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Singapore – Oil And Gas Group Awarded $20 Million In International Arbitration.

5 March, 2013

 

Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

 

INTRODUCTION

 

In a recently concluded arbitration, Drew & Napier  successfully represented an international group of  companies in the oil and gas industry to recover more than $20 million under a series of contracts  with a Middle Eastern party. The international arbitration was heard under the aegis of the Singapore International Arbitration Centre before a 3-member panel (“Tribunal”). Cavinder Bull, SC, Foo Yuet Min, Kong Man Er and Daniel Cai represented the Claimants while  the Respondent was represented by an international law firm with counsel from their Paris, London and Singapore offices. 

 

THE DISPUTE

 

The Claimants were part of an international group of companies in the oil and gas industry with its headquarters in East Asia. The Claimants were in the business of chartering and operating high value off-shore equipment, worth a few hundred million US Dollars each. The Respondent was a Middle Eastern intermediary between equipment providers such as the Claimants and the ultimate end-users of the equipment. 

 

The Respondent and the Claimants entered into a series of contracts for the deployment and operation of certain equipment at an off-shore site in the Middle East. These medium to long-term contracts were to be performed over a period of several years and were worth several hundred million US Dollars. However, a dispute arose between the parties. 

 

Under the terms of the contracts, the Respondent was responsible for obtaining certain approvals from the authorities for the equipment to be transported to the area of operations. The Respondent also had to obtain certain bank facilities in favour of the Claimants as security. As the Claimants’ equipment was extremely valuable, transportation costs were very high and the equipment was being deployed in a region with significant risks, these bank facilities were vitally important to the Claimants to limit their potential losses and exposure. 

 

Subsequently, the deployment of the Claimants’ equipment to their final destinations was delayed by several weeks and this resulted in costs
amounting to several million US Dollars being incurred. The parties each claimed that the other was responsible for the delay. 

 

The Claimants argued that according to the terms of the contracts, the Respondent was the party responsible for obtaining all the requisite approvals and the bank facilities and it had failed to do so by the time the Claimants were ready to move the equipment. In response, the Respondent denied responsibility for the delay and blamed the delay on the Claimants’ refusal to deploy their equipment until the requisite bank facilities were put in place by the Respondent. 

 

THE TRIBUNAL’S DECISION

 

During the course of the arbitration hearing, the Tribunal heard evidence from senior and experienced professionals in the oil and gas industry, many of whom had flown in from various parts of the world to testify in Singapore. Evidence was also given in a number of different languages and translated simultaneously into English. A significant amount of evidence was led about the industry’s practices and the challenges faced by companies operating in the oil and gas industry in certain parts of the world. 

 

Of particular note was the Tribunal’s consideration of the practical importance of the bank facilities which provided security to the Claimants and whether it is acceptable in this industry for performance to be held back when such security has not been provided. There was also extensive consideration of whether, even if the Claimants had wanted to perform the contract without security, the Respondent’s failure to get the necessary approvals meant that performance would not have been possible in any event. This involved some detailed analysis of how the industry operates in that part of the Middle East. 

 

After considering all the oral evidence and the contemporaneous documents, and following closing submissions by the parties, the Tribunal rejected the Respondent’s version of the facts, saying that the Respondent’s arguments were “purely hypothetical”. The Tribunal’s opinion was that it would not be appropriate to penalise the Claimant in this case for refusing to transport their equipment until security was provided by way of the promised bank facilities. Accordingly, the Respondent had to bear the costs of the delay, which according to the contractual rate, amounted to over $20 million. 

 

In the end, what was critical to the success of this arbitration was a strong understanding or how the industry operates and conveying that in a cogent and persuasive manner to a knowledgeable arbitral panel.

 

 
For further information, please contact:

 
Cavinder Bull, Director, Drew & Napier
cavinder.bull@drewnapier.com
 
Foo Yuet Min, Drew & Napier
yuetmin.foo@drewnapier.com

 

Drew & Napier Dispute Resolution Practice Profile in Singapore

 

 

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