I thought these (below) were some the most relevant clauses to FAR and COP's current situation (from the Santos/Apache Judgement).
It looks very positive for FAR IMO if similar laws are applied in Senegal, or wherever any adjudication happens (however, be warned, I am not a lawyer, and I am mainly going by "the vibe" of the clauses...)
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28 A contract must be given an objective construction.[22] The question is to be determined by what a reasonable business person would have understood the language in which the parties expressed their agreement to mean.[23]
29 That requires consideration of the language used, the context, the subject matter and purpose of the provisions of the contract, and of the surrounding circumstances known to the parties.[24]
30 Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result.[25] Consequently, a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.[26] For the same reason, if the language of a contractual term is open to two constructions, the construction which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust will be preferred.[27]
34 The purpose of preemptive rights in resource joint venture agreements similar to the present kind was described by Hargrave J in Beaconsfield Gold NL v Allstate Prospecting Pty Ltd[30] in the following way:
Pre-emptive rights are usually included in resource joint venture agreements. Given the importance of the identity, financial capacity and reliability of the participants in a joint venture, pre-emptive rights operate to ensure that existing participants are empowered to exclude new participants by purchasing the outgoing participant's interest if they so desire. They also permit a joint venturer who may take the view that it has expended a significant amount of money in a high risk area to have an opportunity to increase its interest if another joint venturer desires to withdraw from the joint venture. This allows an enhanced opportunity to reap the rewards from past risk-taking and expenditures.
His Honour's observations are, with respect, entirely apposite in the present case.
35 Having regard to the purpose of preemptive rights clauses, the courts have recognised that there is a need for caution in adopting a construction which would restrict their operation or which would permit their application to be avoided[31] and thus which would erode the benefit conferred by the grant of a right of preemption.[32] For the same reason, preemptive rights clauses have been construed so as not to render it impossible for a joint venturer to satisfy the requirements of the offer.[33]
37 Clause 12.3 establishes the procedure which must be followed in the event of a Change in Control of any Party[34] (referred to as the Acquired Party[35]).
38 The first step in that procedure is set out in cl 12.3(C). That clause requires an Acquired Party (in this case, Apache Oil, Apache East Spar, and Apache Kersail) to issue a notice to each of the other Parties to the Spar JOA (the cl 12.3(C) notice). The cl 12.3(C) notice is to be issued 'once the final terms and conditions of a Change in Control have been fully negotiated'.
39 The cl 12.3(C) notice must have three components - two substantive, and one of an evidentiary nature. First, it must disclose 'the final terms and conditions as are relevant to its [that is, the Acquired Party's] Participating Interest'. Secondly, it must disclose the Acquired Party's determination of the Cash Value of its Participating Interest. These components together constitute an offer to sell the Acquired Party's Participating Interest to the other Parties. In addition, the cl 12.3(C) notice must be accompanied by a copy of the instruments or portions of the agreement negotiated for the Change in Control (the Change in Control transaction agreement) 'establishing such terms and conditions'. The latter component of the cl 12.3(c) notice, as I have noted, appears to have an evidentiary function. The provision of the Change in Control transaction agreement establishes (that is, proves the existence of) the final terms and conditions negotiated between the Acquiror and the Acquired Party.
40 Next, cl 12.3 confers a right on the other Parties to the Spar JOA to acquire the Acquired Party's Participating Interest on the terms and conditions described in cl 12.3(C).[36] The right to acquire the Participating Interest is a right of 'each other Party' to the Spar JOA (other than the Acquired Party)[37] and correspondingly, the cl 12.3(C) notice is required to be given to 'the other Parties'.
4. Why each of the challenged Conditions fails to comply with the requirements of cl 12.3 of the Spar JOA and is invalid
78 In my view, each of the challenged Conditions failed to comply with the requirements of cl 12.3 of the Spar JOA.
Conditions (c) and (d) - purchase price adjusted at the date of Completion
79 Using the Notice from Apache Oil as an example, conditions (c) and (d) provide:
(c) The Economic Transfer date is 12.01am (Western Australia time) on 1 October 2014.
(d) Therefore, the Purchase Price payable by Santos is the Cash Value, adjusted at the date of Completion as follows:
(i) by adding all costs and expenses paid or incurred by Apache Oil from the Economic Transfer Date in relation to the [Participating Interest];
(ii) by deducting all revenues or receipts received by Apache Oil from the Economic Transfer Date in relation to the [Participating Interest]. 5. Issues relevant to the relief sought: severance and specific performance
114 Santos' primary case was that the Court should declare each of the Notices wholly invalid. I am satisfied that declarations of that kind should be made here.
Annexure 1
Spar JOA - Clause 12 (extracts)
12.1(B) For the purposes of this Agreement:
'Cash Transfer' means any Transfer where the sole consideration (other than the assumption of obligations relating to the transferred participating Interest) takes the form of cash, cash equivalents, promissory notes or related interests (such as production payments ) in the Participating Interest being transferred.
'Cash Value' means the market value (expressed in U.S. dollars) of the Participating Interest subject to the proposed Transfer or Change in Control, based upon the amount in cash a willing buyer would pay a willing seller in an arm's length transaction; provided, that, in the case of a Change in Control, the Cash Value shall be computed to yield the transferor the same after-tax cash proceeds that would have been obtained from the merger or stock sale comprising the Change in Control transaction(s).
-------- http://www.austlii.edu.au/cgi-bin/s...em=0&synonyms=0&query=pre-emption&nocontext=1
FAR Price at posting:
7.8¢ Sentiment: Buy Disclosure: Held
(20min delay)