Relative Bargaining Power
Assignment Title/Question : Critically evaluate the concept of “relative bargaining power” in the contractual relationship between host-governments and international oil companies in the early stages of an E&P contract.
You must support your answer with relevant and appropriate examples.
You are required to develop a well presented and logically structured essay on the concept of ‘relative bargaining power’.
Basically you are evaluating the respective parties (Host States and IOC’s) bargaining powers and how the pre-contractual negotiations subsequently translate into a full blown E & P contract. Evaluate which party has more bargaining power and why is this so? Look at the following issues :-
(1) The asymmetry of information in the hands of the IOCs
(2) Their technical expertise, and
(3) They are financing the project development.
Compare this with concession agreements – how do these differ? Also look at royalty payments and returns, and see how these payments and returns affect the relative bargaining power of the parties.
You should aim to develop a number of competing arguments on the dynamics of the relationship between the host-governments and IOCs.
You are to provide a balanced view of the issues involved and whether contractual relationships are sustainable in the long-term in oil producing countries without strong legal frameworks for enforcing contracts.
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