Tom Valentine discusses Foreign Law at the 2008 Energy Services Summit
Daily Oil Bulletin
August 4, 2008
Tom Valentine presented a workshop at the 2008 Energy Services Summit on how to prepare for an overseas venture. At the workshop, Tom outlined the following "seven pillars of wisdom" that address legal issues like foreign liability, "creeping nationalization" and corruption.
1) Determine whether or not the host country requires a foreign company to appoint a local business representative. A contractual agreement with any foreign appointee should carefully define and restrict his spending authority.
2) Any agreement with foreign business representatives and partners should categorically prohibit corrupt practices as understood in Canadian and American law.
3) A company should carefully comply with export controls, such as American restrictions against transferring certain technologies to Iran.
4) Foreign agreements should specifically include the right to repatriate revenue back to Canada in the form of a hard currency.
5) Be wary of governments that have given themselves the right to do commercial business without being subject to their own laws. In a government contract, ensure that the state waives "sovereign immunity" and subjects itself to normal dispute resolution (i.e. courts, arbitration and so on).
6) Contracts routinely relieve a company's obligation to perform if a "force majeure" event like a storm or war occurs. When political instability is a factor, a foreign agreement should define confiscatory state actions as constituting force majeure. Otherwise a company may find itself without legal recourse when its property or profitability is effectively nationalized, suddenly or gradually, through changes in law or regulation.
7) In the same vein, many oil and gas companies add a "stabilization" clause to their foreign contracts, forbidding a host government from unilaterally and legally changing the terms of a deal.
Within the scope of conducting business abroad, legal corruption was a hot topic of interest, generating many questions from workshop attendees. Valentine, who has worked for oil and gas clients in dozens of countries, answered that it should always be avoided and warned that criminality can backfire. He suggests, a company can legally enhance its political influence through social responsibility - in the long run, constructive contributions will often be better for business.