A Succession of Parties; When Does a State Succession Terminate a Contract?

Reg Fowler, Senior Legal Counsel, Shell International BV, Netherlands

Changes in governments and the overthrow of States are increasingly commonplace. Drafters of long term contracts with Sovereign States, be they loan agreements or natural resources or infrastructure investment agreements, ought to understand the legal principles that define when, following a succession, a successor State is bound by previous contracts and when it is not. No widely applicable principle emerged from the State successions at the end of the colonial period. Professor Cheng has studied the successions following the end of the Soviet Union and concludes that in practice, the outcome of successions can be predicted by understanding the forces at work in a succession. He challenges lawyers to give realistic advice on how State successions may play out and how a long term contract may best be drafted and managed to survive a succession. This paper ambitiously takes up that challenge and offers some initial suggestions.

Senior Legal Counsel Atlantic Richfield 1996-2000 Legal Counsel Agip (UK) Ltd. 2000-01 Senior Legal Counsel Shell Trading 2001-08 Senior Legal Counsel, Shell International, Upstream Non-Operated Joint Ventures 2008 to date

Royal Dutch Shell plc is one of the largest integrated global oil & gas companies with 92 000 employees, present in 70 countries and producing 3.2 million barrels of oil equivalent per day.