(1) Crescent Petroleum Company International Limited (2) Crescent Gas Corporation v National Iranian Oil Company (NIOC) - PCA Case No 2009-20 - Partial Award on Remedies - 27 September 2021
TABLE OF CONTENTS
LIST OF DEFINED TERMS
WITNESS STATEMENTS AND EXPERT REPORTS
A. THE PARTIES
B. THE DISPUTE
C. THE ARBITRATION AGREEMENT
D. THE ARBITRATION PROCEEDINGS
E. THE ARBITRAL TRIBUNAL
F. GOVERNING LAW, SEAT OF ARBITRATION AND CASE ADMINISTRATION
II. PROCEDURAL HISTORY FOLLOWING AWARD ON JURISDICTION AND LIABILITY
A. AWARD, REMEDIES PROCEDURE, AND PROCEEDINGS IN ENGLISH COURT
B. CLAIMANTS' APPLICATION BEFORE BAHRAINI COURT
C. DISPOSITION OF ENGLISH COURT PROCEEDINGS AND RESIGNATION OF DR NOORI
D. APPOINTMENT OF MR KHAN AND PRE-HEARING PROCEEDINGS
E. REMEDIES HEARINGS AND POST-HEARING PROCESS
F. RESIGNATION OF DR HOSSAIN, APPOINTMENT OF SIR JEREMY COOKE AND CHALLENGE TO DR GRIFFITH
G. APPOINTMENT OF MR GLEESON AS CHAIRMAN
H. PROCEDURE FOLLOWING TRIBUNAL RECONSTITUTION
I. RESIGNATION OF MR KHAN AND APPOINTMENT OF LORD PHILLIPS
J. FINAL HEARING
K. POST-HEARING PROCEEDINGS AND TRIBUNAL'S ENGAGEMENT OF DAMAGES EXPERTS
III. ISSUES DETERMINED BY THE AWARD ON JURISDICTION AND LIABILITY
IV. THE CLAIMS FOR RELIEF
A. RELIEF SOUGHT BY THE CLAIMANTS
B. RELIEF SOUGHT BY THE RESPONDENT
C. SPECIFIC PERFORMANCE
V. WITNESSES AND EXPERTS IN THE REMEDIES PHASE
A. THE CLAIMANTS' WITNESSES AND EXPERTS
B. THE RESPONDENT'S WITNESSES AND EXPERTS
C. JOINT EXPERT REPORTS
VI. CRESCENT'S LOSS OF BARGAIN CLAIM - FACTUAL ISSUES
VII. CRESCENT'S CLAIM FOR DECLARATORY RELIEF
VIII. IRANIAN LAW ISSUES
A. GOVERNING LAW
B. PROCEDURAL DEVELOPMENTS CONCERNING IRANIAN LAW
C. ASCERTAINMENT OF IRANIAN LAW
D. IRANIAN CONSTITUTION
E. IRANIAN CODES
F. LEGISLATIVE HISTORY OF ARTICLE 515 OF THE CCP 2000
G. EXPERT EVIDENCE
1. Mr Katirai
2. Dr Mehrpour
H. DOES ARTICLE 515 OF THE CCP 2000 APPLY TO THIS ARBITRATION?
I. GSPC ARTICLE 26.1
J. THE PRECLUSION ISSUE
2. The Relevant Context
3. The Meaning of Note 2
4. The Tribunal's Conclusions as to the Meaning of Note 2
IX. RECOVERABILITY OF THE LOSSES CLAIMED BY CRESCENT
A. THE LOSS NORMALLY RECOVERABLE FOR BREACH OF A SELLER'S DUTY TO DELIVER GOODS
B. UNUSUAL FEATURES
C. CGC'S CASE ON ITS RECOVERABLE LOSSES
1. The Nature of the Claim
2. The Formulation of the Claim
D. PROFITS LOST ON SALES TO CNGC
1. Custom of the Trade
2. Reservation of the Value of the Products
E. LIABILITY TO CNGC
1. The CGC-CNGC GSA
2. Objections of Principle by NIOC
3. Foreseeability of the Size of Loss
5. Force Majeure
6. Foreseeability of CNGC's Involvement
7. No Claim for Damages Advanced by CNGC
X. FACTORS IN CALCULATION OF CGC AND CNGC LOSSES
A. GSPC SUPPLY OBLIGATION
B. ARE THE CONTRACTUAL SUPPLY OBLIGATIONS CONTROLLING?
C. CRESCENT'S CAPACITY TO RECEIVE
D. THE AVAILABILITY FACTOR AND OPERATIONAL DAYS
E. GAS COMPOSITION AND OTHER TECHNICAL INPUTS
F. PRICES PAYABLE TO NIOC BY CGC
G. GAS SALES ASSUMPTIONS
1. Gas Sales Contracts
2. Available Volumes of Gas for Sale to End-User Customers
3. Allocation of Available Gas to End-User Customers
H. TRANSMISSION, PROCESSING AND OTHER COSTS
I. PRODUCT SALES
XI. CALCULATION OF QUANTUM
B. END-USER CUSTOMERS AND PRICES
C. PRODUCT PROFITS
D. THE PRICE PAYABLE TO NIOC
E. PERIOD OF LOSS
F. OTHER FACTORS
G. CONCLUSIONS ON CALCULATION OF QUANTUM
XII. CGC'S CLAIM FOR INTEREST
A. THE CLAIMANTS' POSITION
1. Availability of Interest under Section 49 of the English Arbitration Act
2. Availability of Interest under Iranian Law
3. Calculation of Interest
B. THE RESPONDENT'S POSITION
1. Unavailability of Interest under Iranian law
2. Unavailability of Interest under Section 49 of the English Arbitration Act
3. Calculation of Interest
C. TRIBUNAL ANALYSIS
2. Iranian law
3. The Scope of Article 221
4. Interest as Damages for Late Payment
5. Does Section 49 of the English Arbitration Act Trump Iranian Substantive Law?
6. Calculation of Post-Award Interest
XIII. CGC'S CLAIM FOR DECLARATORY RELIEF CONCERNING ITS LIABILITY TO INDEMNIFY THIRD PARTIES
A. NATURE OF THE CLAIM
B. APPLICABLE LAW
C. TRIBUNAL ANALYSIS
A. THE PARTIES
1. The Claimants in this matter are Crescent Petroleum Company International Limited ("Crescent Petroleum" or "CPCIL"), a company incorporated under the laws of Bermuda, and Crescent Gas Corporation Limited ("Crescent Gas" or "CGC"), a company incorporated under the laws of the British Virgin Islands. Crescent Petroleum and Crescent Gas (collectively "Crescent" or "Claimants") are part of the Crescent Petroleum group of companies. Crescent Petroleum is a private exploration and production company in the Middle East and is headquartered in Sharjah, United Arab Emirates ("UAE"). Crescent Gas is Crescent Petroleum's wholly owned subsidiary.
2. Crescent is represented by Lord Charles Falconer QC, Ms Penny Madden QC, Ms Sarah Wazen and Ms Rose Naing of Gibson, Dunn & Crutcher LLP in London; Professor Jan Paulsson, Mr Constantine Partasides QC, Dr Georgios Petrochilos QC, Mr Agustin Sanz, Dr Ryan Manton and Ms Nicola Peart of Three Crowns LLP in London, Paris and Washington DC, and Ms Lucy Martinez, Mr Louis Alexis-Bret, Mr Leon Firios and Mr Mushegh Manukyan (formerly of Three Crowns); Mr Ricky Diwan QC of Essex Court Chambers in London; Dr Tariq Baloch of Verulam Buildings in London; Mr Michael Darowski of McDermott Will & Emery UK LLP in London; Mr Moeiz Farhan of 36 Stone in London (formerly of Gibson Dunn); Judge Koorosh Ameli of Ameli International Arbitration in The Hague; Mr Hamid Sabi of Sabi & Associates in London; Mr Jeremy Carver, Consultant to Crescent; and Mr Drazen Petkovich, Ms Amelia Mibus, Ms Maria Scanlan and Mr Nathan Hooper of Crescent in Sharjah.
3. The Respondent is the National Iranian Oil Company ("NIOC" or "Respondent", collectively with Crescent, "Parties"), a State entity organised under the laws of the Islamic Republic of Iran ("Iran") in 1948 with the objective of exploration, development, production and marketing of Iran's crude oil and natural gas. The Minister of Petroleum of Iran is the Chairman of NIOC's Board of Directors.
4. NIOC is represented by Mr David Sellers, Mr Mark Howarth, Ms Nanette Pilkington and Mr Greg Falkof of Eversheds Sutherland LLP in Paris and London; Mr Simon Rainey QC and Mr Ben Gardner of Quadrant Chambers in London; Dr Wolfgang Peter and Mr Konstantin Christie of Peter & Kim in Geneva; and Dr Seyed Asghar Hendi, Dr Zahra Goudarzi and Mr Saeed Alikhani of NIOC in Tehran.
B. THE DISPUTE
5. The dispute between the Parties arises under a Gas Sales and Purchase Contract concluded by NIOC and Crescent Petroleum on 25 April 2001, as amended ("GSPC" or "Contract"), (1) on 25 April 2001 by the First Amendment ("First Amendment"); (2) on 25 April 2001 by the First Side Letter ("First Side Letter"); (3) on 25 April 2001 by the Second Side Letter ("Second Side Letter"); (4) on 25 April 2001 by the Third Side Letter ("Third Side Letter"); (5) on 25 April 2001 by the Fourth Side Letter ("Fourth Side Letter"); (6) on 17 March 2003 by the Fifth Side Letter ("Fifth Side Letter"); (7) on 17 March 2003 by the Second Amendment ("Second Amendment"); and (8) on 7 July 2004 by the Sixth Side Letter ("Sixth Side Letter").
6. Of the six side letters, only the Fourth, Fifth and Sixth remain in force
7. Under the GSPC, NIOC agreed to supply and sell to Crescent Petroleum, and Crescent Petroleum agreed to purchase from NIOC, specified quantities of natural gas, at the price and on the terms and conditions there provided, for a period of 25 years, commencing on 1 December ("Commencement Date"). (The Commencement Date was fixed at 1 December 2005 by the Sixth Side Letter).
8. Crescent claims that, in breach of the GSPC, NIOC failed to deliver gas on 1 December 2005 or at any time thereafter up until 11 September 2018, on which date Crescent says it terminated the GSPC. (Crescent's claim to have terminated the GSPC on that date was upheld in the second arbitration commenced by Crescent on 28 June 2018 ("Second Arbitration")
9. Pursuant to Article 16 of the GSPC, on 26 July 2003, Crescent Petroleum assigned its rights and obligations under the GSPC to CGC before the first delivery of gas was due
10. Reference will be made below to the nature of the remedies sought by Crescent.
887. For these reasons, and in the light of the Award on Juridiction and Liability of 31 July 2014, the Tribunal makes the following declarations, orders and directions:
A. It is DECLARED that the National Iranian Oil Company ("NIOC") is liable to pay damages to Crescent Gas Corporation ("CGC") for NIOC's breaches of the Gas Sales and Purchase Contract of 25 April 2001 ("GSPC") up to 31 July 2014 in the following amounts:
(1) USD 1,344.70 million in respect of CGC's loss of profits from on-sale of gas that should have been supplied under the GSPC; and
(2) USD 1,085.27 million in respect of CGC's liability to CNGC in respect of CNGC's loss of profits from on-sale of gas and sale of products.
B. It is ORDERED that NIOC pay to CGC, within three (3) months of the date of this Partial Award, the amount of USD 2,429.97 million.
C. It is ORDERED that NIOC pay to CGC post-award interest on the amount referred to in
B. at the rate of 12 month EIBOR + 1 percentage point, compounding annually, commencing from three (3) months from the date of this Partial Award until date of payment.
D. The Claimants' claim for pre-award interest is dismissed.
E. (1) The Claimants' claim for declarations of indemnity in respect of liability to end-users and to CNGC in respect of its liability to end-users and service providers is deferred for further consideration.
(2) The Parties may apply for directions in respect of the matter referred to in E.(1) within three (3) months of the date of this Partial Award.
F. (1) The Tribunal reserves for subsequent determination all questions concerning costs fees and expenses, including the Parties' costs of legal representation.
(2) The Claimants are directed to file, within eight (8) weeks of the date of this Partial Award, any submissions they wish to make on the matters referred to in F.(l) except as to quantum.
(3) The Respondent is directed to file, within a further eight (8) weeks, any submissions it wishes to make on the matters referred to in F.(l) except as to quantum.
G. The Tribunal reserves jurisdiction in respect of the matters referred to in E. and F. above.
H. The Respondent's claims for relief, save insofar as they relate to the matter of declarations of indemnity and questions of costs, are dismissed.
Seat of Arbitration: London, United Kingdom
Sir Jeremy Cooke
The Rt. Hon. The Lord Phillips of
Worth Matravers, KG, PC
The Hon. Murray Gleeson AC