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Law and Arbitration of Oil and Gas Disputes in Brazil and Mexico

Orlando F. Cabrera C.1

Eduardo Silva da Silva

One of the paradoxes of oil and gas disputes is the arbitrability of contracts in which a party is an international petroleum company and the other a State entity, especially if the entity is based at a Latin American country. Due to the fact that such disputes involve political decisions as well as risky, complex and sophisticated investments, arbitration and alternative mechanisms of dispute resolution are preferred methods for the settlement of disputes.

The decline in the production of Petróleos Mexicanos (PEMEX) as well as the discovery of the reserves of “pre‐salt” in Brazil presented new challenges which obliged Mexican and Brazilian Governments to enact new regulations for oil and gas. This article examines the regulatory framework governing oil and gas industry in Brazil and Mexico with special emphasis on the different ways of accepting and managing the risks of dispute resolution. In addition, it provides a general view of the entities involved in the industry.

Whilst the Mexican laws have accepted arbitration and alternative means of dispute resolution since 1990s; the current Brazilian regulations regarding pre‐salt areas harmed the use of these mechanisms. The Brazilian Federal Public Attorney recommended, in certain cases, submitting to arbitration only if arbitration procedures are conducted by a committee of the Brazilian Government. Similar provisions may be found in the Mexican Gas Regulation but not in the Mexican Oil Laws which provide a wide arbitration oriented regulation.

These frameworks create different risks for investors that should be carefully examined before carrying out any exploration or production of petroleum.

• • Eduardo Silva da Silva Ph.D. is Professor of Arbitration and Procedural Law in Uniritter Laureate International Universities (Brazil). Doctor in Civil and Procedural Law (Arbitration Thesis), University of Rio Grande do Sul and Master of Laws in Contract Law. Contacting author e‐mail: eduardosilva2@yahoo.com.br