Mr Sadruddin Hashwani and Others v OMV Maurice Energy Ltd

Hearing date: 8 June 2015

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 parties before me are Zaver Petroleum Corporation Limited ("ZPCL") and Ocean Pakistan Limited ("OPL") on the one side and OMV Maurice Energy Limited ("OMV") on the other, in proceedings arising out of oil and gas exploration in Pakistan. I shall so refer to them, even though there have been certain immaterial changes in name and entity. There was an oil exploration licence granted in December 1999 to OPL's predecessor by the President of Pakistan, which incorporated the Pakistan (Exploration and Production) Rules 1986 ("the Rules"). A series of agreements followed:

i) The Petroleum Concession Agreement ("the PCA") dated 29 December 1999 between the President, a Pakistan entity called "Government Holdings" and OPL.

ii) A Joint Operating Agreement ("the JOA") also dated 29 December 1999 between Government Holdings and OPL.

iii) The Farmout Agreement ("FOA") dated 30 March 2000 between OPL, OMV and ZPCL.

iv) Two Deeds of Assignment amending the licence, the PCA and the JOA, one (the OMV Assignment) between the President, Government Holdings, OPL and OMV, ("the OMV Assignment") dated 30 March 2000, giving a 75% working interest in the relevant Block to OMV, and one ("the ZPCL Assignment") between the President, Government Holdings, OPL and ZPCL dated 20 October 2000, giving a 5% working interest in the Block to ZPCL.

There has unfortunately been since 2011 a plethora of proceedings in Pakistan, either five or six sets of proceedings in the Pakistani Courts, in essence arising out of claims by OMV that OPL and ZPCL have failed to pay calls under the JOA, which if correct would lead to substantial sanctions under the FOA. There have also been two arbitration applications in the Pakistani Courts, both brought by OMV against OPL and ZPCL, the first being an application for a stay, by reference to proposed arbitration under the provisions of the PCA and JOA and the Rules, in June 2011, and then an arbitration petition in October 2011, by reference to the arbitration provisions of the FOA and the Rules ("the 2011 Petition").

There has now been a Request for arbitration, made in November 2014 to the ICC by OMV against OPL and ZPCL (and Mr Hashwani, who controls both companies), by reference to the provisions of the PCA and JOA ("the 2014 Request"). There has been a challenge in these courts to the jurisdiction of the ICC by OPL and ZPCL (and indeed also a successful challenge by Mr Hashwani, to whom Andrew Smith J granted an injunction on 31 March 2015).

There are two applications before me:

i) The application by OPL and ZPCL by reference to s.72 of the Arbitration Act 1996 ("s.72"), challenging the jurisdiction of the ICC, seeking injunctions.

ii) OMV's applications for a stay of these proceedings on the basis that the ICC should determine the question of jurisdiction, alternatively a stay under s.9 of the 1996 Act, on the basis that there is a valid arbitration agreement.

The real issue is whether Article 28 of the PCA (incorporated, as will appear, into the JOA by its Article 17) now relied upon by OMV before the ICC is an arbitration agreement which governs the issues between the parties. Article 28 of the PCA reads as follows:

" 28.1 Any question or dispute arising out of or in connection with the terms of this Agreement or the Licence or any Lease (regardless of the nature of the question or dispute), shall, as far as possible, be settled amicably. Failing an amicable settlement within a reasonable period, such dispute shall be submitted to the International Center for Settlement of Investment Disputes (ICSID) established by the "Convention on the Settlement of Investment Disputes Between States and Nationals of Other States" and THE PRESIDENT and the Working Interest Owners, to the extent required by said Convention, hereby consent to arbitration thereunder.

The venue of the arbitration shall be in Pakistan or elsewhere as mutually agreed between THE PRESIDENT and the Foreign Working Interest Owners. If such mutual agreement cannot be reached, the venue shall be decided by the International Center. The award rendered shall be final and conclusive. The judgment on the award rendered may be entered in any court having jurisdiction or application may be made in such court for a judicial acceptance of the award and an order of enforcement as the case may be. The official language of arbitration will be English.

28.2 If, for any reason, the request for arbitration proceedings is not registered by ICSID, or if the ICSID fails or refuses to take jurisdiction over such dispute, such difference or dispute shall be finally settled by arbitrators under the Rules of Arbitration of the International Chamber of Commerce (the "Chamber Rules") and by three (3) arbitrators appointed in accordance with the Chamber Rules. The arbitrators shall not be nationals of Pakistan or of the country of the other party to the dispute nor shall any of such arbitrators be employees or agents or former employees or agents of any of the parties to the proceedings.

28.3 This Article is only applicable in case of a dispute between foreign Working Interest Owners inter se or between foreign Working Interest Owners and THE PRESIDENT, provided that in the event of a dispute between the Pakistani Working Interest Owner(s) inter se, or between the Pakistani Working Interest Owners and THE PRESIDENT, the arbitration shall be conducted in accordance with the Pakistan Arbitration Act."

Article 28 does not, in accordance with its terms, apply to disputes between a foreign Working Interest Owner (FWIO) and a Pakistani Working Interest Owner (PWIO). ZPCL is a PWIO and OMV is a FWIO, as is OPL. There is the proviso that disputes between PWIOs, or between PWIOs and the President are referred to arbitration under the Pakistani Arbitration Act, but the material words are clear: ICC arbitration as provided for by Article 28 is only applicable to disputes between FWIOs.

Article 17 of the JOA reads as follows:

" Any dispute arising out of this Joint Operating Agreement shall be dealt with mutatis mutandis in accordance with Article XXVIII of the Concession Agreement."

The first question is whether Article 28 of the PCA and Article 17 of the JOA apply to the dispute between OMV and OPL, being both FWIOs. Mr Hancock QC, who appears for OMV, submits that they plainly do and that the claims by OMV against OPL for unpaid cash calls, and the circumstances in which they are unpaid and the consequences of their being unpaid, falls within the ICC arbitration pursuant to Articles 28 and 17.

Mr Brindle QC for OPL and ZPCL submits that Article 28 is only applicable " in case of a dispute between [FWIOs] inter se", and that this dispute is not between FWIOs inter se but between a FWIO, OMV, and two other Working Interest Owners, one of which is a FWIO and one of which is a PWIO.

He submits that the structure and intent of the Article is clear, namely that what is intended is to leave disputes between foreign companies to foreign arbitration, so as to avoid the submission of a foreign party to domestic arbitration, and disputes between Pakistani entities to Pakistani arbitration, and that such a hybrid as this claim does not fall within Article 28 at all: it falls rather within one or both of two arbitration provisions, namely (i) the Rules — to which the PCA is subject, by reference to Article 29.6 (" where any matter is not specifically dealt with in this Agreement") and similarly the JOA, by Article 18, which makes clear reference to the Rules – and (ii) Article 7.2 of the FOA, to which, as set out above, all three of OPL, ZPCL and OMV were parties:

i) Rule 73 reads as follows:

" Arbitration – Except as otherwise agreed, any question or dispute regarding a Petroleum right or any matter or thing connected therewith shall be resolved by arbitration in Pakistan, and in accordance with Pakistani laws."

ii) Article 7 of the FOA reads in material part:

" 7.2 This Agreement and the relationship between the Parties shall be governed by and Interpreted in accordance with the laws of the Islamic Republic of Pakistan. With respect to all disputes to be resolved hereunder, the Parties agree that the forum will be in Islamabad, Pakistan and any dispute shall first besettled by negotiation by the Parties and then resolved by reference to three Arbitrators each one to be nominated by the Parties in accordance with the Arbitration Act 1940 or any other statutory laws enforced for the time being in Pakistan. And in case of any disagreement between the Arbitrators, by an Umpire to be appointed by the Arbitrators but with the consent of the Parties, whose decision shall be final and binding upon the Parties.

7.3. However there shall be no bar on the Parties to settle any dispute through the laws of England after exhausting option/remedy available under Article 7.2 above."

Hence if Mr Brindle's submissions be correct, there is no lacuna and thus no need for any concern in concluding that Article 28...