An international arbitration court yesterday turned down US oil giant Chevron's age-old claim of around $240 million from Petrobangla.
Chevron had filed the case with the International Centre for Settlement of Investment Disputes (ICSID) in March, 2006 saying Petrobangla has been illogically deducting over the years from Chevron's earnings from gas sales.
Even though Petrobangla claims the amount to be $70 million, Dr Kamal Hossain and Associates, which represented Bangladesh at the court, said the total would end up to be around $240 million.
After avoiding the arbitration for three years, Petrobangla last year went to the ICSID, a wing of World Bank, and submitted that the deduction was fair and legal.
The ICSID that heard the case between 2007 and 2009 in The Hague, Washington and London yesterday announced its verdict of unanimous rejection of Chevron's claim.
Petrobangla has been deducting four percent wheeling charge from its payments to Chevron for the purchase of gas from Jalalabad gas field, which is operated by the American company under a Production Sharing Contract (PSC). This charge is imposed because Chevron uses Petrobangla's pipeline to transmit gas from Jalalabad field into the state-owned national gas network.
"We hope Chevron would now accept this verdict," said Petrobangla Chairman Hussain Monsur yesterday expressing happiness. He noted that similar instances in the past where a verdict went against Petrobangla, Bangladesh did not resort to the higher court. He said, "We hope Chevron would respectfully do the same."
"This goes to prove that if we have just cause…we can expect to get justice from an international court. If we invoke international law, we can get justice," Dr Kamal Hossain said over the phone from Germany yesterday.
This is the second time Dr Kamal brought victory for Petrobangla against a foreign oil company. In the early 90s, he led Petrobangla to win a case against Canadian company Scimitar.
Dr Kamal attributed the victory to a team effort of Petrobangla and a group of international lawyers who worked hard for Bangladesh at his request.
Bangladesh was represented by Dr Kamal Hossain; Dr Sharif Bhuiyan; Moin Ghani; Mahmudul Islam, senior advocate of the Bangladesh Supreme Court; Toby Landau, Essex Court of Chambers; Jeremy P Carver; Samuel A Stern, Hills Stern & Morley LLP; Prof Laurence Boisson de Chazournes, University of Geneva.
King & Spalding LLP represented Chevron.
Chief of External Affairs, Chevron Bangladesh Naser Ahmed giving the company's reaction noted, "Chevron is reviewing the decision of the ICSID and expects to have a statement tomorrow."
In a press release, Petrobangla said it would collect another $312 million from Chevron as wheeling charge over the next 20 years.
Though the dispute is quite old and Chevron wanted to settle the matter long ago through the ICSID, Petrobangla had been hesitant about going to the court.
Petrobangla sources explain the reason for being not-so-confident about going to an international court. In 2003-04, Petrobangla lost a similar case with British oil company Cairn in the arbitration court and lost substantial amount of money. The defeat is attributed to poor legal representation and lack of understanding between Petrobangla and its lawyers. During that period, Petrobangla had selected a panel of pro-BNP and Jamaat lawyers.
After Chevron filed the case, Petrobangla avoided going to the ICSID till late 2008 and resorted to local courts.
Petrobangla eventually turned to Dr Kamal Hossain in late 2008. In May last year, Petrobangla chief and other officials went to London and submitted Bangladesh's version of the case.
Chevron has been arguing that the four percent wheeling charge is applicable only if it uses Petrobangla's pipeline to supply gas to other parties, but it has been supplying gas from the three gas fields--Jalalabad, Moulvibazar and Bibiyana--to only Petrobangla.
Petrobangla argued that it has been deducting the four percent charge as per the Gas Purchase Sales Agreement (GPSA) with Chevron.
Bangladesh is presently facing another arbitration case from Canadian company Niko over payment of arrears for gas sales from the Feni gas field.
Regarding this case, Petrobangla chairman Hussain Monsur told The Daily Star, "We are trying to resolve this through a discussion. Niko has offered us some options. If this discussion is successful, Niko has promised to withdraw that case."