(1) Progas Energy Ltd v The Islamic Republic of Pakistan
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Picken |
| Judgment Date | 09 February 2018 |
| Neutral Citation | [2018] EWHC 209 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2016-000801 |
| Date | 09 February 2018 |
[2018] EWHC 209 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr. Justice Picken
Case No: CL-2016-000801
Professor Dan Sarooshi (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Claimants
David Foxton QC and Iain Quirk (instructed by Allen & Overy LLP) for the Defendant
Hearing date: 25 January 2018
Introduction
This is an application, first, for security for costs pursuant to section 70(6) of the Arbitration Act 1996 relating to the proceedings which the Claimants have brought before this Court under section 68 of the 1996 Act, and, secondly, for an order under section 70(7) of the same Act that the Claimants should pay into Court or otherwise secure the monies awarded in favour of the Defendant by the arbitrators whose awards (the ‘Awards’) are the subject of the section 68 challenge.
The first of these applications seeks an order that security for costs be provided in the sum of £482,029.19, the estimated costs which the Defendant expects to incur in dealing with the section 68 application. The second application concerns the costs which were awarded to the Defendant by the arbitrators in the underlying Award, namely US$141,549.00, €236,616.86 and £7,769,974.59. The application relates also to interest incurred in relation to those costs. That interest continues to accrue.
Background
The Claimants are three companies incorporated in Mauritius. The First Claimant (‘Progas Energy’) wholly owned the Third Claimant (‘Sheffield Engineering’) which, in turn, owned 23.75% of the shares in Progas Pakistan Limited (‘PPL’), an energy company incorporated in Pakistan which built and operated an import terminal for liquefied petroleum gas (or LPG) at Port Qasim in Karachi, Pakistan. Progas Energy additionally owned 61.8% of the shares in the Second Claimant (‘Progas Holding’) which, in turn, had a 44.99% shareholding in PPL. Between them, therefore, the Claimants own the majority of the shares in that company.
Mr Ali Allawi was the chairman of PPL and an investor, through the Claimants, in PPL. A British citizen, he was formerly a minister in the Iraqi transitional government.
PPL imported LPG for sale into Pakistan. Its business, however, suffered, the Claimants say owing to the Defendant's wrongful conduct as further explained below, and as a result PPL defaulted on repayment of various loans. PPL's lenders having taken various action to recover what they were owed, PPL's assets were put up for auction by the High Court of Sindh in Karachi, the terminal operated by PPL being sold to SSGC LPG Ltd (‘SSGC’), a subsidiary of Sui Southern Gas Company Limited (a company majority-owned by the Defendant).
The Claimants' position being that PPL's plight was the result of various measures taken by the Defendant, including specifically measures concerning the pricing of LPG in Pakistan, claims were brought by the Claimants against the Defendant in an arbitration (conducted under the UNCITRAL Rules) pursuant to the Mauritius-Pakistan Bilateral Investment Treaty. It was this arbitration which led to an award being issued by the Tribunal consisting of Yves Fortier QC, Judge Charles Brower and Christopher Thomas QC on 30 August 2016 (although later corrected on 7 November 2016).
In addition to the arbitration commenced by the Claimants, Mr Allawi also commenced an arbitration against the Defendant pursuant to a different treaty, namely the UK-Pakistan Bilateral Investment Treaty. The hearing of that arbitration took place at the same time before the same arbitrators as the arbitration commenced by the Claimants.
The Claimants' claims against the Defendant alleged expropriation in breach of the fair and equitable treatment obligations contained in the Mauritius-Pakistan Bilateral Investment Treaty. They also included alleged violation of similar obligations contained in the Denmark-Pakistan Bilateral Investment Treaty (together with full protection and security and non-discrimination provisions contained in that treaty) which the Claimants argued could be imported into the Mauritius-Pakistan Bilateral Investment Treaty in reliance on a most-favoured nation clause in the treaty.
The Tribunal decided in the Award dated 30 August 2016 (as well as in the Award relating to the arbitration commenced by Mr Allawi issued on the same day) as follows:
(1) in respect of jurisdiction, that the Tribunal had jurisdiction to determine the Claimants' expropriation claims in full and that it was not necessary to determine whether jurisdiction also existed in relation to the other claims brought by the Claimants in view of what the Tribunal went on to decide concerning the merits of those claims;
(2) in respect of attribution, there being a dispute about whether certain acts could be attributed to the Defendant, that this was an issue which did not need to be determined in the light of the Tribunal's rejection of the Claimants' case on causation;
(3) as to causation, that this had not been established by the Claimants, even assuming that there had been the violations which the Claimants alleged; and
(4) that there had been no expropriation leading to the failure of PPL since that failure was principally caused by erroneous assumptions which should be made in PPL's business plan rather than any market disruption caused by the Defendant, the Tribunal going on to hold that the Defendant had also not interfered in the auction process which saw PPL being sold.
As to (4) in particular, the Claimants alleged that the Defendant had orchestrated the sale to SSGC. The Tribunal held, however, that the assets were actually taken at the initiative of its banking syndicate (PPL having defaulted on its loans), not the Defendant, and that this is what led to the demise of PPL's business. The Tribunal summarised the position as follows:
“In the end, PPL's objective to serve the untapped consumer segment failed for many reasons, but principally for what turned out to be the erroneous assumptions of its business plan. These other factors which the Tribunal has reviewed caused the company's demise rather than the generalized allegations of market disruption by the Government, as pleaded by the Claimants. Thus, not only have the Claimants failed to prove proximate cause of damage in relation to the alleged breaches, they have failed to comprehensively address the other causal factors that account for the company's failure.”
In the circumstances, the Claimants' claims were dismissed and costs were awarded in the Defendant's favour. Those costs, after a correction brought about by the revised Award issued on 7 November 2016, were in the amounts which I have previously identified. The Tribunal also awarded interest payable on those costs, hence the present application relating also to such interest.
Subsequent to the first of the Tribunal's Awards and prior to the corrective Award, the Claimants applied to the Tribunal on 27 September 2016 under UNCITRAL Rule 39, taking the position that the Tribunal had failed to rule on the Claimants' allegations of breach other than in relation to the expropriation case which they had advanced. The Tribunal rejected that application on 15 November 2016, so declining to issue an additional award. The Tribunal did so on the basis that, as the Tribunal explained, the Claimants' case on causation having failed, it was not right to suggest that any claims had been left undecided.
Following this, on 23 November 2016, Allen and Overy LLP, on behalf of the Defendant, sought payment of the sums awarded to the Defendant by way of costs. There was no response to the request for payment and, indeed, the costs (and interest on those costs) remain unpaid to this day.
A month after Allen & Overy LLP had made their demand for payment of the costs, the Claimants commenced the present section 68 proceedings. Specifically, that application, which was made on 20 December 2016 and served on the Defendant by the Foreign & Commonwealth Office on 2 May 2017, is based on section 68(2)(d) ( “failure by the Tribunal to deal with all the issues that were put to it”). It is the Defendant's position that there is no merit in this application since it was not incumbent upon the Tribunal to address every issue and certainly not an issue which, on the Tribunal's findings concerning causation, did not need to be determined.
The present application follows a previous application by the Defendant, made on 27 July 2017, seeking an order for summary dismissal of the Claimants' section 68 proceedings on the basis that they have no real prospect of success. That application was dismissed by Phillips J on 18 October 2017.
It is worth mentioning also the position of Mr Allawi. He, too, has commenced proceedings under section 68, but substantially out of time and only after an order was obtained from this Court for enforcement of the Award made by the Tribunal as far as he is concerned. That order was made on 2 August 2017 and was served on Mr Allawi two weeks later. It is clear that his section 68 application was made in response to that order having been obtained by the Defendant.
So much for the procedural history, in particular the history relating to the Claimants (as opposed to Mr Allawi). Before coming on to deal with the Defendant's applications, I shall say something briefly about the funding of the Claimants' claims. Specifically, it emerged during the course of the hearings before the Tribunal that the Claimants were in receipt of funding for the purposes of the arbitration proceedings...
To continue reading
Request your trial
-
The Czech Republic v Diag Human SE
...at [12]–[15]; Konkola Copper Mines Plc v U&M Mining Zambia Ltd [2014] EWHC 2146 (Comm), per Eder J at [25]–[26]; Progas v Pakistan [2018] EWHC 209 (Comm), per Picken J at 30 Mr Riches KC, for the Defendants, highlighted the fact that this test requires the court to consider not only what ......
-
BSG Resources Ltd v Vale S.A.
...in the written submissions, I proceed on the basis that for present purposes the law is as stated by Picken J in Progas v Pakistan [2018] EWHC 209 (Comm) that it is necessary (in relation to a challenge under section 68 or 69) to show that the challenge in some way prejudices the ability o......
-
English Court Provides Guidance To Parties Challenging Or Seeking Enforcement Where The Award Debtor Is In Administration
...and may direct that the application or appeal be dismissed if the order is not complied with. The Court, applying Progas v Pakistan [2018] EWHC 209 (Comm), considered that Vale had to show that the Challenge Application would prejudice its ability to enforce the Award or diminish BSGR's ab......
-
Security For Costs - Progas Energy v Islamic Republic Of Pakistan
...Alert - [2018] EWHC 209 (Comm) Judge considers whether security for costs/payment into court should be made pending a challenge to an arbitral The claimants challenged (pursuant to section 68 of the Arbitration Act 1996) an arbitral award which awarded the defendant its costs of the arbitra......