MNR_KRG_logo_flame__2015_03_16_h18m18s35__MZ

KRG press statement regarding Tribunal Partial Award

Erbil, Kurdistan Region, Iraq – On 27 November 2015, the Kurdistan Regional Government (KRG) received a partial ruling from the tribunal in the ongoing arbitral proceedings between the KRG, Dana and others. The arbitration is subject to duties of confidentiality under applicable law and arbitration rules.  Without waiving these duties of confidentiality, the KRG is obliged to correct inaccurate public statements made by Dana, which create an impression that is materially misleading and incomplete.

Further to a hearing in London on 21 September, the arbitral tribunal has ruled on some of the Claimants’ claims.

Significantly, this is a partial award that does not finally determine all issues in the arbitration, and leaves many issues unresolved.  The arbitral tribunal has neither heard nor decided the KRG’s counterclaims, which, as the tribunal noted, have been partially and provisionally quantified by the KRG’s experts at more than US$ 3 billion.  The quantum of the KRG’s counterclaims is, therefore, almost double the amount of the payment claims that are the subject of the partial award and, if upheld, would eclipse those claims and result in the Claimants owing significant amounts to the KRG.  The tribunal specifically proceeded on the basis that, as conceded by the Claimants, the KRG has an arguable case on its counterclaims.  The KRG’s counterclaims will be heard in the next phase of the arbitration.

Dana and its affiliates and principals have caused substantial losses to the KRG as a result of their failures to meet their obligations.  The KRG will continue forcefully to pursue its claims for damages and other relief against Dana, its affiliates and principals as a result of these failures in all appropriate fora.

Moreover, the Claimants remain obliged, under the terms of the accounting procedure in their contract with the KRG, to refund to the KRG the balance of any revenues after recovering their invested petroleum costs and a contractual remuneration fee.  Even according to the Claimants’ own accounts (which are not accepted by the KRG), the amounts awarded in the partial award far exceed the amounts the Claimants would be entitled to retain under the contract.  This means that, even based on the Claimants’ own (disputed) figures, the Claimants would have to pay back to the KRG a significant portion of the amount awarded.

Dana’s press release is also materially selective and misleading in other material respects:

a. As the KRG explained in its press release of 5 July 2015, Dana has omitted that the tribunal determined in its previous partial award that the Claimants have no entitlement to payment for gas supplied to the power stations in excess of 200 MMscf/day pursuant to the parties’ service plan.  The Claimants had previously issued invoices in excess of $1.3 billion for such gas.  The tribunal has not made any award in the Claimants’ favour in relation to these invoices, which have no basis and should be withdrawn.

b. Dana still omits that the tribunal has ruled that the KRG is entitled to be supplied free of charge at the power stations at Erbil and Bazian with such gas as may be produced by the plant at Khor Mor in accordance with the parties’ service plan.  Any failure to meet this obligation will place Dana in further breach of its duties and will give the KRG additional rights and remedies.  Particularly given the importance of uninterrupted power supply in the current environment, the KRG calls upon Dana to confirm that it will provide a continuous and uninterrupted supply of this gas, as it is required to do.

c.  Dana is incorrect to suggest that the KRG ‎has prevented the proper and timely development of the fields.  The KRG is, and has always been, willing to proceed with further development in accordance with international petroleum industry practice.  In the KRG’s view, it is Dana that has prevented further development.

d. Dana continues to omit that the tribunal has rejected the Claimants’ arguments that Dana and Crescent novated their obligations to Pearl, and has specifically held that Dana and Crescent remained and remain liable to the KRG to perform the obligations created by the contract.  This finding is relevant to the KRG’s counterclaims against Dana and Crescent.  In addition, as a result of the tribunal’s finding that Dana has assigned its rights under the contract to Pearl, Dana also has no subsisting contractual entitlement to payment from the KRG.  The KRG is not party to any arrangements between Dana and Pearl.

e. Dana fails to mention that, in any case, any proceeds received by the Claimants for sales of condensates and LPGs – under the partial award or otherwise – are subject to a contractually mandated accounting procedure, and a significant portion of such proceeds will be payable to the KRG.

The KRG considers that the Claimants’ continuing attempts to escalate their disputes are unreasonable and unconstructive.  The Claimants are well aware of the enormous financial pressures facing the KRG and the people of the Kurdistan Region.  The KRG’s financial difficulties result from taking essential steps that are critically important to both the Kurdistan Region and the international community, including the KRG’s effective fight against ISIL terrorism and its efforts to care for over 1.8 million refugees and IDPs within the Kurdistan Region.

It is regrettable that, rather than cooperating in the common good and seeking a constructive way forward with the KRG as other International Oil Companies are doing, the Claimants appear set on a course of escalating legal action and improper attempts to vilify the KRG.  In circumstances where the Claimants have singularly failed to meet their own commitments to the KRG, and yet are aggressively pursuing the KRG in legal proceedings, the KRG will continue vigorously to pursue its own counterclaims and to defend its position.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>