By Felix Ayanruoh

With the introduction of the UK Bribery Act 2010, and the continued strict enforcement of the US FCPA, the 2012 JOA revised and expanded the anti-bribery and business ethics provisions of the 2002 JOA. The revised provision increases transparency and indemnity arising from the UK Bribery Act.

Article 20 of the 2012 increase the anti-graft provision to include the definition of “Anti-Bribery Laws and Obligations” with an alternative that is all embracing to guarantee compliance with the UK Bribery Act by all parties. This provision is pursuant to liabilities caused by an associate or an entity that is liable to any offence under the UK Act, and particularly a joint venture party. In the context of contractual joint ventures, liability is likely to arise where a bribe is paid in connection with the joint venture business; particularly where the joint venture is entered into after the Act came into force.

The indemnity provision of the revised JOA contains significant changes favouring non-breaching parties and an optional provisions including: non operator’s right of removal of the operator for admitted allegations of breaches of Anti-Bribery Laws and Obligations, or when the operator has been finally adjudicated to be guilty of such a breach. This provision shows the gravitas of the UK Bribery law to present day realities.

Also, a party that is withdrawing from the JOA because another party has breached anti-bribery and corruption warranties will be entitled to an indemnity and have included in its calculations of damages the amount of its investment that it lost as a result of the withdrawal. It is likely that many parties will resist having such a provision in their JOA for fear that it could be utilised by a counterparty which may in any case have other reasons for wishing to withdraw from the JOA.

Besides the reinforced warranties, there is a requirement in the 2012 JOA for each party to notify the other parties of any investigations or proceedings by any government authority pursuant to an alleged breach of the Anti-Bribery Act. Furthermore, it provides for each party to respond to requests for further information by the other parties to verify the warranties relating to not engaging in any conduct that may be in breach of the anti-bribery and anti-corruption laws. Also, each party is also mandated to provide the others a certification (in a form attached to the 2012 JOA) that the parties have continued to comply with the warranties for the preceding one year period.

Most petroleum development contracts grant the host government through the National Oil Company (NOC), a right to elect to participate in joint operations in each exploitation area at the time of the declaration of commercial discovery for such area.

The 2012 JOA hold in place existing provisions dealing with NOC participation, either by the NOC becoming a party to the JOA, or by entering into a separate agreement. The revision of this provision includes a carry of the NOC’s share of the costs of operations, and for subsequent repayment of those carried costs out of a portion of the NOC’s share of cost petroleum.

The 2012 JOA guidance note provides for suggested drafting options to deal with applicable carried costs. Additionally, parties may wish to include the relevant provisions in a separate carry agreement. The provision concerning carried cost has the potential of becoming a challenge in the drafting process. A carry structure in favour of the NOC may take diverse forms depending on the circumstances.

Generally, the carry provision is included as part of the granting instrument – host government contract, such as a production sharing contract (PSC). The commercial variations on a carry are many and will depend on the outcome of negotiations between the host government and/or NOC and the petroleum companies involved.

Integrated Project Team (IPT) is made up of representatives of all parties or all parties holding a participation interest higher than a certain determined threshold to the JOA. The IPT is seen as a means for the non-operating parties to have a say in the project’s operations and decision-making.

Prior to the 2012 JOA, IPT was a topic of debate over the years and the need to incorporate it into the AIPN’s model JOA. The 2012 JOA drafting committee and AIPN board concluded that although IPTs are not recognised standard industry practice, its concept and suggested text should be incorporated into the Guidance Notes. The 2012 JOA Guidance Note provide for suggested language for the introduction of an IPT.

Since host countries are becoming more troubled with the decommissioning of matured petroleum fields, major joint venture parties see it as crucial in negotiating JOAs -disproportionate share of the financial burden. The 2002 JOA provided for an option to negotiate a security agreement, which requires each party to provide security on an annual basis. The 2012 JOA updated this provision to include, requiring the operator to prepare and provide the non operators a draft decommissioning work programme and budget at the time of delivering the draft development plan – Exhibit E to 2012 JOA.

Concluded.