With the objective of promoting, boosting and reactivating the activities of exploration and production of hydrocarbons in the country, and in the framework of the development of the Permanent Process of Area Allocation the President of the National Hydrocarbons Agency (ANH), through its Resolution No. 78 of February 22nd , 20191, announced the final Contracts minutes for Exploration and Production of Hydrocarbons both for Offshore areas as well as Continental areas. In this sense, in order to participate in the new Process of Area Allocation it is important that the companies and the hydrocarbon sector in general, know the differences in matters of dispute resolution, in regards to the activities that the contractor must be carry out if the production period between the Costa Afuera E&P Contracts Minute and the Continental E&P Contracts minute is extended , as well as in regards to the development of Community Benefit Programs ("PBC"), where the principle of coordination and concurrence in both minutes is incorporated.
First, in regards to the settlement of disputes, both minutes establish a stage of direct agreement when a conflict or controversy arises between the parties. However, there are nuances that are worth highlighting. First, the E&P Continental contract minutes provide that the controversy that arises between the parties will be resolved within thirty (30) calendar days, starting from the moment one of them informs the other of the reasons for the conflict. This term may be extended, if the parties so consider, for an equal term.
This term varies in the Costa Afuera E&P contract minute, since the direct settlement term was established within a period of twenty (20) business days, also renewable by agreement between the parties.
However, if the dispute is not resolved, according to the Continental E&P contract minute, the matter may be considered by any of the parties before the president of the ANH and the highest executive of the contractor residing in Colombia, a provision that is not stipulated in the Costa Afuera E&P contract minute, leaving the negotiation on a possible solution tied to the parties in conflict, without the top executives of each of the parties being able to mediate
In the event that there is no agreement on the dispute, the parties have the power to resort to arbitration, under the arbitration clause, which is incorporated in the two minutes. However, as a relevant difference, it should be noted that in the Costa Afuera E&P Contract minute it was established that the parties will determine if the arbitration is national or international, at the time of conclusion of the contract. If international arbitration is chosen, the Court must be subject to the latest published version of the Arbitration Rules of the International Chamber of Commerce. It is important to note that the Court can decide based on the Arbitration Rules of the International Chamber of Commerce that the arbitration is not an international one, and for this reason, a new court will be appointed which will be subject to the rules and procedures provided in Law 1563 of 2012 for national arbitration. On the contrary, such power of choice does not exist in the Continental E&P Contract minute, since, in the event of a conflict, the parties must submit to the decisions of a national arbitration court.
The second relevant difference between the Costa Afuera E&P Contract minutes in regards to the Continental Contract minutes, is related to the conditions that the contractors must comply with in those cases in which the ANH authorizes the extension of the Production Period. Thus, when dealing with an Costa Afuera E&P Contract, in the event of an extension of the Production Period, the contractor must make available at the Delivery Point "an additional five percent (5%) of the Production of Liquid Hydrocarbons, or an additional five percent (5%) of the Non-Associated Gas, of Heavy or Extra Heavy Liquid hydrocarbons, in all cases, after Royalties and other Participations (...) "2 . Conversely, the Continental E&P Contract minute establishes that, in case of an extension of the Production Period, the contractor must make available at the Delivery Point "at least an additional ten percent (10%) of the Production of Liquid Hydrocarbons, or an additional five percent (5%) of the Non-Associated Gas or Heavy Liquid or Extra Heavy Hydrocarbons, in both cases after Royalties and other Economic Rights (...)" 3
Finally, similarities between the Costa Afuera E&P and Continental Contract minutes are the PBC, defined in the same way in both minutes as "the set of activities and / or social investment projects defined by the contractor in the framework of its contractual obligations, to contribute with some benefits corresponding to the needs of the populations located in the Area of Interest ", and in which the principle of coordination and concurrence Nation -Territory has a special importance. The great importance that has been given to this principle originates from the decision of the Constitutional Court in SU-095 of 2018 sentence4, which aims to give a greater prevalence to social investment projects that the contractors are in charge of through the linking of local and territorial authorities during the stages of formulation, execution, monitoring and closure of the PBC, with a final purpose, which is to inform and listen to the communities in such a way that their actions are complementary to the achievement of the objectives of the PBC, ensuring that the projects defined are harmonized with current planning instruments such as Communal and Community Development Plans, Development Programs with a Territorial Approach, Life Plan, National Action Plan for Human Rights and Business and other territorial planning instruments. It is important to note that the coordination of social investment projects will continue to be an articulated work between the contractor and the community, but with the duty to inform the local or territorial authority as the case may be.
In conclusion, both the Costa Afuera E&P and Continental Contract minutes present a series of differences, the most relevant being the issue that deals with arbitration and the possibility of choosing between national or international arbitration for the case of the Costa Afuera minutes, a matter that is not established in the Continental minutes. Conversely, the incorporation of the principle of coordination and concurrence ordered by the Constitutional Court in the structuring of the PBC, allows the development of responsible social investment projects, contributing the exercise of exploration activities and hydrocarbons production that benefit the communities in topics such as proactive inclusion, income generation and development of social infrastructure, amongst others.
- By which the Definitive Terms of Reference of the Permanent Process of Area Allocation are approved and the final Contract minutes of Exploration and Production of Hydrocarbons E&P, for Continental and Offshore Areas for such process
- Article 220.127.116.11.4 Costa Afuera E&P minutes
- Article 5.2.4 Continental E&P minutes
- Constitutional Court. SU-095 of 2018. M.P. Cristina Pardo Schlesinger