However, in a recent case, RSM Production Corporation v. Victoria Oil and Gas and Rodeo Development Limited, the ICC tribunal found that a forfeiture clause was invalid due to a technical flaw in a 2011 dispute between the companies, which did not sufficiently establish default under the governing Texas laws. Legal experts have questioned whether forfeiture provisions can be enforced at all, despite the fact that the ICC has not directly ruled on this issue, because English law typically forbids penalty clauses - laws designed to prevent catastrophic losses on the part of the defaulting party. While courts have generally found that agreements like these are legal when made by parties that have equal financial standing, arbitration experts are increasingly encouraging companies to avoid testing the law.
Due to the uncertainty regarding this issue, the 2012 Model International Joint Operating Agreement issued by the Association of International Petroleum Negotiators has several alternatives. A new enforcement clause might allow the non-defaulting party to enforce security interests and mortgages on the defaulter's prior investment, or they may use a "withering option" that reassigns the investment, although the latter option is considered unwieldy. Instead, the most reasonable approach may be a buy-out clause in which defaulters can sell their investments at a discounted rate to exit the agreement while avoiding suboptimal market value buy-outs.