The International Centre for Settlement of Investment Disputes (ICSID) has not discarded the two cases filed by Niko Resources (Bangladesh) Ltd against Petrobangla and Bapex, involving the two blowouts at the Chattak gas field in 2005.
The Dhaka Tribune has reached the conclusion after a complete study of the tribunal’s “decision on jurisdiction”, and from talking to legal experts.
However, Petrobangla at a press briefing on August 20 this year claimed the cases were rejected by the ICSID tribunal. Contrary to this claim, the proceedings of the two cases are yet to begin.
The ICSID is a member institution of the World Bank Group based in Washington, DC. It facilitates arbitration and conciliation of legal investment disputes between international investors and host states.
On August 19 this year, the tribunal issued a single decision on its jurisdiction, involving the two cases (ARB/10/11, ARB/10/18) brought before it by Niko Resources against the Bangladesh government, Petrobangla and Bapex. Bangladesh has already questioned the tribunal’s jurisdiction to move the Niko cases.
ICSID ruled that the tribunal did not have any jurisdiction over Bangladesh state; however, it retained jurisdictions over both Petrobangla and Bapex.
Of the two cases, ARB10/11 relates to compensation for the two blowouts while carrying out drilling at the Chattak gas field, locally known as Tengratila field, on January 7, 2005 and five months later on June 24, 2005.
Following the incidents, a government-formed investigation committee held Niko responsible for the blowouts and estimated the damage caused. On June 15, 2008, a case against Niko was filed with the Dhaka District Judge’s Court seeking Tk7.465bn in compensation. The proceedings of the trial are still pending.
Niko brought the case to the ICSID Tribunal, asking whether they should pay any compensation and seeking a declaration that it was not liable.
In reply, the ICSID Tribunal categorically stated that it has “jurisdiction to determine whether Niko has any liability for the two blowouts” and also that it has “jurisdiction to make the declaration of no liability if there are sufficient grounds to make such declaration.”
Under this context, the tribunal also found Bapex as the relevant petroleum exploration entity of Bangladesh.
Thus, no longer having Bangladesh as a party would not have any significant impact on the eventual final (merits) decision, leaving the issue of compensation open for adjudication by ICSID at the next stage of the arbitration proceedings.
In the second suit (ARB10/18), Niko demanded $35.71m from Petrobangla as payment of gas sales from the Feni gas field. The amount includes $8.55m that Petrobangla owes to Bapex, according to the joint venture agreement (JVA).
Petrobangla had refrained from making any payment to Niko following a High Court order, unless the company paid the compensation of Tk7.465bn for the Chattak blowouts.
The HC gave the verdict on June 17, 2009 in response to a writ filed by Bangladesh Environmental Lawyers Association (BELA), which had brought public interest litigation against Niko and subsequently won an injunction order that barred the payments.
The Canadian firm stopped gas production from the Feni field in May 2010.
Sharif Bhuiyan, an international law expert and lawyer at the Supreme Court of Bangladesh, told the Dhaka Tribune: “Under the ICSID Convention in respect of arbitration between foreign investor and agencies of a state, eg Petrobangla, Bapex, there is a requirement of making a designation by the state to the tribunal that such agencies can participate in arbitration. Bangladesh made no such designation in respect of Petrobangla and Bapex. Yet, the tribunal held that it has jurisdiction over Petrobangla and Bapex.”
Moin Ghani, another Supreme Court lawyer, pointed out: “As a World Bank member institution, ICSID is supposed to follow a strong international public policy against corruption. Jurisdiction is generally not exercised by ICSID when a claimant investor does not act in good faith or comes before ICSID without [clean hands]. However, in this case the tribunal found jurisdiction not withstanding the clear evidence of corruption committed by Niko in Bangladesh.”
In 2011, a Canadian court had convicted Niko for bribing Bangladesh’s former minister for energy and mineral resources, AKM Mosharaf Hossain, with a Toyota Land Cruiser valued at US$188,000 and other “non-business-related” expenses.
The three-member ICSID tribunal was constituted back in 2010 with Michael E Schineider of Germany as its president. The other arbitrators include New Zealand’s Campbell McLachlan, who represented Bangladesh, Petrobangla and Bapex; and Jan Paulsson, representing Niko.
Tawfique Newaz represented Bangladesh in the arbitration but he was unavailable for comment on the cases, despite repeated attempts by the Dhaka Tribune.
Hearings on the merits of the cases are yet to be held and the tribunal will now give separate order directions for the continuation of the proceedings pursuant to arbitration.
Petrobangla Chairman Prof Hossain Monsur said: “Sometimes you have to say things from a political point of view, and taking the country’s interests into consideration. However, we are hopeful of winning the arbitration.”
Niko described the ICSID’s ruling as “a positive step” in an August 21 press release and said it was “encouraged that the ICSID Tribunal will finally be able to determine the merits of its claims.”
