INTERNATIONAL ARBITRATION 1/3LY
IN CONVERSATION WITH DIANE HUGHES 27
IN CONVERS AT ION WI TH DI ANE HUGHES MANAGING DIRECTOR , AL I XPARTNERS Stewart Perry, Partner at Clyde & Co, in conversation with Diane Hughes, a Managing Director in the Financial Advisory Services practice at AlixPartners, a global business advisory firm.
Recently, we’ve been engaged in several investment treaty arbitrations. These have been related to situations in countries in Eastern Europe, Asia and Africa. I’msure that you are fully aware that businesses in the oil &gas sector are based in, or trade through andwith, countries with unstable regimes. Where you have contracts being awarded by governments in these regimes, those contracts aremore prone to getting cancelled, simply not honoured or unilaterally re-negotiated, particularly if the government suddenly changes. Big sums of money are involved, often because of the large up-front investment required prior to generating returns and these investors end up as claimants. I think the uptick in arbitration is largely because somany transactions in the oil &gasmarket are based on cross-border contracts. This is increasingly so because of saturation in national markets. The USA is a good example of this; refineries which traditionallymight have just sold in-country, have been forced to start trading internationally by virtue of the increase in alternative fuels and the fracking boom in the USA. The refineriesmay not have deep experience in international trade. If contracts with newnon-local partners are not properly honoured, in performance or payment terms, then for the first time, they’ve got international issues. ST EWART In your experience, are the people that are investing in these foreign countries, and the people having to go internationally for the first time, all looking at contracts with arbitration provisions? DI ANE I believe so, yes. Lately, the disputes inwhich AlixPartners has been engaged in have been arbitrated. My partners are currently, or have beenmost recently, involved in arbitrations in London, Paris, Switzerland and Singapore.
DOWNS I Z ING , M& A & IN T ERN AT I ON A L D I SP U T E S : A F ORENS I C A C C OUN TA N T ’ S V I EW OF T HE O I L & G A S MA RK E T ST EWART I knowyou’ve a large teamof advisers focussed on the oil &gas sector at themoment. What are theymostly engaged on? DI ANE My colleagues are engaged in awide range of activities in this sector. Whilst the oil price hit a sevenmonth high thismonth, there is little optimism for the rest of 2016 and, therefore, much continued uncertainty across the value chain. Company side, we are advising on cost structure improvements, whether through operating and overhead cost reduction or procurement and outsourcing strategies. We are also seeing transaction activity, in particular selling out of non-core businesses. Another busy area is disputes. It is hard to discern trends, but certainly parties appear in general to be seeking to avoid obligations, resulting in claims through both litigation and arbitration. ST EWART We’re busy in those areas too, especially the disputes work. Have you noticed a significant increase in requests for forensic accountants fromclients in the sector? DI ANE We are seeing a rise in companies prepared to contemplate litigationwith an early focus on the potential economic benefits. These potential disputes are varied in origin but definitely have been driven by the fact that the sector is stressed. One noticeable feature in the oil &gas sector is that the quantumof damages tends to be a big number.
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