Tesoro Petroleum Corporation v. Trinidad and Tobago

[Ed.’s note: The casebook excerpt is from an article from a law journal that was written by counsel for the government of Trinidad and Tobago to highlight the advantages of pursuing conciliation proceedings in lieu of arbitration proceedings. The conciliation report itself is not a public record.] Tesoro Petroleum Corporation (Tesoro) (plaintiff) and the government of Trinidad and Tobago (defendant) entered into a joint venture to purchase and develop oil fields in Trinidad and Tobago. The parties entered into an agreement providing that after five years of operation, dividends could be paid at the request of either party up to 50 percent of the net earnings after tax. The parties also entered into a series of side agreements. The main agreement between the parties also provided for the resolution of any disputes before the International Centre for the Settlement of Investment Disputes (ICSID). After many years of operation, a dispute arose between the parties on a number of issues, including Trinidad and Tobago’s refusal to approve the declaration of dividends for 1981 and 1982. Tesoro filed a request with the ICSID for initiation of conciliation proceedings. The request contained a brief description of the dispute and attached the relevant agreements. The secretary-general of the ICSID registered the request, and the parties were then required to cooperate on the selection of a conciliation commission. The parties agreed on a single conciliator. The conciliator held a preliminary procedural consultation with the parties and then received the parties’ submissions of written arguments and evidence. The conciliator notified the parties that a hearing would not be necessary, and that he would issue his determination based solely on the written submissions. After several months, the conciliator issued his recommended solution, explaining that he evaluated the relative merits of each party’s positions and the likelihood of success at an arbitration or court proceeding, in the hopes that such an evaluation would assist the parties in reaching a settlement. Thereafter, the parties engaged in negotiations and finally agreed to a settlement of the dispute.