Dynasty Company for Oil and Gas Trading Ltd v The Kurdistan Regional Government of Iraq

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Butcher
Judgment Date23 April 2021
Neutral Citation[2021] EWHC 952 (Comm)
Docket NumberCase No: CL-2019-000509
Date23 April 2021

[2021] EWHC 952 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

Mr Justice Butcher

Case No: CL-2019-000509

Between:
Dynasty Company for Oil and Gas Trading Limited
Claimant
and
(1) The Kurdistan Regional Government of Iraq
(2) Dr Ashti Hawrami
Defendants

Charles Kimmins QC, Richard Waller QC, Belinda MacRae and Daniel Benedyk (instructed by Preiskel & Co) for the Claimant

Graham Dunning QC, Anton Dudnikov and Catherine Jung (instructed by Wilmer Cutler Pickering Hale and DorrLLP) for the Second Defendant

Hearing date: 8–11 February 2021

Approved Judgment

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.

THE HONOURABLE Mr Justice Butcher

Mr Justice Butcher Mr Justice Butcher
1

The Second Defendant (‘Dr Hawrami’) has made an application challenging the jurisdiction of the court under CPR Part 11. This judgment decides on that challenge.

Introduction

2

The Claimant (‘Dynasty’) is a company existing under the law of Iraq. It is a joint venture which was formed in 2018 by two private energy companies in Kurdistan, namely South Kurdistan for Oil and Gas Services Limited (‘South Kurdistan’) and Tigris Holding.

3

Dynasty has brought proceedings against the First Defendant, the Kurdistan Regional Government of Iraq (the ‘KRG’), and Dr Hawrami, who was from 2006 until July 2019 the KRG's Minister for Natural Resources. Since that date he has had the title of Assistant Prime Minister for Energy Affairs.

4

The essential claim made in those proceedings is that the KRG, acting through Dr Hawrami, wrongfully failed to provide consent to a change of control in favour of Dynasty in connexion with two production sharing contracts (‘PSCs’) which had previously been entered into by the KRG with other parties.

5

The Claim Form was served, or purportedly served – there is an issue about whether it constituted valid service – on Dr Hawrami at Heathrow Airport on 31 October 2019. The KRG has not been served with the Claim Form.

6

On 14 November 2019 Dr Hawrami filed an Acknowledgment of Service indicating his intention to contest the jurisdiction of the English Court. His Part 11 challenge was issued on 12 December 2019.

7

The grounds on which Dr Hawrami contests the jurisdiction of the English Court can be grouped under four heads, as follows:

(1) That he has immunity from suit under s. 14 of the State Immunity Act 1978 (‘the SIA’);

(2) That he was not validly served with the Claim Form but should have been served by way of the special procedure laid down in s. 12 of the SIA;

(3) That the claim is non-justiciable by reason of the doctrine of foreign act of state; and

(4) That jurisdiction should be declined and the action stayed because England is not the appropriate forum.

8

Before I turn to consider these issues, it is necessary to set out the background in more detail.

Background

The KRI

9

The Kurdistan Region of Iraq (‘KRI’) is a largely autonomous region in Iraq. It borders Syria to the west, Iran to the east and Turkey to the north. It has an area of approximately 40,000 square kilometres. The KRG is the elected government of the KRI.

10

Under the constitution of Iraq (the ‘Constitution’), Iraq is a federal state. The Constitution provides special recognition to the KRI. Article 117 First provides that the KRI is recognised ‘as a federal region’. Although other regions were intended to be recognised as components of the federation, only the KRI is recognised in the Constitution itself, and in fact no other regions have been formed.

KROGL

11

The regulation of oil and gas in the KRI is carried out pursuant to the Kurdistan Region Oil and Gas Law (‘KROGL’) enacted in 2007. The KROGL contained a number of provisions of relevance to the issues on this application, including the following:

‘Article 4

The Regional Council shall be established as follows:

First: The Prime Minister – President;

Second: The Deputy Prime Minister – Deputy President;

Third: The Minister of Natural Resources – Member;

Fourth: The Minister of Finance and Economy – Member; and

Fifth: The Planning Minister – Member.

Article 5

The Regional Council shall perform the following functions:

..

Second: approve Petroleum Contracts …

Article 6

The Ministry [of Natural Resources] or its nominee shall:

First: oversee and regulate Petroleum Operations. The responsibilities of the Ministry include the formulation, regulation and monitoring of Petroleum Operation policies, as well as the regulation, planning, implementation, supervision, inspection, auditing and for enforcement of all Petroleum Operations by all Persons and all activities relating thereto, including the marketing of Petroleum; and

Second: negotiate, agree and execute all Authorisations, including Petroleum Contracts, entered into by the Regional Government.

Article 7

The Minister [of Natural Resources] shall exercise his powers and discharge his functions under this Law, including under Authorisations made hereunder, in such a manner as:

First: to ensure sound management of the petroleum industry; and

Second: to ensure that the petroleum industry is developed in a way that minimises damage to the natural environment, is economically sustainable, promotes further investment and contributes to the long-term development of the Region; and is reasonable and consistent with good oil industry practices.

Article 24:

First: The Minister may, after obtaining the approval of the Regional Council, conclude a Petroleum Contract for exploration and development in respect of a specified area, with a Person or a group of Persons … The Person, or group of Persons, may include private companies in the Region and other parts of Iraq or foreign petroleum companies.

Second: A Petroleum Contract may be based on a Production Sharing Contract, or on other contracts which the Minister considers to provide good and timely returns to the people of the Region, as stated in Chapter 10 of this Law.

Third: In order to be eligible to enter into a Petroleum Contract, a Person must demonstrate:

(1) the financial capability, and the technical knowledge and technical ability, to carry out the Petroleum Operations in the Contract Area, including direct experience in carrying out similar petroleum operations, and to submit reliable documents as proof; and

(2) a record of compliance with principles of good corporate citizenship, and a commitment to the Ten Principles of the Global Compact, launched by the United Nations on 26 July 2000.

Fourth:

(1) … a Petroleum Contract grants to the Contractor the exclusive right to conduct Petroleum Operations in the Contract Area.

(2) The Petroleum Contract may be limited to Crude Oil, Natural Gas or other constituents of Petroleum.

Sixth: A Petroleum Contract shall oblige the Contractor to carry on Petroleum Operations only in accordance with work programs, plans and budgets approved by the Minister or as otherwise specified in the Contract.’

The PSCs

12

As envisaged and provided for in the KROGL, the KRG has entered into a number of PSCs. A PSC is typically an agreement whereby a government or state entity authorises a contracting party to develop and exploit a state's natural resources in a given block, without granting title to the natural resources in the ground, and on terms that include provision for the recovery of costs incurred by the contractor out of production, if it is sufficient to do so, and for the sharing of any production between them. Under such agreements, the state has no payment obligations, and the risk of the development resides with the contractor.

13

The PSCs relevant to the present case relate to two contiguous oil and gas blocks within the KRI known as the Kurdamir Block and the Topkhana Block, and I will refer to them as the ‘Kurdamir PSC’ and the ‘Topkhana PSC’ respectively.

14

The Kurdamir PSC was concluded in February 2008 between the KRG and WesternZagros Ltd (‘WesternZagros’), a company existing under the laws of Cyprus but with its headquarters in Canada. In June 2008 an SPV called Talisman (Block K44) BV (‘Talisman 44’), then owned by Talisman Energy Inc, acquired a 40% participating interest.

15

The Topkhana PSC was concluded in August 2011 between the KRG and another SPV, Talisman (Block K39) BV (‘Talisman 39’), also owned by Talisman Energy Inc. In December 2014, with the consent of the KRG, Talisman 39 and Talisman 44 were acquired by Repsol Exploración SA, a wholly owned subsidiary of Repsol SA (‘Repsol’), an international oil and gas company with its headquarters in Spain.

16

The Kurdamir and Topkhana PSCs were in similar terms. It is convenient to refer to some of the terms of the Kurdamir PSC. That agreement, when originally concluded in 2008, was signed on behalf of the KRG by Dr Hawrami as Minister for Natural Resources and by Nechirvan Barzani, then the Prime Minister of the KRG.

17

The Kurdamir PSC defined ‘the Government’ as being the KRG. In the Recitals to the Kurdamir PSC appeared the following:

‘(A) The GOVERNMENT wishes to develop the petroleum wealth of the Kurdistan Region (as defined in this Contract) in a way that achieves the highest benefit to the people of the Kurdistan Region and all of Iraq, using the most advanced techniques of market principles and encouraging investment, consistent with the Constitution of Iraq including Article 112 thereof;

(B) In accordance with the Constitution of Iraq, the prevailing law of the Kurdistan Region is the Kurdistan Region Law (as defined in this Contract), except with regard to a matter wholly within the exclusive jurisdiction of the Government of Iraq;

(I) WesternZagros Limited is a company,

(i) with the financial capability, and the technical...

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