Application of the Theory of Dépeçage to Upstream Oil and Gas Contracts
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University of Calgary PRISM: University of Calgary's Digital Repository Graduate Studies The Vault: Electronic Theses and Dissertations 2018-03-29 Application of the Theory of Dépeçage to Upstream Oil and Gas Contracts Karimi, Sahar Karimi, S. (2018). Application of the Theory of Dépeçage to Upstream Oil and Gas Contracts (Unpublished master's thesis). University of Calgary, Calgary. AB. doi:10.11575/PRISM/31771 http://hdl.handle.net/1880/106483 master thesis University of Calgary graduate students retain copyright ownership and moral rights for their thesis. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission. Downloaded from PRISM: https://prism.ucalgary.ca UNIVERSITY OF CALGARY Application of the Theory of Dépeçage to Upstream Oil and Gas Contracts by Sahar Karimi A THESIS SUBMITTED TO THE FACULTY OF GRADUATE STUDIES IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS GRADUATE PROGRAM IN LAW CALGARY, ALBERTA MARCH, 2018 © Sahar Karimi 2018 Abstract Determination of the applicable law in upstream oil and gas contracts plays an important role with regards to the parties’ rights and liabilities. There are various approaches regarding the choice of applicable law and different theories have been expressed relating to choice-of-law provisions. This research explores one of these theories called Dépeçage in private international law and conflict of law. The theory of Dépeçage is a concept in private international law that refers to the process of cutting a case into individual issues whereby each issue is constrained to a different applicable choice-of-law analysis. In other words, the theory of Dépeçage is the application of different laws to various legal issues arising from a dispute. The theory was first applied in Tort law and specifically aviation litigation. This research shows that there is an opportunity to gain many advantages by the application of the theory of Dépeçage in upstream oil and gas contracts. However, adopting this theory ought to be treated with caution due to its disadvantages and the issues it may cause if not applied within a specific framework. Therefore, for appropriate application of Dépeçage, upstream oil and gas contracts must meet certain criteria such as protecting parties’ justified expectations, and maintaining parties’ interests. Also, this theory should not be applied in cases where it would lead to dissatisfaction of the contracting parties, destruction of legislative intention, or invalidation of a contract. Moreover, the applicable law that has the greatest concern for each issue must be applied to effectuate the purpose of each of the applied rules. In other words, choice-of-law values are significant principles for the application of Dépeçage. Lastly, judges and arbitrators must provide criteria and legal reasons for the application of Dépeçage in upstream oil and gas contracts during the dispute resolution process. ii Acknowledgments First and foremost, I am grateful to The Almighty God for all the countless gifts I have been blessed with and for establishing me to complete this research. The success and final outcome of this undertaking would not have been possible if not for the guidance, efforts, and assistance offered by the many people whose names may not all be enumerated. However, I would like to take this opportunity to acknowledge the valuable contribution of the following people. It is great pleasure to express my deepest thanks and gratitude to my supervisor, Professor Evaristus Oshionebo for his guidance and encouragement in finishing the thesis. Moreover, I place on record my sincere appreciation to Professor Gregory Hagen, the Associate Dean and the Director of Graduate Programs, for his kind and endless support. I also would like to acknowledge Professor Ian Holloway, Dean of Law at the University of Calgary, for his constant encouragement. I would like to record my sincere gratitude to all the faculty members of Faculty of Law especially my professors, Professor Nigel Bankes, Professor Alastair Lucas, Professor Fenner Stewart, Professor Jennifer Koshan and Professor Jonnette Watson Hamilton for the academic support, valuable guidance and all of the encouragement extended to me. Above all, I am indebted to my family for their unceasing encouragement and endless help. I am extremely grateful to my parents, Professor Abbas Karimi and Dr. Soheila Javadi for all of their academic support as well as kind and understanding spirit. I also wish to thank my lovely siblings Hedieh and AmirAli for being always there for me. Last but not least, I express my deep sense of appreciation to all relatives, friends, and others who shared their support, encouragement, and assistance. iii Dedicated to My Beloved Parents, My Mother, who has been a great source of inspiration and motivation, and My Father, for his faith in justice and his passion for Law. iv Table of Contents Abstract ..................................................................................................................................... ii Acknowledgments .................................................................................................................. iii Dedication ................................................................................................................................ iv Table of Contents ..................................................................................................................... v Introduction .............................................................................................................................. 1 1. Purpose of Study ................................................................................................................. 1 2. Research Questions ............................................................................................................. 3 3. Research Methodology ....................................................................................................... 4 4. Limitation of the Study ....................................................................................................... 7 5. Organization ........................................................................................................................ 7 Chapter 1: History and Evaluation of the Theory of Dépeçage .......................................... 9 Definition of the Theory of Dépeçage ................................................................................ 9 History and Origin of the Theory of Dépeçage ................................................................ 10 Development and Application of the Theory of Dépeçage in the United States .............. 12 Development of the Theory of Dépeçage in Other Countries .......................................... 16 Impetus for the Application of the Theory of Dépeçage .................................................. 18 Advantages and Disadvantages of Application of Dépeçage ........................................... 20 a. Advantages of Application of the Theory of Dépeçage .................................................... 20 i. Resolving What Seems to Be a Legal Impossibility .................................................. 21 v ii. Maintaining the Parties’ Interests ........................................................................... 21 iii. Increasing Foreign Investments .............................................................................. 22 iv. Solving Complex International Law Problems ....................................................... 22 v. Emphasis on the Most Related Law to the Given Issue .......................................... 23 vi. Grant More Justice .................................................................................................. 23 vii. Emphasis on the Social Consequences of a Judicial Decision ............................... 24 b. Disadvantages of Application of the Theory of Dépeçage ................................................ 24 i. Destruction of Legislative Intention ........................................................................... 24 ii. A Means to Escape from Strict Choice-of-law Determinations ............................. 25 iii. Effect on the Neutrality of Judges and Arbitrators ................................................. 26 iv. Prolongation of the Process of Finding the Applicable Law .................................. 26 v. Inability to Function Where There Are No Clear Preferences ............................... 27 vi. Lack of Requisite Background to Apply Different Foreign Laws .......................... 27 vii. High Cost of Negotiation ........................................................................................ 27 Different Areas of Law in which the Theory of Dépeçage Has Been Applied ................ 28 a. Dépeçage in Aviation Law ............................................................................................. 29 b. Dépeçage in Marriage Law ............................................................................................ 32 c. Dépeçage in Consumer Contracts .................................................................................. 37 d. Dépeçage in International Commercial Arbitration ....................................................... 40 vi Chapter 2: Special Features of Upstream Oil and Gas