Petrobangla finally decides to face Chevron in the Hague
Friday, 1 August 2008
Petrobangla has finally decided to contest the arbitration filed by the US-based international oil company (IOC) Chevron with the International Centre for Settlement of Investment Dispute (ICSID) to settle the score over payment of a gas-business charge, reports UNB.
The state-run petroleum corporation also decided to withdraw its case filed in the local court against the IOC (Chevron).
The issue of 4.0 per cent payback on account of wheeling charge is a longstanding issue between the two sides in the gas-exploration business, as the company declines to pay the charge for pipeline use.
Initially, both the parties tried to resolve the issue through negotiation, but now they agreed to go for international arbitration.
Chevron claimed that the 4.0 per cent wheeling charge is applicable only if it uses Petrobangla's pipeline to supply gas to other parties.
But Chevron has been supplying all its gas from its three gas fields-Jalalabad, Moulvibazar and Bibiyana-only to Petrobangla.
When contacted, Chevron in a written statement said, "In instituting the case, Chevron is in full compliance with the production sharing contract (PSCs), the gas purchase and sales contract (GPSAs) and all applicable laws governing its operations in Bangladesh.
The PSCs, which are based on Petrobangla's own Model PSC, provide for ICSID arbitration, and both the parties are signatories to the ICSID Convention."
But Petrobangla, which has been deducting the amount from its payment to Chevron against its gas purchase, earlier had filed a counter-case terming the US company's claim invalid. Both the cases are pending.
In such a situation, suddenly Petrobangla decided to withdraw the case pending with the local court and contest in the ICSID arbitration.
According to official sources, the ICSID, an autonomous arbitration institute of the WB, set August 5 for the hearing over the dispute.
The state-owned agency also hired eminent lawyer Dr. Kaman Hossain to contest the arbitration to be held in the Hague.
When contacted, Chief Adviser's Special Assistant for Power and Energy Ministry Dr. Tamim said that in the changed situation, the government decided that Petrobangla withdraw the local court's case and move in the international arbitration court.
He said the decision was made as per advice of the Petrobangla's legal consultant, Dr. Kamal Hossain.
Asked whether Petrobangla's earlier decision was wrong to go to the local court, Tamim said, "That decision was made as suggested by the previous lawyer."
He also said any dispute under PSC has to be settled through international arbitration.
About the arbitration, Chevron said the company filed for ICSID arbitration in March 2006 only after the parties (Petrobangla and Chevron) were unable to amicably settle this longstanding dispute.
Chevron said all of the parties' agreements -- the PSCs, the GPSAs and various side letter agreements -- specifically require ICSID arbitration for dispute resolution, with no avenue for use of Bangladeshi courts.
Chevron Bangladesh president Steve Wilson said his company stood by its contractual position, and believed that the Bangladesh government "should respect the sanctity of the PSCs and the international law and norms by complying with the ICSID Treaty, to which it is a signatory".
He, however, expressed his company's willingness to meet to discuss alternative options to settle the account, but parallel to the ongoing ICSID arbitration, as the company believed that "it is in the best interest of both parties to resolve this issue without further delay".
According to the Petrobangla officials, if it was defeated, it would have to pay back to Chevron about US$ 40 million, the amount it had deducted as wheeling charge since 1999.
The state-run petroleum corporation also decided to withdraw its case filed in the local court against the IOC (Chevron).
The issue of 4.0 per cent payback on account of wheeling charge is a longstanding issue between the two sides in the gas-exploration business, as the company declines to pay the charge for pipeline use.
Initially, both the parties tried to resolve the issue through negotiation, but now they agreed to go for international arbitration.
Chevron claimed that the 4.0 per cent wheeling charge is applicable only if it uses Petrobangla's pipeline to supply gas to other parties.
But Chevron has been supplying all its gas from its three gas fields-Jalalabad, Moulvibazar and Bibiyana-only to Petrobangla.
When contacted, Chevron in a written statement said, "In instituting the case, Chevron is in full compliance with the production sharing contract (PSCs), the gas purchase and sales contract (GPSAs) and all applicable laws governing its operations in Bangladesh.
The PSCs, which are based on Petrobangla's own Model PSC, provide for ICSID arbitration, and both the parties are signatories to the ICSID Convention."
But Petrobangla, which has been deducting the amount from its payment to Chevron against its gas purchase, earlier had filed a counter-case terming the US company's claim invalid. Both the cases are pending.
In such a situation, suddenly Petrobangla decided to withdraw the case pending with the local court and contest in the ICSID arbitration.
According to official sources, the ICSID, an autonomous arbitration institute of the WB, set August 5 for the hearing over the dispute.
The state-owned agency also hired eminent lawyer Dr. Kaman Hossain to contest the arbitration to be held in the Hague.
When contacted, Chief Adviser's Special Assistant for Power and Energy Ministry Dr. Tamim said that in the changed situation, the government decided that Petrobangla withdraw the local court's case and move in the international arbitration court.
He said the decision was made as per advice of the Petrobangla's legal consultant, Dr. Kamal Hossain.
Asked whether Petrobangla's earlier decision was wrong to go to the local court, Tamim said, "That decision was made as suggested by the previous lawyer."
He also said any dispute under PSC has to be settled through international arbitration.
About the arbitration, Chevron said the company filed for ICSID arbitration in March 2006 only after the parties (Petrobangla and Chevron) were unable to amicably settle this longstanding dispute.
Chevron said all of the parties' agreements -- the PSCs, the GPSAs and various side letter agreements -- specifically require ICSID arbitration for dispute resolution, with no avenue for use of Bangladeshi courts.
Chevron Bangladesh president Steve Wilson said his company stood by its contractual position, and believed that the Bangladesh government "should respect the sanctity of the PSCs and the international law and norms by complying with the ICSID Treaty, to which it is a signatory".
He, however, expressed his company's willingness to meet to discuss alternative options to settle the account, but parallel to the ongoing ICSID arbitration, as the company believed that "it is in the best interest of both parties to resolve this issue without further delay".
According to the Petrobangla officials, if it was defeated, it would have to pay back to Chevron about US$ 40 million, the amount it had deducted as wheeling charge since 1999.