Gross Negligence and Willful Misconduct in Petroleum Joint Operating Agreements with Emphasis on British Legal System

A well-known method for risk management in petroleum joint operating agreements (JOA) and, generally speaking, in upstream petroleum contracts is the use of knock for knock liability clauses. In such clauses, the liability is limited to gross negligence and willful misconduct. While conventionally, in British legal system, likewise Iranian legal system, the difference in degree of negligence is not recognized, new decisions of British courts indicate the movement toward the acceptance of such concept. However, subjecting the liability to such negligence and also willful misconduct by the parties may well be recognized and declared as valid in Iranian legal system too. Finally, although some legal authorities support that the concept of gross negligence is similar to the concept of willful misconduct, it is established in this article that willful misconduct has a recognized concept and it is distinguished from gross negligence in the British legal system. However, at least, the model published by the Association of International Petroleum Negotiators (AIPN) on joint operating agreement introduces a single definition for both, probably for avoiding future unwanted interpretations.