AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC

JurisdictionEngland & Wales
JudgeBurton J.
Judgment Date16 April 2010
Neutral Citation[2010] EWHC 772 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: 2009 Folio 1035
Date16 April 2010
Between
AES UST-Kamenogorsk Hydropower Plant LLP
Claimant
and
UST-Kamenogorsk Hydropower Plant JSC
Defendant

[2010] EWHC 772 (Comm)

Before: Mr Justice Burton

Case No: 2009 Folio 1035

IN THE HIGH COURT OF JUSTICE

Royal Courts of Justice

Strand, London, WC2A 2LL

Bernard Eder QC and Jessica Wells (instructed by Allen & Overy LLP) for the Claimant

Antony White QC (instructed by Reed Smith LLP) for the Defendant

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Hearing dates: 25, 26 March 2010

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Approved Judgment

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I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR JUSTICE BURTON Mr Justice Burton
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Mr Justice Burton:

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1. This has been the hearing of an application by the Defendant Ust-Kamenogorsk Hydropower Plant JSC (“JSC”) to challenge the jurisdiction of this Court to entertain the proceedings brought against it by the Claimant AES Ust-Kamenogorsk Hydropower Plant LLP (“AESUK”), and to consider the continuation of the anti-suit injunction given in favour of AESUK by Andrew Smith J on 31 July 2009, and continued by Teare J on 21 August 2009, and the grant of final relief on its Arbitration Claim Form. Mr White QC, on behalf of JSC, has made it plain that JSC has only appeared for the purpose of challenging the jurisdiction, and, although it has consented to the simultaneous hearing of AESUK's substantive claim, he is not taking any part in it, although plainly all the submissions he has made in support of JSC's jurisdictional challenge would fall to be considered by the Court, in the event of such challenge failing, in the course of its consequential consideration of the grant of substantive relief in favour of AESUK.

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2. JSC and AESUK, which are both companies incorporated and carrying on business in the Republic of Kazakhstan, are effectively the owners and grantors (JSC) of a 20-year concession, and the grantees and lessees (AESUK) of such concession, to operate hydroelectric plant and equipment and produce hydroelectric energy in Kazakhstan. The precise contractual arrangements, though considerably canvassed in lengthy evidence, have not in the event been material at the hearing. In summary, JSC has become entitled to the rights of the Republic of Kazakhstan (RK) pursuant to the Concession Agreement dated 23 July 1997, made between RK and AES Suntree Power Ltd (“Suntree”) (which immediately assigned its rights to an associated company Tau Power BV (a Dutch Company) (“Tau”)), as a result of a Deed of Adherence and an Amended Concession Agreement, both dated 2 October 1997: and AESUK has become entitled to the rights of its parent or affiliate Tau as a result of a Transfer Agreement between RK, JSC and AESUK dated 1 October 2007.

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3. The dispute before this Court has revolved around an arbitration clause contained in the Concession Agreement: it is common ground that the same clause was incorporated into the Amended Concession Agreement, and in this judgment I shall make no further differentiation between the two agreements, referring only, where appropriate, to them as the Concession Agreement. Although by Clause 31 it was provided that this Agreement shall be subject to and governed in accordance with Kazakhstan legislation, there is no dispute that the arbitration clause contained in Clause 32 is to be governed by, and to be construed in accordance with, English law. It reads as follows:

32. Dispute Resolution

32.1 Subject to the provisions contained in Clauses 17.8 and 17.9, should any dispute or difference arise out of or in connection with any matter or thing in relation to the provisions of this Agreement and the transactions contemplated by the parties, then the Party or Parties shall issue a Notice to the other Party or Parties, and shall supply full details of the dispute or difference.

32.2 In the event of any such dispute or difference being notified pursuant to Clause 32.1, the Authorised Persons of each of the Parties shall promptly meet together and negotiate in good faith and take all practicable steps in order to try and resolve the same as quickly and economically as possible.

32.3 Should the Parties not have resolved the dispute or difference at the expiry of a period of one (1) month (unless otherwise extended by agreement of the Parties in writing) from the date of any Notice issued in accordance with Clause 32.1 such dispute or difference shall be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce [“ICC”] in force at the relevant time.

32.4 In accordance with the Rules of Conciliation and Arbitration of the [ICC] (“Rules”), the Parties have agreed that there shall only be one (1) arbitrator who shall be appointed by mutual agreement between the Parties. If the Parties fail to reach agreement as to the identity of the arbitrator to be appointed within thirty (30) Days of the expiry of the one (1) month period referred to in Clause 32, the arbitrator shall be appointed upon the application of any party to the dispute or difference by the President or Vice-President for the time being of the [ICC] of London and the arbitration shall be commenced and carried out as soon as is possible.

32.5 The arbitration shall be carried out and conducted in London, England and shall be in the English language.

32.6 The finding of the arbitration shall be final and binding on the Parties and by way of appeal or otherwise no dispute or difference shall be referred to the courts or to arbitration (other than in compliance with the requirements of this Clause 32 in the case of arbitration) ….

32.7 Each of the Parties hereby represents and warrants that it can validly and unconditionally consent under Kazakstan Legislation to the referral of the matters as set out in this Agreement to an Expert, to the arbitration agreement contained in this Clause 32, as well as the other dispute resolution mechanisms referred to in this Agreement.

32.8 The Parties hereto agree to exclude any right of application or appeal to any court which would otherwise have jurisdiction in the matter in connection with any question of law arising in the course of the Expert or arbitration reference or out of the award. However the Parties may make an application to any court for enforcement of any Expert decision or arbitral award (including execution of such judgment), including enforcement of any such decision or award granting interlocutory relief against a Party, and for the obtaining of any evidence (whether by discovery of documents, interrogatories, affidavits or testimony of witnesses or whatsoever) which the Expert or arbitrators direct shall be admitted in the Expert or arbitral proceedings.

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The reference in subclause 32.1 to Clauses 17.8 and 17.9 and to an Expert and an Expert decision in subclauses 32.7 and 32.8 is to the fact that separate provision was made by Clause 17 for the determination of tariffs, with disputes resolved by an independent expert as there provided.

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4. Although it did not in the event become material during the hearing, it should be recorded that there was also a provision, Clause 9, in the Transfer Agreement above referred to whereby:

The [Concession Agreement's] provisions regarding governing law and dispute resolution through arbitration shall be deemed to be incorporated in this Transfer Agreement.

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Clause 4 of the Deed of Adherence also incorporated Clause 32 by reference.

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5. AESUK still continues to operate the concession, but it is apparent that matters have become progressively more fraught between the various parties, and there has been a number of proceedings in the courts of Kazakhstan, culminating in that brought by JSC against AESUK in the Specialist Inter-District Economic Court of East Kazakhstan Oblast (“the Economic Court”) by a Statement of Claim dated 12 June 2009. Those proceedings, to which I shall refer further below, prompted, after the failure on 28 July 2009 of AESUK's motion to dismiss the proceedings by reference to Clause 32, the bringing of these proceedings in the Commercial Court, and the application for, and grant of, the anti-suit injunction referred to above.

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6. I should as briefly as I can summarise the previous proceedings:

i) On a date sometime in late 2001 a claim was made by RK in the East Kazakhstan Regional Court (“the Regional Court”) seeking recovery of debts allegedly due under the Concession Agreement. It is not entirely clear which parties were the defendants, but reliance was placed by those defendants on Clause 32, on the basis that the disputed debt could only be resolved by international arbitration in London. The Kazakhstan Court upheld that challenge and dismissed the claim on 26 December 2001.

ii) It appears that at about the same time AESUK applied to the Ust-Kamenogorsk City Court to challenge an Order that had been made on 17 May 2001 to include them in the State Register of Market Entities Holding a Dominant (Monopolistic) Position on a Specific Commodity Market for the year 2001. AESUK's claim against the relevant department of RK's Agency for the Regulation of Natural Monopolies, Protection of Competition and Support for Small Business was issued on 10 October 2001 and was dismissed by judgment dated 27 May 2002. It seems that such Order is renewed annually, and AESUK tried again in the following year to challenge a renewed Order dated 29 July 2002 for its inclusion on the same Register, by a claim dated 12 August 2002, which was dismissed on 15 July 2003.

iii) On 23 November 2002 the Committee of State Property and Privatisation of the Ministry of Finance of RK issued proceedings in the Regional Court against Suntree and Tau, seeking a declaration that the Concession Agreement was invalid. Suntree and Tau applied to dismiss the claim, relying on Clause 32, on 18 December 2002, which...

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