February 15, 2017
Update: Further to yesterday’s statement that the Ministry of Natural Resources published regarding a Dana Gas arbitration award, today we issue the following addendum to the statement:
In addition, the KRG confirms that the tribunal has not found that that the KRG has significant liabilities to Dana pursuant to the Strategic Alliance Protocol entered into between the KRG and Dana and another in April 2007 and which the KRG terminated in May 2009 (the SAP).
Dana’s press release omits to state that although the Claimants attempted to argue that the KRG’s termination of the SAP was wrongful and the Claimants were entitled to damages arising from the failure to build the “Kurdistan Gas City” as envisaged in the SAP, the Claimants abandoned this claim, which was entirely without basis.
The tribunal did not award damages against the KRG in respect of the SAP.
Statement Regarding Dana Gas – Third Partial Final Award dated 30 January 2017
Erbil, Kurdistan Region, Iraq – On 13 February 2017, the Kurdistan Regional Government (KRG) received a partial ruling from the tribunal in the ongoing arbitral proceedings between the KRG and Dana and others (the Claimants). The arbitration is subject to duties of confidentiality under applicable law and arbitration rules. Without waiving these duties of confidentiality, the KRG is obliged to correct public statements by Dana, which quote selectively from the partial award and create an impression that is materially misleading and incomplete.
Further to a hearing in London on 5 September 2016, the tribunal has ruled on some of the claims by the parties. This is a partial award that does not finally determine all of the issues in the arbitration.
Dana’s press release omits to state that the tribunal ruled against the Claimants in multiple important respects:
– The tribunal rejected the Claimants’ claim for over $1.7 billion in respect of so called excess gas. The tribunal determined that the KRG is entitled to receive all the gas produced by all the existing facilities at Khor Mor without additional charge and the Claimants are not entitled unilaterally to charge the KRG for such gas.
– The tribunal entirely rejected a claim that Dana and Crescent had lost some $3.3 billion in respect of earn out payments they claimed they would otherwise have received.
– The tribunal entirely rejected further claims by Dana that it could recover over $24 million in damages from the KRG as a result of emergency asset sales it allegedly undertook as a result of its financial difficulties.
– The tribunal declined to provide 18 of the 19 declarations the Claimants sought in relation to their alleged rights under the contract.
– The tribunal held that some declarations sought by the Claimants on international petroleum industry practice are “wrong” and declined to grant additional determinations sought by the Claimants.
Moreover, Pearl remains obliged, under the terms of the accounting procedure in the contract with the KRG, to refund to the KRG the balance of any revenues after recovering its invested petroleum costs and a contractual remuneration fee.
The remaining issues will be heard in the next phase of the arbitration. The KRG will continue vigorously to defend its position in all available fora.
Dana’s press release is also materially misleading as regards Dana’s own performance. The tribunal did not find that the Claimants managed and performed the project efficiently or well or there was no unreasonable delay in the Claimants’ execution of the project. It merely found that the Claimants’ management of the project progress did not amount to a breach of contract. It took the Claimants over four years to complete the LPG plant despite their original indication that it would take them only nine to ten months to complete.
The KRG considers that the Claimants’ approach in the arbitration is unconstructive and unnecessarily escalates the dispute. Rather than embarking on costly and protracted legal action that distracts the KRG from the important tasks it faces, the Claimants should, like other IOCs, cooperate with the KRG to develop the resources of the Kurdistan Region to the optimal benefit of its people.
The Claimants are well aware of the enormous financial pressures facing the KRG and the people of the Kurdistan Region. The KRG’s financial difficulties result from taking essential steps that are critically important to both the Kurdistan Region and the international community, including the KRG’s effective fight against ISIL terrorism and its efforts to care for over 1.8 million refugees and IDPs within the Kurdistan Region