A New Paradigm for Attracting Foreign Investments: Restructuring Investor-State Arbitration for Resolution of Petroleum Disputes: Dynamics of the New Iranian Oil Investment Contract

Abstract

In Feb 2014 Iranian government launched a new oil investment contract to replace the outdated and unattractive buyback model that had been used for more than two decades for development of oil and gas fields. The new investment model is similar to the Production Sharing Agreement (PSA) and offers integrated exploration, development and production stages, flexible and transparent terms. The thesis advances the hypothetical argument that the common denominators of international investment law are the building blocks for structuring an "internationally sound legal system for foreign direct investment" (FDI) and that the new paradigm for attracting FDI is emerging through harmonisation of investment laws. The definition of "investment" in BITs covers "the right to extraction and exploration of mineral resources" therefore, contracts for exploration and exploitation of petroleum resources qualify for protection under investment protection treaties including access to investor-state dispute settlement (ISDS) system. Finally, the author critically analysis the Iranian arbitration laws relating to oil and gas disputes and concluded that the dispute resolution provision in oil investment contracts could be formulated on basis of ISDS containing rules of procedures for arbitration of energy disputes including, notice of dispute and request for arbitration, constitution of arbitral tribunal, consent to arbitration, applicable substantive law, language and location of arbitration, waiver of sovereign immunity, non-intervention of state courts and enforcement of arbitral award.