as if it was a live agreement, pending state approval. This is an alternative to relying on the terms of a JSBA to regulate the relationship between the parties during that interim period.
The JSBA should come to an end in accordance with its terms prior to the commencement of the JOA but there may be some transitional issues (such as the carry-over of payments made under the JSBA to be accounted for under the JOA and the application of any agreed carry arrangements (see 3.2) which need to be taken into account in the ensuing JOA.
(e)Exclusivity and commitment
It is common for the JSBA to prohibit the consortium parties from being party to an application for the award of a particular concession outside of the consortium to which the JSBA relates. Consideration should also be given to prohibiting the parties from making an application for any other concession in the concession award round, unless it is made with the same members of the consortium under the JSBA.
A situation may arise where a party to a number of consortia (if that is permissible) focuses more resources on its most preferred application, resulting in its commitment to other applications being lessened. In the worst case, it may be that such a party has merely been tyre-kicking various consortia and will only agree to progress the application which it most favours, resulting in that party attempting to withdraw from all but one application.
It will be a matter for debate as to whether the obligations of exclusivity given by a party should apply equally to affiliates and associated interests of that party.
The JSBA might also provide that any concession interests which are secured by a party in breach of the JSBA’s exclusivity commitments must be transferred to, or held on trust for, the other members of the consortium.
The exclusivity provisions in the JSBA might also be expressed to apply to the parties for a period of time after the JSBA is terminated in respect of them (such as where the application has been unsuccessful).
The exclusion of consortium parties from making other applications could present competition law problems, depending on how the exclusion is structured. Care therefore must be exercised when considering and drafting the exclusivity provisions in the JSBA.
Careful consideration must also be given to provisions to manage the introduction of a third party as a new party to the consortium (whether in addition to the existing parties or in replacement for a departing party). The JSBA will usually provide that a party can only transfer its rights and obligations under the JSBA to a third party with the prior written consent of all the other parties. Given that the technical and financial competence of a third party can be anywhere in the range of highly competent to completely unproven, the criteria for the introduction of a third party must be carefully considered in order to minimise the risk of dissatisfaction amongst the consortium members in the event that a third party joins their group. The JSBA should set out the criteria required in order to be eligible to enter the consortium and should deal with the process for approval of a third party by the consortium members. It is also recommended to make provision for the requirement for the effective novation of the JSBA to bring in a third party. This could be done by appending a deed of accession to the JSBA.
(f)Withdrawal
In some cases, the consortium members might not be able to reach unanimous agreement as to which concession they wish to apply for jointly and/or upon the terms of the intended concession application. In such an event it is common for the JSBA to provide a process which results in a proposal being made, but where any parties not supportive of such a proposal can elect not to participate by withdrawal from the consortium. Where less than all the original parties participate, the participating interests in the proposal will require recalculation and each participating party will normally be allocated a greater participating interest than that which it had originally contemplated at entry into the JSBA, save for where third parties are introduced to the application (see above) in place of the non-participating parties so as to avoid the remaining parties increasing their respective stakes.
The parties to the JSBA should therefore recognise that it is possible that they may finish the bid process holding a greater participating interest than they originally started with. A party wishing to avoid such a situation must pay careful attention to the recalculation formula and should negotiate the JSBA to protect against this.
The timing of the ability of a party to exercise a right of withdrawal is an important consideration. Where a party wishes to withdraw from the JSBA in the period prior to the closing date for the concession award, it is normally important to keep that party bound by the exclusivity restrictions imposed upon it in relation to making other applications during the concession award round, and in relation to confidentiality.
The JSBA might also specify prohibited periods, in respect of which the withdrawal right cannot be applied (such as after the application for the award of the concession has been submitted).
(g)Default
The default provisions under the JSBA should operate such that if a member of the consortium defaults in the performance of the JSBA (such as by not paying its proportionate share of the joint study and/or bid costs), that default does not jeopardise the intended concession application for the other members of the consortium. In most cases, the default provisions are not dissimilar in effect to those which are found in a JOA (see Chapter 18). In the event of a default under the JSBA the operator will notify the default to all of the parties and the non-defaulting parties will make good the default amount. It is, however, prudent to adjust the default provisions in the JSBA so that in the event of a default prior to the closing of the concession award round, the defaulting party is obliged to remain a party to the JSBA, to support any application being made by the consortium, and to do all things required to support the award of the concession to the consortium (since it could be that the defaulting party is essential to the success of the consortium’s application in the eyes of the state).
It is therefore sensible to draft the default provisions such that only after the
concession award process has concluded will the defaulting party then forfeit its interest to the other consortium members, through a deemed withdrawal. This will also be without prejudice to the right of the other parties to make a claim for damages suffered in consequence of the acts or omissions of the defaulting party.
Once the business of negotiating the terms of the JOA has concluded, the parties will sign the JOA and will record in the JOA the date that is agreed to be the date upon which the JOA was so signed. This execution date will appear in the opening paragraphs of the JOA, but this will not actually be the date upon which the JOA will become effective if there are any conditions precedent to the effectiveness of the JOA that have to be fulfilled (see below).
If for any reason the JOA is not ready to be signed by the parties on the same day that the concession is executed, then the parties can always sign the JOA with a later execution date, but they can also record their agreement that the JOA is deemed to have come into force on the earlier date that is the execution date of the concession.2
This approach is possible where the concession is granted to multiple parties at the outset, where those same parties will be party to both the concession and the JOA. This approach will not be appropriate, however, where the concession is initially granted to a single party and the JOA becomes necessary only later when another party is admitted to the concession. To suggest that the JOA would be deemed to have been effective back to the date on which the concession was originally granted to the first party would be too much of an artificiality, and would cause the incoming party to be concerned about the allocation of historical liabilities that might have arisen in that intervening period.
The alternative option for timing the execution of the JOA is to agree that the parties will sign the JOA in advance of the award of the concession, and that the JOA will specify a condition precedent to its effectiveness (notably, that the concession is granted to the parties, with acceptable commercial terms, and is executed by the state and the parties as the holders of the concession). When the concession is granted and is executed then this condition precedent will have been fulfilled and the JOA will automatically become live and effective between the parties.
A further condition precedent that might be considered for insertion into the JOA is one relating to the approval of the terms of the JOA by any state agency that has such responsibility, where the terms of the prevailing petroleum law or of the concession so require, although as a practical measure the draft of the proposed JOA can be so approved before the JOA is actually signed by the parties, so that the condition precedent will not be necessary.
The term ‘effective date’ is sometimes used to describe the date on which any conditions precedent to the effectiveness of the JOA have been satisfied (or waived by the person for whose benefit the condition precedent is expressed to apply), such that the JOA then becomes fully unconditional and effective. Paradoxically, the AIPN JOA uses the term ‘effective date’ to mean the execution date (see above).
The insertion of a condition precedent into any commercial agreement inevitably introduces a measure of uncertainty and for that reason the JOA should be careful to limit the number and scope of the conditions precedent that it imports.
Once the door has been opened to the introduction of a condition precedent in respect of the execution of the concession, there may be a temptation for the parties to consider inserting other conditions precedent to the effectiveness of the JOA (such as the securing by a party of any financing that might be necessary to enable that party to meet the costs of performing its obligations under the concession and the JOA, or the agreement of outline terms for the sale and/or transportation of any resultant quantities of produced petroleum, or the delivery of legal opinions regarding certain aspects of the JOA). These additional conditions should be resisted, not least since they are unlikely also to appear as conditions precedent to the effectiveness of the concession and so they should not appear in the JOA for the sake of consistency.
The AIPN JOA makes no provision for the introduction of any conditions precedent to the effectiveness of the JOA. Rather, the AIPN JOA assumes that the parties have already entered into the concession, and that the JOA will have effect from the date of its execution.3 Neither does the OGUK JOA include an express conditions precedent formulation. Rather, the OGUK JOA assumes that the concession has been granted to the parties, and that the necessary regulatory approval of the terms of the JOA has been granted.4 Similarly, the AAPL JOA and the CAPL JOA both assume that the necessary leasehold interests have been granted and do not prescribe conditions precedent to their effectiveness.
The AMPLA JOA does, however, provide for the implication of certain conditions precedent,5 with the securing of any necessary authorisations and the provision of any agreed collateral support (see 3.3) suggested as conditions precedent.
The relationship between the concession and the JOA has been commented on previously (see Chapter 2). The JOA will generally not subsist if the concession to which the JOA relates is terminated, since the essential purpose of the JOA (which is to regulate the horizontal relationship of the parties in respect of the vertical relationship created by the concession) will have been extinguished.
Because the business of the JOA is to enable the effective performance of the concession the JOA should ideally subsist for as long as the concession is in existence. This will entail the simultaneous signature of the concession and the JOA, such that both documents have the same execution date.
If the duration of the concession is extended because of force majeure under the concession, the duration of the JOA should be extended accordingly.
If there is a point at which the concession is extended or renewed beyond its original term then the duration of the JOA will also be extended so as to track that extension or renewal. Similar principles will apply where there are different concessions for different phases of the joint operations (see 1.8). This assumes that all of the parties to the JOA will be party to the extension or the renewal, but this will not necessarily be so if a party has withdrawn from the concession’s extension or renewal.
In contrast with a conventional commercial contract, the JOA does not contain many of the customarily recognisable termination provisions. There are a number of circumstances that are defined in the JOA which can lead to its termination in relation to an individual party (such as a party’s withdrawal (see 14.7), the forfeiture of a party’s interests (see 18.7)), and loss of the concession against a party (eg for a party’s insolvency or unremedied breach, or in response to an alleged breach by a party of the anti-bribery and corruption principles recited in the concession) will obviate the need for the JOA for that party, but it will be apparent that the correlation between termination events in a JOA and a general commercial contract is quite incomplete.
It will always be an option for the parties to vote to terminate the JOA, which may well be reserved as an item requiring unanimity of voting between the parties (see 8.4), and they might well resolve to do this where the concession has terminated in accordance with its terms, such that the very purpose of the JOA’s existence has been removed.
The JOA will also become redundant where a single party has aggregated all of the other parties’ interests (whether by agreement or through the exercise of the forfeiture or the withdrawal mechanisms), such that it has become the sole party to the concession. In this circumstance there will be no joint operations to be conducted between a group of parties as a joint venture and so no need for a JOA. If there is a subsequent admission of another party to the concession, it will be necessary to reanimate the JOA for that joint venture, but that will result in the creation of a fresh JOA.
Whether the right of a party to terminate a contract at common law in consequence of a repudiatory breach of contract by another party that deprives the innocent party of substantially the whole benefit of the contract6 might apply in respect of the JOA and the relationship that it creates should also be considered.
The English courts have ruled7 that explicit contractual termination clauses will not necessarily operate so as to exclude the implication of the common law termination right, unless the relevant contract was sufficiently clear in evidencing this intention. The relative paucity of express termination clauses in a customary JOA could therefore further emphasise the potential for the application of the common law termination right. The application of such a termination right in respect of the JOA would not result in a corresponding termination of the underlying concession, however, which would lead to an illogical outcome.
The right of withdrawal (considered at 14.7) is effectively a free surrender by a party of all or part of its interests in the JOA, which is exercised by the withdrawing party giving notice of its intention to withdraw from the JOA and the concession to all of the other parties. Careful consideration will be needed of how the right of withdrawal in the JOA is reconciled with any comparable right in the concession. The concession might not always contain an obvious right by which a party, as a concession-holder can elect to surrender its corresponding interests in the concession at any time and for any reason. Thus, a right of withdrawal in the JOA allowing a party to withdraw at its option might not always be matched by an equivalent right in the concession (in which case a withdrawal by a party only of its JOA interest would make little sense).
Where the concession comes to an end in accordance with its terms, then the JOA should ostensibly end too. However, most JOAs do not end completely on termination of the concession, because there will be a number of ongoing items that the parties will need to address through the vehicle of the JOA,8 such as the following.
•Decommissioning – the most obvious ongoing issue that the parties will need to be involved with, notwithstanding the termination of the concession, is the decommissioning of any petroleum production, processing, storage or transportation infrastructure that has been installed and used as joint property in the performance of the joint operations (see 3.4), and in any exclusive operations (see 13.1). The business of decommissioning is addressed in more detail in Chapter 16, but suffice it to say for present purposes that the continuing existence of the JOA could be necessary in order to conclude the decommissioning process9 and any residual liability at law that the parties might have in respect of any of the decommissioned infrastructure.10 However, this will not be an issue if the concession and the JOA are terminated prior to the installation of any such infrastructure. This may be the case, for example, if the exploration and appraisal phase activities do not indicate sufficient quantities of petroleum to justify the introduction of a development plan, any exploration and appraisal wells that have been drilled have been properly plugged and require no further decommissioning activities to be performed, and there has been a withdrawal from the concession and the JOA.
•Final accounting – the JOA should continue to exist for as long as may be necessary to enable the operator to complete a final accounting and reconciliation between the parties in respect of their respective petroleum entitlements, which will include final accounting in respect of joint operations or exclusive operations and addressing the reconciliation of any underlift or overlift balances (see 12.3).11 Once again, this will be of no relevance as an issue if the concession and the JOA are terminated before any petroleum is actually produced.
Even where the JOA does come to an end, there could still be some individual provisions of the JOA that are expressed to continue in force for some time after termination of the JOA. There is usually a generic provision in the JOA to the effect that termination of the agreement will be without prejudice to a party’s accrued and contingent liabilities,12 but the JOA might also make reference to a series of specific issues where some continuation of individual provisions, despite the termination of the overall JOA, might be suggested.
•Confidentiality – the undertakings of confidentiality that have been given by and between the parties in respect of the JOA (see 15.1) will often be expressed to continue to subsist for a defined period after the termination of the JOA.13
•Ongoing disputes and defaults – there may be ongoing litigation or other disputes in respect of the JOA (whether between the parties or involving a third party), which will not conveniently come to an end just because the JOA has terminated. If the operator is performing its obligations in respect of litigation management (see 20.7), then those obligations (and the obligation of the parties to cover the operator’s costs of doing so) should continue until the relevant disputes have been concluded. The same principle will apply in respect of any unremedied default by a party and that party’s liability for that default (see 18.4).14
•Indemnity obligations – where an obligation of a party to indemnify another party has arisen in accordance with the terms of the JOA, that obligation should not be extinguished simply because the JOA has come to an end.15
•Ongoing entitlements – there could be certain legacy arrangements which are required to survive the JOA, such as the licensed use of intellectual property between the parties (see 15.4).
As a further alternative to a provision that entails the continuation of the JOA in its entirety notwithstanding the termination of the concession, or a provision that is intended to apply in its own right as an ongoing commitment in isolation despite the termination of the JOA, the OGUK JOA provides that if there are (in the opinion of the operator) any obligations and liabilities arising out of the existence of the joint property (see 3.4) that are likely to subsist beyond completion of the decommissioning phase and the final accounting between the parties, then the parties will enter into a separate agreement with regard to such obligations and liabilities; and in the absence of such a further agreement, the whole of the JOA shall be extended and shall continue to apply.16
This solution might apply to govern any general, ongoing liabilities that are to be settled between the parties (such as, for example, any ongoing, residual liabilities for decommissioning that might remain beyond the conclusion of the decommissioning activity), or between the operator and the non-operating parties, but might also apply, for example, to any arrangements made between the parties and any third parties for the use of the joint property (see 6.2).
1A model form JSBA has been published by the AIPN (available at www.aipn.org) and by the AAPL (available at www.landman.org).
2CAPL JOA head agreement; OGUK JOA §2.1.
3AIPN JOA recitals; AIPN JOA §2.
4OGUK JOA recitals.
5AMPLA JOA §2.
6Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.
7Stocznia Gdynia SA v Gearbulk Holdings [2009] EWCA Civ 75.
8AAPL JOA §26.1; AIPN JOA §2; AMPLA JOA §17.4; CAPL JOA §1.14; OGUK JOA §2.1.
9AIPN JOA §2.1.
10AAPL JOA §26.1; OGUK JOA §26.4.
11AAPL JOA §26.1; AIPN JOA §2; AMPLA JOA §17.4; CAPL JOA §1.14; OGUK JOA §2.1.
12AAPL JOA §26.1; AIPN JOA §2.
13AAPL JOA §7.1; AIPN JOA §15.2; AMPLA JOA §18.7; CAPL JOA §18.00; OGUK JOA §19.1.
14AIPN JOA §8.5.
15AIPN JOA §2; OGUK JOA §2.1.
16OGUK JOA §2.2.
