1999

ICC

Join Venture Yashlar & Bridas v Ministry of oil of Turkmenistan Case 9151 Interim Award

1991 Turkmengeologia and Bridas (Argentinean company) signed the Joint Venture Agreement Yashlar and a Charter. The JVA contained a reference to arbitration. 1992 a letter of the Deputy Head of Government of Turkmenistan and Turkmenologia, both on behalf of the government said: in connection with the JVA the government confirm that the JV may assume effective control of operations, without any other approval, authorisation or consent of any governmental or non governmental agency, and the JVA will have all the rights stipulated in the agreement June 1996 a dispute concerned whether the JVA is extant or void and the claims entails compensation for breaches was submitted to ICC. Claimants were JVA & Bridas and the defendants Turkmenistan &/or Ministry of oil. 1993, the Ministry was substituted by presidential decree for Turkmengeologia. July 1996 the Ministry was abolished and another ministry created in its stead. December 1997 statutes of Turkmengeologia Corporation were approved by presidential decree, this state corporation is the legal successor of the original signatory of the JVA Defendants alleged that no matter what the tribunal said the long term partnership has been broken so the JVA must be terminated Claimants said that tribunal has jurisdiction over the government of Turkmenistan as a real party to the JVA The defendant claimed that the only respondent party to the arbitration was the Ministry Resolution Defendant argues that the JVA is void and voidable. In any case, Bridas is not welcome in Turkmenistan and will not be permitted to resume its position in the JVA. As far as the defendant is concerned it has unilaterally terminated the agreement and the question is merely whether that termination was justified. Bridas has not accepted repudiation. Under English law both parties are obliged to continue to perform the contract. Specific performance was sought for Bridas in the original claim, but it withdrew it latter. An English court does not ordinarily grant specific performance of a contract with continuous and complex duties

In the circumstances is impossible to say that damages will not be adequate remedy. In fact they will be the only remedy available to Bridas. The Tribunal cannot compel Bridas t oask for damages, but damages is the only remedy this tribunal can award. At the end of the oral hearing Bridas claimed damages. An award on this termes will be enforceable at law. Defendant claimed that tribunal did not jurisdiction to determine claims against the government or state of Turkmenistan since it was not a party to the JVA and the only respondent party was the ministry Under English law the constitution and capacity of a corporation are governed by the law of its place of incorporation (Carl Zeiss) Under Turmenistan law, Trukmengeologia is a separate legal entity, a state enterprise, and under that law the state bears no responsibility for its obligations. There is a distinction in English law of a state controlling enterprise aching government directions and on the other hand exercising sovereign functions (I Congreso) Government control of an entity does not justify identifying it with the government, by its separate existence does not mean that under certain circumstances it cannot be identified in a particular transaction as an organ of the State. (Trendtex) Art 28.3 JVA ‘interests rights and obligations of Trukmenistan as represented by Turkmengeologia’ Turkmengeologia gave guarantees or undertakings of a type which normally only a government could give. Under English law is difficult to see how a Ministry is anything other that a part of the government, without imposing English ideas into foreign constitutional arrangements, that fact taken together with the provision in its statute that is ‘an executive and administrative state organ, prima facie support the contentions of Bridas. It is unnecessary to decide whether the original party Turkmengeologia or the Ministry did or did not as organs or arms of the Government The government obviously chose not to become a party to the JVA but rather to authorise an agreement to be entered by a body which was a legal entity of its own. The activities of Turkmenian party are commercial rather than sovereign activities. Tribunal said that bridas has not discharged and could not discharge the burden of proving that the government itself was a party to the JVA, and it follows that it cannot be a party to the arbitration. Bridas referred to cases where attempts to evada liability by abuse of corporate forms, but that is a matter that the tribunal will not speculate In case of damages awarded against the Ministry and if the awards is not honoured, it would be open to Bridas to enforce the award in Turkmenistan courts or in any other jurisdicition. It would be at that stage to decide whether the Ministry acted as an organ of the Government and not here The only party to this arbitration was the party named in the JVA or its assignee, and it is unnecessary to decide here if that party acted as organ of the government.