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The legal relationship between multinational oil companies and the Sudan: problems and prospects

Published online by Cambridge University Press:  28 July 2009

Adila Abusharaf
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Multinational oil corporations (MNOCs) are a strategically important group of multinational corporations (MNCs). There are now many MNOCs operating in both the private and public sectors with remarkably diverse characters, strategies and objectives. Handling large budgets, revenue and capital, and complex advanced technology, they are responsible for exploration, crude oil production, refining, and distribution. These very capacities enable MNOCs to make a number of positive contributions to the economic growth and development of the developing oil-producing countries in which they operate. In that regard, MNOCs engage extensively in joint marketing operations with their host countries in various parts of the world, and foreign funds injected by MNOCs' operations relieve the shortage of financial capital and make greater production possible.

Type
Articles
Information
Journal of African Law , Volume 43 , Issue 1 , Spring 1999 , pp. 18 - 35
Copyright
Copyright © School of Oriental and African Studies 1999

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References

1 MNCs (the other terms referring to MNCs are multinational enterprises (MNEs) and Trans-national Corporations (TNCs)). TNCs is the term used in the UN documents. As a general definition, MNCs usually comprise companies or other entities whose ownership is private, state, or mixed, established in different countries and United in such a way that one or more of them may be able to exercise a significant influence over the activities of others, and, in particular, to share knowledge and resources with the others. For discussion on terms and definitions of Multinational Corporations see, Muchlinski, P., Multinational Enterprises and the Law, Oxford, 1995, 12.Google Scholar

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6 According to the United Nations Development Program, developing countries are defined as all countries other than Canada, Europe, the United States, Australia, New Zealand and Japan, including a number of countries that have relatively high per capita incomes, such as Saudi Arabia and Singapore. According to the GATT provisions (Art. XVIII: 1), they are denned as contracting parties whose economies can only support low standards of living and are in the early stage of development. See Trebilcock, M. and Howse, R., The Regulation of International Trade, New York and London, 1995, 581.Google Scholar

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21 The group was named after the 77 original countries that formed it.

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32 Manniruzzaman, op cit., n. 16, 213.

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34 Below, 6.

35 Manniruzzaman, op. cit., n. 16, 223.

36 Ibid.

37 Bendi, op. cit., n. 1, 4; Igbokwe, op. cit., n. 30, 116. See also Davis, op. cit., n. 30, VI.

38 Manniruzzaman, op. cit., n. 16, 224.

39 Ibid.

40 Ibid.

41 For a detailed discussion of these other contractual forms, see Ibid., 223–228.

42 Bechtold, op. cit., n. 29, 212.

43 The public sector was to be a pioneer sector and to lead progress in all fields of development and to be based on public ownership and subject to people's control. The co-operative sector was to be based on collective ownership by all members participating in co-operative societies. The state was to care for the co-operative societies and the law was to regulate their formation and management. The private sector was to be based on non-exploiting private ownership. The state was to protect and encourage it and organize its functions so as to enable it to play a positive and active role in the national economy.

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46 It was granted concessions in the southern and The middle area of the Red Sea. After finding almost 300 million barrels of oil in Sudan during the early 1980s, Chevron scuttled a $2 billion project to export 50,000 barrels per day of Sudanese crude in 1986. It drilled 90 wells and sank more than $1 billion into the project. See “Oil development project called off in Sudan”, (15 September, 1986) Oil and Gas Journal 42.

47 Ibid., 42.

48 Bendi, op. cit., n. 11, 3.

49 The oil fields discovered in the 1960s and 1970s and only partly developed are in the Muglad Rift Basin Complex in southern Sudan. The Heglig field has an estimated yield of 25,000 barrels/ day yield. The main oil areas of the Red Sea Coastal Zone and the southern part of the country have not been exploited.

50 World Bank, “Refocusing on the effectiveness of the state”, World Development Report, New York, 1997, 29.Google Scholar

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52 International Monetary Fund, “Sudan recent development”, (February 15, 1995) IMF Staff Country Report No. 92/12, Washington DC, 1995, 2.

53 El Sheikh, op. cit., n. 44, 48.

54 Usually foreign companies invest in products that can be exported to compete in the international markets, however, they are not encouraged to invest in products for national use and consumption.

55 Bendi, op. cit., n. 11, 3.

56 Oil and Gas Journal, op. cit., n. 46, 42.

57 Pauly Knox, “Fighting in Sudan threatens oil project”, (February 14, 1998) Globe and Mail A 13.

58 Since the Sudan gained its independence in 1956, it has had two democratic systems, in 1964 and 1985, and three military regimes 1957, 1969 and 1989.

59 International Monetary Fund, op. cit., n. 52, 7.

60 Gabb, op. cit., n. 13, 3.

61 Bendi, op. cit., n. 11, 4.

62 The distribution infrastructure consists of rivers, roads, pipeline and railway systems, all of which are in need of improvement. There is a product jetty at Port Sudan to the major consuming centre of the capital Khartoum. Sudan is dependent on imported petroleum products as its domestic production and refining capacity is not sufficient to cater for its needs. The country has a small refinery at Port Sudan.

63 Bendi, op. cit., n. 11, 4.

64 Ibid., 5.

65 This Act was made in accordance with the provisions of Article 27, of the Fifth Constitutional Decree 1991 by the President of the Republic. It repealed the Investment Act of 1990.

66 See s. 7 of The Act.

67 Bendi, op. cit., n. 11, 4.

68 International Monetary Fund, op. cit., n. 52, 1–7.

69 Ibid., 2

70 World Bank Report, op. cit., n. 50, 11.

71 Ibid., 37.

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74 Oil and Gas Journal, op. cit., n. 46, 42.

75 Knox, op. cit., n. 57, A 13.

76 El Sheikh, op. cit., n. 44, 49.

77 United Nations Centre on Transnational Corporations, “Relations between host developing countries and transnational Corporations”, in Transnational Corporations in World Development: Trends and Prospects, New York, 1988, at 314–329.Google Scholar

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79 Ibid.

80 Ibid.

81 Ibid., 313.

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83 My survey on various materials shows that, since Sudan gained independence, its constitution has been changed five times and its laws and regulations governing oil investment ten times.

84 Trebilcock, op. cit., n. 82, 20.

85 For detailed discussion of Ghana, Egypt, Tanzania, see UN Centre on Transnational Corporations, op. cit., n. 77, 314.

86 Ibid.

87 Ibid.

88 Igbokwe, op. cit., n. 30, 121.

89 Ibid.

90 Gabb, op. cit., n. 13, 6.

91 Bendi, op. cit, n. 11, 5.

92 Gabb, op. cit., n. 13, 7.

93 Ibid.

94 Manniruzzaman, op. cit, n. 16, 224.

95 This agency has been established under the Geological Research Authority Act 1986.

96 Gabb, op. cit., n. 13, 7.

97 Igbokwe, op. cit., n. 30, 118–119.

98 Ibid., 119.

99 Ibid., 99.

100 UN Centre on Transnational Corporations, op. cit., n. 77, 315.

101 Kennedy, op. cit., n. 27, 78.

102 S. 12, Encouragement of Investment Act, 1996.

103 Art. 58 of the constitutions of the Sudan, 1973 and 1985 provides that subject to art. III hereof, any person aggrieved by any law passed by legislative authority may institute a civil suit before the Supreme Court to declare such law void on the ground of its violation of the freedoms and rights guaranteed by this constitution. Art. III deals with the right of the president to declare a state of emergency in case of imminent danger threatening the independence or integrity of the country and the safety of its territory or economy.

104 El Sheikh, op. cit., n. 44, 326.

105 Trebilcock, op. cit., n. 82, 35.

106 Ibid.

107 UN Centre on Transnational Corporations, op. cit., n. 77, 315.

108 Sornarjah, , “The climate of international arbitration”, (1991) 8 J. of Int. Arb. 54.Google Scholar

109 To quote the typical provision: “the signatories base their relations with respect to this agreement on the principles of good will and good faith. Taking into account their different nationalities, be given effect to be interpreted and applied in conformity with the principles of law common to the Arab Republic of Egypt and the contractor's country and in the absence of such common principles normally recognized by civilized nations in general, including those which have been applied by International Tribunals”. Davis, op. cit., n. 30, IX.

110 Igbokwe, op. cit., n. 30, 119.

111 Sudan Laws, 4th edition, Vol. 4, 1982.Google Scholar

112 Section 32 of the Sudan 1980 Encouragement of Investment Act provides: “(a) If a national, Arab, or foreign investor obtains any privileges and facilities or guarantees under this Act, this will be regarded as a consent by him to submit to arbitration any legal disputes arising in accordance with the provisions of sub-sections (2), (3), and (4) of this section; provided that the Sudan shall be the place of arbitration. The Government of the Sudan shall be bound to make available all facilities required by arbitration. (2) The provisions of chapters IV and VI of the Civil Procedure Act, 1974, relating to arbitration, shall apply to every legal dispute arising directly from investment of national capital in any project. (3) The provisions of the Convention of Settlement of Investment Disputes between Host States for Arab Investment and Nationals of Other Arab States, 1972, shall apply to every legal dispute arising directly out of any of the investment to which that Convention applies. (4) The provisions of the Convention of Settlement of Investment Disputes between States and Nationals of Other States, 1965, shall apply to every legal dispute arising directly out of any investment to which the provision of that Convention applies.”

113 For text see L.S.D.R.S.G. No. 1244, 15 July, 1978, at 18.

114 El Sheikh, op. cit., n. 44, 327.

115 S. 30 of 1996 Encouragement of Investment Act provides in sub-section (1) that: save such disputes, as may be governed by the provisions of the agreements, set out in sub-section (2), where a legal dispute relating to investment arises, the same shall be submitted for reconciliation, or arbitration, or to be settled in accordance with provisions of the Civil Procedure Act of 1983, or such other law, as may replace the same. In case of agreement the Sudan shall be the place for reconciliation or arbitration. The state shall be bound to providing all such facilities, as may be required by the procedure thereof. Sub-section 2 provides: the provisions of the Investment of Arab capitals in the Arab States United Agreement, 1980; the Settlement of Disputes Between the Arab States Host of Arab Investment and Between Citizens of Arab States Agreement, 1974; the Settlement of Investment Disputes between the States and the Citizens of Other States Agreement, 1965; the Economic, Technical and Commercial Co-operation Between the States Parties to the Islamic Congress Organization Agreement, 1977; and any other agreement, in this respect, as the Sudan may be a party thereto, shall apply to any legal disputes, as may directly arise, from any of such agreements.