• Monday, 23 December 2024
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Kurdistan Regional Government wins complete arbitration victory over Genel Energy

Gulan Media December 9, 2024 News
Kurdistan Regional Government wins complete arbitration victory over Genel Energy

The Government has won an important arbitration case against Genel Energy Miran Bina Bawi Limited (GEMBBL).  GEMBBL is a wholly owned subsidiary of Genel Energy plc and was the contractor for both the Miran and Bina Bawi production sharing contracts (PSCs).  The arbitration was heard in London under the rules of the London Court of International Arbitration.

The dispute arose from GEMBBL’s failure to develop the Miran and Bina Bawi blocks as required by the PSCs and associated gas lifting agreements.  The main legal issue in the dispute was whether the Government was entitled to terminate the PSCs.

Faced with GEMBBL’s continued failure to develop the blocks, the Government took the decision to terminate the Miran and Bina Bawi PSCs in December 2021.  On 5 December 2021, the Government sent GEMBBL notices of termination under both PSCs.  On 10 December 2021, GEMBBL purported to terminate the PSCs with immediate effect and asserted that the Government was in repudiatory breach of its contractual obligations.  GEMBBL’s parent company, Genel Energy plc, advanced the same assertions in a press release dated 10 December 2021.  The press release stated that Genel intended to claim substantial compensation from the Government in arbitration proceedings in London.  

To protect its rights, the Government filed a request for arbitration against GEMBBL on 27 December 2021.  The Government sought declaratory relief from the arbitration tribunal that the Government’s termination of the Miran and Bina Bawi PSCs was valid.  GEMBBL brought counterclaims against the Government as part of the same proceedings.  The counterclaims alleged that the Government breached the PSCs and sought damages of more than US$1.75 billion.  The Government strongly denied and robustly defended GEMBBL’s counterclaims.  The arbitration tribunal heard the Government’s claims for declaratory relief, together with GEMBBL’s counterclaims, in London in February and March of 2024.

On 2 December 2024, the arbitration tribunal issued its Partial Award on the Merits in favor of the Government.  In a strong endorsement of the Government’s rights under the PSCs, the tribunal:

upheld the Government’s rights to terminate the Miran and Bina Bawi PSCs;
confirmed the Government’s interpretation of its termination rights under both PSCs;
confirmed that the Government validly issued its notices of termination on 5 December
2021 in accordance with its express contractual rights;

confirmed that GEMBBL unlawfully repudiated the Miran and Bina Bawi PSCs on 10 December 2021;

confirmed that the Government validly terminated the PSCs on 12 December 2021;

found the Government had not breached any of its contractual obligations to GEMBBL; and o     dismissed GEMBBL’s counterclaims in their entirety.
 

The Government now looks forward to the costs phase of the LCIA arbitration proceedings, where the Government will be seeking to recover its full legal costs from GEMBBL. 

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