Adjusting International Agreements in Light of Change: A Case of Assisted Renegotiation

CASE DESCRIPTION The case is based on a true story. The primary subject matter of the case concerns conflict resolution via mediation and conciliation meetings. Secondary issues examined include the effect of economic conditions on price, personal and emotional involvement in the negotiation, the creation of effective business partnerships and the contrast between distributive and integrative negotiation strategies. The parties will engage a mediator to resolve their dispute. The exercise consists of simulating the mediation/conciliation meetings. Neither one of the two parties in the dispute is sure that they have a solid case. The case is expected to be taught in two hours with additional student preparation time of thirty minutes. Student preparation may be done inside or outside of the classroom. The case is designed for an upper level undergraduate or graduate course and could be used in a strategy course, or as part of a conflict/negotiation module of a general course in business management. CASE SYNOPSIS Set in the context of a conflict over a business agreement, this negotiation exercise explores the dynamics of two companies with resource asymmetries. These parties choose mediation to resolve their dispute. The dynamics of a large industrial corporation against the independent owner in the retail gas industry the main premise of the case. The role play activity highlights the difficulties of fulfilling obligations when there are changes occurring in the political and economical environment. Two parties, Global Gas Inc. (GGI) and Gas Station Janet (Mr. Tony Martinez) agree to remodel an existing gas station and build two more. Mr. Tony Martinez provided the land lots and he operates the gas stations under an exclusive relationship with GGI regarding branding of the gas station and supply of gas, lubricants and any other oil product for 15 years. GGI paid for the exclusive rights, the remodeling and construction of one gas station but GGI did not complete the original investment plan since they did not construct the third gas station as stated in the Mortgage Warranty Contract. GGI argues that the third station was only a project and that there was no actual commitment to build it. In addition, the original premises of the business plan have changed since the Government of Colon has frozen the price of gas for the last two years. Mr. Tony Martinez contends that GGI made a clear commitment in the Mortgage Warranty Contract and therefore they are subject to liabilities. The main incentive of reaching an agreement at this stage is that the parties will have control over the cost of the outcome; otherwise, they will be subjected to the cost uncertainty of the final arbitration. Several other concepts are illustrated including the effect of economic conditions on price, personal and emotional involvement in the negotiation, the creation of effective business partnerships and the contrast between distributive and integrative negotiation strategies. The mediator 's role is crucial for building viable options and reaching a final agreement. The present case is a simulation of a conflict and its resolution via mediation and conciliation. This exercise consists in simulating the conciliatory meetings. THE OIL INDUSTRY IN THE REPUBLIC OF COLON The politics, economics, and social conditions of the Republic of Colon changed radically since the first signs that the country was rich in oil deposits, in the second decade of the 20th century. In the 1920s, the majority of the population was extremely poor. The economy was highly dependent on coffee and cacao exports. The country suffered from a succession of civil wars, which only ended when the ruthless dictator Gonzalez took power in 1920. Gonzalez effectively got rid of all the local factions, and while he was not keen on setting a democratic course for the country, he did take decisive steps into economic modernization. He developed a series of infrastructure projects throughout Colon that marked the beginning of a modern era. …