1999

ICC

Bridas v Turkmenistan and others Case 9058

1993 Bridas, (Argentinean), negotiated with Turkmenistan a Join Venture Agreement ‘Kemir’ (legal entity registered in Turkmenistan) to carry out hydrocarbon operations for 25 years. The JV Agreement included other documents named Charter all documents, JVA & Charter signed by Bridas and Turkmenneft (legal entity registered in Turkmenistan created by Presidential Decree), but not by the government. Turkmennef is respondent in the case along with the government. JV Kemir and Ministry of Oil entered a ‘Protocol agreement’ related to export and processing of oil without arbitration clause. JVA contained an arbitration clause, The law of the contract is deal in the terms of reference: English law applicable to merits plus application of procedural law of the place of arbitration, law of Turkmenistan, practices of international oil and international law Arbitration proceedings conducted under ICC rules Place of arbitration Houston Government did not sign the terms of reference. Government objected jurisdiction of the Tribunal on the grounds of invalidity of the agreement to arbitrate. The respondent (Turkmennef) and the government take the position that the tribunal does not have jurisdiction to decide if the government is bound by the commitment to arbitrate [Whether a state itself, or only one of its agencies is a party to the arbitration agreement?] Resolution Parties agreed to arbitrate under the ICC, there a decision to jurisdiction has to be taken by the arbitrator itself, besides any procedural issues not determined by ICC shall be determined by the law of place of arbitration, the US Federal Arbitration Act in this case. So the tribunals have jurisdiction to determine its own jurisdiction

Unmistakable evidence is required to show that the parties agreed to arbitrate the arbitrability issue (arbitral jurisdiction to be decided by arbitrator), but the fact that a party did not sight the instrument under discussion is not determinative of the issue The government is not signatory to the JVA or nay document, expect the Protocol Agreement with JV Kemir, but it conducted tendering process, negotiated terms, was active in the management of exploitation. The legal entity signatory (Turkmenneft) was created by presidential decree Provisions of the Join Venture Agreement Kemir contained commitments that only the government could give or fulfil such as special treatment to export, preferential tax regime. Taken in isolation none of the provisions would be conclusive for the proposition that it was the intention of the parties for the government to be bound by the provisions of the JVA, but cumulatively they constitute a significant involvement of the government powers and interest in the contractual relationship. Art 22.3 JVA said that ‘interests, rights, obligations of Turkmenistan’ were represented by Turkmennef Art 28.9 JVA provides that a guarantee by Turkmennef to the claimants ‘against any limitation to which the claimants may be subject’ in the access to the pipelines capacity in Turkenistan, exchange and exports, currency controls. All those provisions are not pre-contractual, they are contained in the contract itself, they are representation with no ability for enforcement if the commitment of the government would not be fulfilled. The provisions are integral to the effective operation of the project and reflect a direct hand of the government. They can be so only if the government were bound to them. The rational, good faith conclusion is that the government intended the claimants to rely on these commitments and to be bound to ensure that they would be fulfilled. Even more, they were included in the JVA by presidential decree. So government is a party to arbitration The respondent and the government had said that the project will not be allowed to continue and the JV is at end. For a repudiation to be effective it must be accepted. The government has repudiated the JVA without legal right to do so, nothing impedes the tribunal to order specific performance, and damages have not been claimed. But if claimants accepted the repudiatory conduct bringing the JVA to an end, damages would have to be assessed it would be calculated in according to present value. Third arbitrator will present a dissenting oppinion