How to Answer Law School Exam Questions (Practical Example)

How to Answer Law School Exam Questions (Practical Example)

This is an example of a first-class answer to a postgraduate law exam question that was typed out by a student from a Russell Group university.

Do you agree with the author that there is a transnational petroleum society functioning under the belief of a common purpose?

1.Lex Petrolea is primarily focussed on the upstream oil industry. The common purpose of the transnational petroleum society is making exploration and exploitation of natural resources both possible and profitable. Sometimes, one is only able to achieve the possible if the venture itself is profitable. The host state needs to give incentives to the investors and international oil companies to encourage participation in oil and gas projects resulting in profit. The common purpose is to produce oil but questions as to who gets the oil and how can become a basis for disputes to arise. Creeping nationalisation would still fall within the common purpose but outright nationalisation would go against such a purpose. Therefore, if there is no outright nationalisation only creeping, then the common purpose continues to remain good. The state, which is the owner of the resource, is the only one that would stop acting as a commercial entity. The aim is to achieve successful economic goals. Private players in the oil and gas industry are answerable to their shareholders whereas the state is to their mandates and their people. Environmental policies may influence how natural resources are exploited. Therefore, all the key players in an oil and gas contract, for example, have different interests which influence them. A wholly self-sufficient state just needs to make the project possible but it has the most conflicting interest in De Jesus’ model because it has to balance achieving its political mandates, human right and environmental protection concerns against the common purpose of making exploration of oil and gas in its country possible and profitable. The overriding economic objective would be key to De Jesus’ argument for acceptance of the rules and the transnational system of law by the transnational petroleum society.

Those resisting De Jesus’ assertion of Lex Petrolea are unwilling to accept that a rule of law can have a private origin and not stem from a state or inter-state legal order. They believe that the only way to deal with international relationships is by applying the conflicts of laws method, thereby “nationalising” international relations and condemning them to the application of a rule of national law designed to govern domestic relations. In Aminoil v Kuwait, the arbitral tribunal rejected the Kuwait government’s argument that the compensation for its expropriation od Aminoil’s concession should be based on precedents resulting from a series of transnational negotiations and agreements arising out of other recent nationalisations in the Middle East. The Kuwait government argued that these precedents had generated a customary rule valid for the oil industry-a lex petrolea in some way a particular branch of a general universal lex mercatoria. Despite this initial notable rebuff of the notion of lex petrolea, today there are four possible sources of a lex petrolea which can be identified and considered-national petroleum laws, international petroleum contracts, customs and practices in the international oil industry and international arbitration awards.  It is agreed that there is a transnational petroleum society but whether it is functioning under the belief of a common purpose is questionable given the notable conflicts of the host state with its own mandates, the need for sovereignty against furthering the common purpose.

Do you agree that the concept of nation-states and the related legal positivism are outdated paradigms? If so, by what should they be replaced?

2.Related legal positivism is generally law that is created by states or a state and has hierarchy. Therefore, it is based on a hierarchical system of law. At the top is state made law, which includes those made by supra national organisations as well as where there is state participation. Within related legal positivism, there is the practice of “soft law” (quasi-legal instruments which do not have any legally binding force such as UN Resolutions, codes of practice or conduct) as well as customs and practices, all of which fall at the bottom of the hierarchical system. The hierarchy was developed to maintain stability. International law such as treaties and conventions, all form part of related legal positivism. Hard law (traditional law with binding force such as statutes) gives stability and certainty.

It is argued that related legal positivism should be replaced with legal pluralism namely a network of rules so that one party can choose the legal practices and rules, which are to apply. TOPCO & LIAMCO had different decisions from two different arbitrators yet players in the transnational petroleum society understood each decision perfectly. The question is does legal pluralism sacrifice certainty and stability? Under De Jesus’ common purpose, the parties will get what they wanted. However, with no precedents being binding, there is no certainty.

The concept of nation-states is that the state is the unique source of law and therefore the totality of the legal phenomenon is reduced to national and international law. The ideal of “nation-state” is that the state incorporates people of a single ethnic stock and cultural traditions. However, most contemporary states are poly-ethnic. Thus, it can be argued that the nation state “would exist if nearly all the members of a single nation were organised in a single state, without any national communities being present. Although the term is widely used, no such entities exist.” It is agreed that related positivism and the concept of nation-states are outdated paradigms because in the contemporary world, businesses want certainty and flexibility whilst ensuring that their interests and needs are met. De Jesus argues that “the progressive production of rules of law by private entities or non-state institutions has forced the dominant paradigm of legal state positivism to shift into the new paradigm of legal pluralism.” International oil companies (IOCs) are realistic and are aware of the risks of conflict, which arise in oil rich regions such as Southern America, Africa and the Middle East. The cases of LIAMCO, TOPCO and AMINOIL established that the globalised world is not as harmonised as we are led to believe in so far that where there are competing interests as between the host state and an oil company, conflicts may arise in certain situations. These cases set precedents but in arbitration, tribunals are not bound by previous decisions. Unless these precedents are created and become binding, there is a lack of certainty with the related legal positivism paradigm. The concept of nation-states is outdated and should be replaced with legal pluralism. De Jesus asserts that there is a network of rules, customs and practices and in order to fulfil the common purpose of the transnational petroleum society, these rules and practices must be considered when a dispute arises especially if the dispute is to be determined by arbitrators. In AMINOIL, the best oilfield practices was argued by the Government as being relevant and binding. These are those practices, methods, standards and procedures generally accepted and followed by prudent, diligent, skilled and experienced operators in petroleum exploration, development and production operations. However, the Tribunal felt that such practices were too flexible and did not provide a level of flexibility. Such decisions would not give international oil companies confidence and it is argued that the adoption of legal pluralism would sufficiently address such an issue.

The author argues that the lex petrolea is an example of private non-state or non-national law making. Can you think of other examples?

3.Lex mercatoria (the common law of merchants, principles, customs and practices), law of construction, arbitral jurisprudence, lex arbitri (law of the seat of arbitration), finance (lex numerica), lex specialis, (a specialised area of law that applies to legal rules. Certain organisations having their own rules to govern them), institutional rules such as the ICC or ICSID, UNCITRAL Model Law with ad hoc arbitrations.

How do you define or characterize a legal order? What are, according to the author, the features that make lex petrolea, a legal order? Do you agree?

4.A legal order contains rules that has to have some normative value. There must be some sort of organisation of those rules and laws together with regulation. Access to resources together with an enforcement mechanism is required. There must be a clear, transparent methodology for determining such rules and laws. One must look at the interest and needs of key players and groups of people. It is not just about normative values. It does raise the question as to whose interests and needs are being served. Is it the institutions, societies and groups?

The existence of a transnational petroleum society and the legal order of the transnational petroleum society are features of Lex Petrolea. The society must all have a common purpose and goal. They would create their own rules & laws to serve their common purpose and goals. The transnational legal order must be completely autonomous from national and legal orders. De Jesus refers to contractual solidarism and relational contracts. The idea behind this is that oil companies will co-operate with each other where it is mutually beneficial. This results in certainty of rules and practices such as the use of standardised contracts, best oilfield practices and trying to set industry standards. This leads to the creation of transnational rules, which embodies all these things and will be within the scope of arbitral jurisprudence. De Jesus acknowledges that arbitrators are part of this society and share the common purpose. The transnational arbitrator plays a fundamental role in the creation and construction of Lex Petrolea. Academics and thinkers who serve the needs of the transnational petroleum society are also key in its creation and construction. Lex Petrolea is there to meet the needs of the transnational petroleum society, it is private law in its truest sense. It is distinguishable to soft law.

Do you think the lex petrolea is part of the lex mercatoria or separate?

5.Lex petrolea is separate to the lex mercatoria because it is servicing the needs and interests of a transnational petroleum society. The key players share risks which are different to those of merchants. It also appears that they have a different concept of how the common purpose will be achieved. Lex mercatoria are a set of rules created by transnational businessmen and is based on the traditional understanding of contracts. Its rules are derived from that. De Jesus argues that though Lex Petrolea is based on the Lex Mercatoria model, they are distinct from each other. He believes it is a completely separate legal order though there are common principles such as good faith and common origins.