Q.1
The legal issues are part of the business in the modern times, and the companies have to demonstrate greater level and degree of care in order to preserve their stake in the deal. The larger corporate players in the business world often trick the smaller ones into entering a bad deal so the Little Oil Company (LOL) seriously qualifies as smaller company in the featured transaction. The Big Tex Oil Company (BTOC) has to help the formerly mentioned organization in order to make the intended and planned project into a corporate success of historical nature.
However, the confidentiality clauses will assist the LOL in terms of protecting the sensitive information that they have to show to their new partner in order to bring them up to speed about the true nature of the project. Additionally, trust is a virtue that the company cannot afford to practice in the commercial arena. The smaller company does not have formal legal counsel at their disposal and therefore, one can imagine about the financial suffering that the entity is going through.
The mentioned clauses are generalized ones that cover the need to uphold confidentiality of the information, but they are not very strict in nature because they require the prosecution party to initiate the legal action after proving that the other participant breached the conditions by committing negligence.
The confidentiality agreement is necessary because the information that is about to be revealed is sensitive in nature, and because the reason, the other party will get an opportunity to offer greater potential productivity to the customers in the industry as they have higher ability to acquire economies of the scale and scope due to their size of operations.
Both of the material clauses to this question will have the potential capability to hurt the objectives of LOL. The company has to omit both of the conditions from the contract so that they can have the privileged right to claim extraordinary damages. The unintentional leakage of data will qualify as reason to place a legal claim, and the mini company will have the freedom to request the court of law to allot special damages if the agreement’s breach occurs.
Q.2
The larger partner in the deal is developing the groundwork in order to lead the business engagement that they will have with their associate. However, the LOL found out the new possibility of wealth creation, and therefore, they have to lead the show as well. The BTOC is trying to hijack the project that clearly belongs to the offices of LOL. The arbitrator must the one who understands the local socioeconomic system of Silo, Tome, and Principe.
The English arbitrator will be expensive, and the party will be hard to access as well so the process of resolution will not be cost effective, and the LOL will face financial suffering, as its cost structure will escalate beyond the control of major stakeholder in the whole endeavor. Furthermore, the local arbitrator will do the job both effectively and efficiently as well without even disrupting the natural flow of activities.
The key elements that both of the parties have to consider and weigh during the process of selecting the arbitrator are as follows: -
- The geographical accessibility of the arbitrator is the most critical element of the process because both the parties will require quick resolution of the affair, and if the middleman is geographically distant then, he cannot do his job properly.
- The geographical nearness will permit the arbitrator to have adequate knowledge about the cultural, economical, ethical, and social context of the dispute, and he can reach an effective solution in less time while make marginal level of effort as well
- The arbitrator will have to have the significant level of social and political power over the parties so that he can play a notable hand in terms of reaching a resolution
- The arbitrator should be a neutral party so that he cannot tilt towards fulfillment of only one party’s interest. He needs to create a win-win situation for two companies involved
Q.3
The Memorandum of Understanding (MoU) is an informal legal tool that the companies use in order to decipher the common strategic plan that both or more parties intend to implement in the near future. However, the resultant document does not have the power to bind the parties in the eyes of law. The parties therefore, do not have any legal responsibility to fulfill their duties entailed and allotted in the light of abovementioned sort of document.
There are no significant threats to the stake of LOL in the project if the company signs such an agreement because both companies have to operate together, and in order to do that, they require a common strategic layout to follow. The signed document will provide them with the needed software. The division of profits, and levels of investments from both the companies will be determined by the same piece of paper. At the same time, the document will bless the involved organizations to walk away freely whenever they feel like it.
The potential merger does not have any legal capability to influence the setting of the agreement, but the change in management will happen, and the project might experience operational and strategic level modifications as a result of that. The managers have to review and revisit the document in order to bring needed changes, but the LOL will have the liberty to safeguard its interests through negotiations and mutual discussions as well. Overall, there is no apparent harm in entering into the memorandum at this point in time.
Q.4
The sovereign immunity is a legal principle that forms the legal immunity that shields the state from prosecution, and the state does not have lawful ability to commit any kind of crime whatsoever. The legal courts have no right and privilege over the state to run any sort of legal activity against the aforementioned entity.
The state creates the courts, and therefore, they do not have any authority to consider governmental officials as suspects in legal cases. The government of America has the right to waiver sovereign immunity, if the private parties can show that the governmental officers have indulged themselves into some kind of illegal activity. According to recent research on the topic, the sovereign immunity is a partial residue of kingdom-ship when leadership was generationally decided, and kings nominated their sons as their heirs of the throne. The general public did not have any right to trail their leaders in old times.
However, with the introduction of participatory democratic systems, the governments have become accountable in front of the masses, and the waiver of sovereign immunity provides the guarantee that the pubic preserves the right to prosecute their representatives in the court of law. Before doing so, they need to prove presence of probable cause in order to support the alleged involvement of the suspected parties into a crime.
The court responds with the issuance of waiver of sovereign immunity, if it finds the initial investigation satisfactory in nature. The companies need waiver in this regard because they may have to sue governmental officers against the charges. However, the court of law does not trail the entire government or even a division of the system. The jury considers the officials of the government as agents of the setup, and therefore, the court trails the individuals in their isolated capacities as persons.
The government of Sao, Tome, and Principe agreed to arbitrate the affairs that both of the parties may face in the future. The parties do not have the freedom to claim sovereignty immunity’s waiver because the government is not officially involved in the agreement. They will designate a liaison officer in order to mitigate the affairs, and the parties will have the power to legally accuse the concerning person of malpractice, if they find out that he did not do his job and function effectively. Again, the court of law will try the individual in his individual capacity as well.
The state can issue the waiver, if it is provided with the compelling evidence suggesting that a governmental office was a party in civil or criminal disturbance committed against the commercial parties. The step will be taken in order to facilitate investigatory process that will result in identification of suspects. Once they are identified then, the court will have to try them in their individual capacities in order to convict them against their atrocities.
Q.5
The governments establish a production sharing agreement with the companies that engage in order to explore and extract oil reserves in the specific geographical locations. The governments in Middle East, and Central Asia often form the featured kind of deals. The companies work to explore the oil reserves in the countries, and they have to carry the risk of financial and operational nature during the earliest phase of the projects.
The companies produce an active oil extraction and processing plant. The entity has the right to recover its costs and expenditures that they have faced, and the initial costs are referred to as “cost oil”. The profits of the operations have to be divided according to a pre-established formula. The resultant profits are called “profit oil”, and the governments often get eighty percent of the total stake while sparing twenty percent for the material private parties that were involved in the project.
The aforementioned sort of agreement operates in order to assist the governments and private parties in the process of collaboration by splitting the financial results and fruits of the project.
The concession agreement is similar to production sharing one. However, there are marked differences present between the two as well. The governments permit the companies to engage in exploration of oil, and they form rental contracts with the private parties, and charge them ongoing fees in this regard. Furthermore, the governments do not share profits with the companies under the material agreement to this paragraph.
The organizations have full right to hold their earnings, but they have to pay corporate taxes and their working conditions must adhere to local legislation in the area of employee management. LOL must enter the concession agreement with the government because it will enhance the profits of the company.
Q.6
The contract states that the partners have to be liable to business debts in their individualistic capacities and they have to face a joint liability in this regard as well. The production sharing agreement states that the companies have to divide the expenses according to their size and scope. The credit ratings have nothing to do with the division of costs and expenditures.
The companies have the right to pick and choose their liabilities according to the strategic and financial prosperity that they have acquired in the recent past. The law protects the smaller organization when dealing with alliances and partnerships. The BTOC has to comprehend the fact that all key strategic positions have to be occupied by LOL’s top management because it is the sole initiative as far as initial contracting is concerned. Additionally, the BTOC is trying to overcome the managerial rights and authorities of their partner.
However, their dream of earning overseeing rights in the project will never come true, and see the day of light as well because legal system is working in order to protect the stake of the smaller company. The larger one does not undermine the earnings of the partner by putting its economies of scale and scope to bad use due to strict legal regulations governing the distribution of profits between the partners.
Q.7
The companies operate in the petroleum industry by entering farmout agreement. The farmout agreement is a contract that results out of the formal request that a party places to another in order to have technical and technological assistance. The legal terminology refers to both the parties as farmer and farmee respectively. The local legislation impacts the agreement a great deal, and therefore, governments all over the world charge fees in order to approve the transfer of interests in the partnering companies.
The initiator side of the deal has the duty to pay the resultant fees that government might require before passing and legalization of the contract. In this case, LOL will have to pay the contractual expenses, and if the company cannot get an approval due to some reasons then, the other partner will have the right to drag them in the court of law, and plea that they have breached the court. However, the court will determine the extent of damages that fits the crime. The LOL at the same time might face a painful option of searching a new partner because the old one will not be able to provide services. The lack of transference of interests means that the BTOC will not have any legal right to provide LOL with technological help they need in order to complete the project in question.
The BTOC will not have any legal obligation towards LOL, but vice versa will be true because the latter company has the responsibility to obtain the entire required documentary approval before jumping into the game. Additionally, the BTOC will reserve the freedom to take the matter into the court of law because LOL fails to fulfill the statuary responsibilities stated in the contract. However, the partner can sue them under the assumption of contract breach.
Q.8
The planned trip to Las Vegas does not qualify as a professional one, and therefore, LOL does not have any need to worry about the event. The BTOC wants the local authorities to study and evaluate their operations so that they can extract Sulfur from the new site as well.
The whole project should be halted before the trip because LOL must demand their partner to provide them with evidence that they did not bribe the delegates in order to acquire extraction and processing rights of the sulfur. The act of industrial visit does not ring any bells in the legal community. However, they can have authorities obtain a warrant in order to access financials of the tripping officials so that they can find out any suspicious transactions during the timing of trip. The LOL has the right to perform a thorough search of the matter that can undermine their precious project in the light of law and ethics.
The LOL cannot consider the provision of per diem allowance as an also illegality and it is fine according to recommended guidelines of ANP-STP. The LOL does not have any probable cause to investigate the issue further. The BTOC is doing a pretty good job if they are bribing the officials because they are keeping the process within legal formations of the modern world.
Q.9
The Goofy wants LOL to ensure safety of their workers and staff on the site, and the latterly mentioned organization will be responsible for compensating the injured parties who might face incidents during the work. The LOL has hired the Goofy’s workforce in order to perform the drilling operations, and therefore, the contract issuer has the sole responsibility to provide safety to the labors, managers, and outside individuals who might visit the site.
The law does not leave each mishap on the active industrial site in the domain of the LOL because people have to practice due diligence while visiting the place, and they have to follow the signs and symbols that management will place in order to guide human resources of potential dangers that they might face during working for the contractor. The minor cuts and bruises will be treated by field medical center that LOL will establish onsite.
The operational level of injuries will not qualify as basis of compensation claim. However, the major ones will have to be treated as soon as possible in order to assist the suffering employees in terms of mitigating feel of loss as much as probable.
Q.10
The LOL is the leading party as far as managerial rights are concerned so with power comes responsibility, and therefore, the company is dutiful regarding the payment of fine of substantial nature. The government does not have any active or even a passive participation in the mishap that occurred due to a simple negligence on the part of LOL. The negative development that the question is representing resulted because LOL was adamant to reserve the managerial rights of the project, and now they have to pay the price of such bold decision. The business managers must remain ready in terms of facing the loss in the game because it is an integral part of the whole paradigm.
The managers can argue that they have nothing to do with the incident, but as it happened on the field that was operating under the managerial rule of the company so they have to pay regardless of painfulness involved in doing just that. The mangers have to step up, and they have to deal with the consequences of their mistake.
The Joint Operating Agreement (JOA) establishes the fact that the alleged guilty party is leading one in the project, based on the language of the agreement; the leader does not have any chance to escape the price of managing the oil extraction and purification site. The company can have forensic investigators seek the real causes of the incident, if they find out that the management is guilty then, the management will have an internal contentment that they have attempted to manage the situation as best as they can.
The injured party can be impressed to withdraw his claim, but still the government will place fine because the company potentially endangered the human life, and to be honest, the company does not have a way out of the dilemma lawfully.
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