Hi PhillW,
This is not a direct response to your post but I'm just using it to interject with this post ( in some way it further addresses an issue that you raised in your post).
Any event..this is an extract of an article from a legal firm ( source mentioned below).
What's discussed in the article and from the bits and pieces we know/speculate about as to our own situation, it certainly seems that the mechanisms to avoid pre-emption, as discussed in the articles, had been applied in the sale of the COP35% stake.
"KEEPING IT IN THE FAMILY: AVOIDING THE PITFALLS OF PRE-EMPTION CLAUSES
Pre-emption clauses are a common feature of joint venture agreements, particularly in the energy and natural resources sector. Despite their complexity and significance, such clauses are at times given little attention when the agreement is being drafted. When this happens, joint venture parties should not be surprised that disputes arise concerning the proper construction and application of the pre-emption clause.
Pre-emption clauses typically prohibit a joint venture participant from disposing of its interest in the joint-venture without first offering its fellow joint venturers the opportunity to acquire that interest. However, with careful drafting, this requirement can be made subject to certain caveats, such as a change of control or a transfer to a related entity.
Third party transfers
The underlying objective of pre-emption clauses is to prevent a new third party joining the joint venture without the approval of the other joint venturers. To that extent, the provisions resemble a clause that limits free assignment of interests. The difference between the two types of restriction is that pre-emption provisions also provide the opportunity for one of the other joint venturers to purchase a bigger piece of the action and this has the potential to alter the dynamic within the joint venture significantly. This possibility, coupled with the alternative of admitting a new party into the joint venture, can raise corporate temperatures and lead to hard fought disputes. Given the aim of pre-emption clauses to police the entry of third parties to the joint venture, certain exceptions can be carved out to cover circumstances where the exiting party wishes to transfer its interest to an affiliate or where a third party is purchasing the exiting company as a whole resulting in a change of control. The justification is that in both cases, the corporate identity of the exiting co-venturer is not changing significantly and it is not being substituted with a completely new third party.
Combination transactions
Recently, one of our clients was faced with a very difficult situation emanating from the pre-emption provisions, which threatened the future of the joint venture project. When the joint venture was put together, the participants intended to get the project up and running and then introduce a third party with both deeper experience of oil and gas exploration and downstream LNG facilities, and deeper pockets to inject additional investment into the project. However, when our client, as operator of the project, sought to introduce such a third party, the other major joint venturer objected and threatened to use the pre-emption provisions to stymie the deal. The deadlock that ensued began to impact the progress of the project and jeopardised completion of the deadlines set by the host government in the licence agreement.
Our client turned to us for advice and, on reviewing the contract in question, we discovered that the pre-emption provisions exempted both change of control transactions and transfers to affiliates. We therefore advised our client to structure the deal as two separate transactions. The first step consisted of the transfer of part of our client's participating interest to an affiliate entity, followed by the sale of the shares in that affiliate to the third party wishing to join the project. The deal went ahead and was challenged by the other major joint venturer on the basis that the pre-emption provisions should bite given the overall intention to transfer the interest to a new third party. They argued that the tribunal should apply the spirit of the pre-emption provisions, and not just the letter of them. ICC arbitration proceedings were commenced, but the tribunal upheld the combined deal as permissible given that it consisted of two separate transactions, both of which were exempted from the application of the pre-emption provisions. The end result was that the participating interests were kept within the (albeit extended) family and the project is now proceeding apace."
Might even go so far as to take a guess ( with good odds) who acted on behalf of COP in concluding the SPA.
Critical question is whether the proposed form/construction to "side-step" PEs, was exemption from the application of the pre-emption provisions.
Also wondering how the ICC will treat the scenario where the said type of transactions were not necessarily exempted by the JOA pre-emption provisions but that the JOA is simply quiet on those type of transactions .. I think if that was the case, the ICC would have come to a different conclusion/finding.
But having said that, I strongly the JOA would be quiet because as I've previously stated, nowadays, it pretty much became the norm to incorporate "change of Control" provisions in the JOA's to prevent the above type situation arising.
Also, IF FAR only received Notice on the COP/WPL transaction AFTER the SPA was signed off, COP might have made a critical error because the provisions, generally, provide that Notice must be given to the Co-venturers of the sellers intention to sell (...after T&C have been fully negotiated...) to third party at a certain price.... NOT After they signed and sealed the deal... So I'm wondering whether this is what was meant/referred to when Cath, in the announcement of 23 August, stated: " ConocoPhillips has failed to comply with the terms of the Joint Operating Agreement in relation to the proposed sale of its interests in the Senegal project." "
Any event, so much at stake, I can't see this matter not going to court. Only way for it to stay out of court is if COP realises that they've made critical mistakes and will be fighting a losing battle with a mountain of wasted legal fees to pay.
All bears down on what is written in the JOA. So yes... FAR should keep those cards close to its chest.
(20min delay)