TABLE OF ABBREVIATIONS | |
AWP | Annual Work Program |
BIT or Treaty | Bilateral Investment Treaty; specifically, the Bilateral Investment Treaty concluded between the United States of America and the Republic of Kazakhstan Concerning the Encouragement and Reciprocal Protection of Investment, dated 19 May 1992 |
Caratube | Caratube International Oil Company LLP |
Caratube I arbitration | Caratube International Oil Company LLP v Republic of Kazakhstan; ICSID Case No. ARB/08/12 |
CCC | Consolidated Contractors (Oil and Gas) Company S.A.L. |
CDC | The Central Committee on Development of Deposits of the MEMR (the Central Development Committee) |
CER | Caspian Energy Research Limited Liability Company |
CIOC | Caratube International Oil Company LLP |
Claimants | Up to the decision on jurisdiction: Caratube International Oil Company LLP and Mr. Devincci Salah Hourani. Thereafter: Caratube International Oil Company LLP |
Contract | Contract [No. 954] for the Exploration and Production of Hydrocarbons within Blocks XXIV-20-C (partially); XXIV-21-A (partially), including Karatube Field (oversalt) in Baiganin District of Aktobe Oblast of the Republic of Kazakhstan between Ministry of Energy and Mineral Resources (Competent Authority) and Consolidated Contractors (Oil and Ga) Company S.A.L. (Contractor), dated 27 May 2002 |
Counter Memorial | The Respondent’s Counter Memorial on Jurisdiction and the Merits dated 20 March 2015 |
CRP | Cessation risk premium |
Decision on Provisional Measures | The Tribunal’s Decision on the Claimants’ Request for Provisional Measures dated 4 December 2014 |
Decision on "Leaked Documents" | The Tribunal’s Decision on the Claimants’ Request for the Production of "Leaked Documents" dated 27 July 2015 |
Defense on Jurisdiction | The Claimants’ Defense on Jurisdiction dated 17 September 2015 |
DCF | Discounted cash flow |
DLOM | Discount for lack of marketability |
Exh. C- | Claimants’ Exhibits |
Exh. CLA- | Claimants’ Legal Exhibits |
Exh. R- | Respondent’s Exhibits |
Exh. RL- | Respondent’s Legal Exhibits |
Extended MWP | Revised Minimum Work Program agreed between CIOC and MEMR for the two-year extension period, dated 23 April 2007 |
FCP | First Calgary Petroleum |
FET | Fair and equitable treatment |
FIL | Foreign Investment Law |
FMV | Fair market value |
fn | Footnote |
FRV | Full reparation value |
FSU | Former Soviet Union |
Geology Committee | The Committee on Geology and Subsoil Resources Management |
GT | Grant Thornton |
ICSID | International Centre for Settlement of Investment Disputes |
IFM | IFM Resources, Inc. |
ILA | International Law Association |
ILC Articles | International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts with comments, November 2001, Supplement No. 10 (A/56/10), chap. IV.E.1 |
IRR | Internal rate of return |
JOR | JOR Investment Inc. SAL |
KNB | National Security Service of the Republic of Kazakhstan |
Law on Oil | Kazakh Law on Oil of 28 June 1995 |
Memorial | The Claimants’ Memorial dated 19 September 2014 |
MEMR | The Ministry of Energy and Mineral Resources of the Republic of Kazakhstan |
MFN | Most-Favored Nation clause |
MT | Metric tonnes |
MWP | Minimum Work Program |
NPV | Net present value |
p./pp. | Page(s) |
para./paras. | Paragraph(s) |
PCIJ | Permanent Court of International Justice |
PO1 | Procedural Order No. 1 dated 20 June 2014 |
PO2 | Procedural Order No. 2 on the Claimants’ Document Production Requests on Jurisdiction dated 24 July 2015 |
PO3 | Procedural Order No. 3 on the Parties’ Remaining Document Production Requests dated 31 August 2015 |
PO4 | Procedural Order No. 4 on the Respondent’s Supplemental Document Production Requests dated 14 September 2015 |
Request for Arbitration | The Claimants’ Request for Arbitration dated 5 June 2013 |
Respondent | The Repulic of Kazakhstan |
Respondent’s First Post-Hearing Brief | The Respondent’s First Post-Hearing Brief dated 4 March 2016 |
Respondent’s Reply PostHearing Brief | The Respondent’s Reply Post-Hearing Brief dated 13 May 2016 |
Revised Work Program | Revised Minimum Work Program agreed between CIOC and MEMR for the two-year extension period, dated 23 April 2007 |
SPE-PRMS | Society of Petroleum Engineers Petroleum Resources Management System |
Tr. [page:line] | Transcript of the hearing on jurisdiction and the merits |
TU Zapkaznedra | The Western Kazakhstan Territorial Administration of Geology and Subsoil Use, based in Aktobe |
UNCITRAL | United Nations Commission on International Trade Law |
US | United States of America |
Vienna Convention | Vienna Convention on the Law of Treaties, concluded at Vienna on 23 May 1969 |
World Bank Guidelines | The World Bank Group, Legal Framework for the Treatment of Foreign Investment: Volume II, Report to the Development Committee and Guidelines on the Treatment of Foreign Direct Investment dated 21 September 1992 |
September 2001 | ||
Azurix v Argentina | Azurix Corp. v Argentine Republic, ICSID Case No. ARB/01/12, Award, 14 July 2006 | CLA-86 |
Barberie v Venezuela | Ann Eulogia Garcia Cadiz (Loretta G. Barberie) v Venezuela, American-Venezuela Commission, 1890 | As cited in Gentini, CLA-204 |
Bayindir | Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009 | RL-122 |
Benvenuti & Bonfant v Congo | S.A.R.L. Benvenuti & Bonfant v People’s Republic of the Congo, ICSID Case No. ARB/77/2, Award, 8 August 1980 | CLA-123 |
Biwater Gauff v Tanzania | Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008 | CLA-101 |
Cable Television Nevis | Cable Television of Nevis, Ltd. and Cable Television of Nevis Holdings, Ltd. v Federation of St. Kitts and Nevis, ICSID Case No. ARB/95/2, Award, 16 December 1996 | CLA-131 |
Caratube I arbitration | Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award, 5 June 2012 | CLA-8 |
CCL v Kazakhstan | CCL v Republic of Kazakhstan, SCC Case 122/2001, Jurisdictional Award, 2003 | CLA-288 |
Cementownia "Nowa Huta" S.A. v Turkey | Cementownia "Nowa Huta" S.A. v Republic of Turkey, ICSID Case No. ARB(AF)/06/2, Award, 17 September 2009 | RL-31 |
Chorzow Factory | Case Concerning the Factory at Chorzow (Germany v Poland), ICJ Reports Series A. No. 17, 13 September 1928 | CLA-102 |
CME v Czech Republic | CME Czech Republic B. V. (The Netherlands) v Czech Republic, UNCITRAL, Final Award, 14 March 2003 | RL-199 |
CMS | CMS Gas Transmission Company v Argentine Republic, ICSID Case No. ARB/01/8, Decision of the Tribunal on Objections to Jurisdiction, 17 July 2003 | CLA-188 |
DLP v Yemen | Desert Line Projects LLC v Republic of Yemen, ICSID Case No. ARB/05/17, Award, 6 February 2008 | CLA-34 |
Europe Cement | Europe Cement Investment and Trade S.A. v Republic of Turkey, ICSID Case No. ARB(AF)/07/2, Award, 13 August 2009 | RL-30 |
Exxon Mobil | Venezuela Holdings B.V. and others v Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Award, 9 October 2014 | RL-181 |
Gemplus v Mexico | Gemplus, S.A., SLP, S.A. and Gemplus Industrial, S.A. de C.V. v United Mexican States, ICSID Case No. ARB(AF)/04/3, and Talsud, S.A. v United Mexican States, ICSID Case No. ARB(AF)/04/4, Award in Conjoined Arbitrations, 16 June 2010 | CLA-115 |
Genin | Alex Genin and others v Republic of Estonia, ICSID Case No. ARB/99/2, Award, 25 June 2001 | RL-136 |
Gentini | Gentini Case (of a general nature), Italian-Venezuelan Mixed Commission, 1903 | CLA-204 |
Goetz | Antoine Goetz and others v Republic of Burundi, ICSID Case No. ARB/95/3, Award, 10 February 1999 | CLA-301 |
Gold Reserve v Venezuela | Gold Reserve Inc. v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, 22 September 2014 | CLA-307 |
Henderson v Henderson | Henderson v Henderson, High Court of Chancery, 3 Hare 100, [1843] EngRC 917, (1843) 67 E.R. 313, Sir James Wigram VC, 20 July 1843 | RL-38 |
Inceysa | Inceysa Vallisoletana S.L. v Republic of El Salvador, ICSID Case No. ARB/03/26, Award, 2 August 2006 | As cited in Europe Cement, RL-30 |
Interocean v Nigeria | Interocean Oil Development Company and Interocean Oil Exploration Company v Federal Republic of Nigeria, ICSID Case No. ARB/13/20, Decision on Preliminary Objections, 29 October 2014 | CLA-207 |
James M Saghi v Iran | James M. Saghi, Michael R. Saghi and others v Islamic Republic of Iran, Iran - United States Claims Tribunal Case No. 298, Award, 22 January 1993 | CLA-305 |
KT Asia Investment Group | KT Asia Investment Group B.V. v Republic of | RL-83 |
Turkey, ICSID Case No. ARB/02/5, Award, 19 January 2007 | ||
Romak | Romak S.A. (Switzerland) v Republic of Uzbekistan, PCA Case No. AA280, Award, 26 November 2009 | RL-28 |
RSM et al v Grenada | RSM Production Corporation and others v Grenada, ICSID Case No. ARB/10/6, Award, 10 December 2010 | RL-39 |
Ruby Roz | Ruby Roz Agricol LLP v The Republic of Kazakhstan, UNCITRAL, Award on Jurisdiction, 1 August 2013 | CLA-17 |
Rumeli | Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 July 2008 | CLA-16 |
Saba Fakes | Saba Fakes v Republic of Turkey, ICSID Case No. ARB/07/20, Award, 14 July 2010 | RL-20 |
Sapphire v NIOC | Sapphire International Petroleums Ltd. v National Iranian Oil Company, ad hoc Tribunal, Award, 1963 | CLA-110 |
Siag v Egypt | Waguih Elie George Siag and Clorinda Vecchi v Arab Republic of Egypt, ICSID Case No. ARB/05/15, Decision on Jurisdiction, 11 April 2007 | CLA-297 |
SOABI v Senegal | Societe Ouest Africaine des Betons Industriels v Republic of Senegal, ICSID Case No. ARB/82/1, Jurisdictional Decision, 1 August 1984, and Award, 25 February 1988 | CLA-116 |
Soufraki | Hussein Nuaman Soufraki v United Arab Emirates, ICSID Case No. ARB/02/7, Award, 7 July 2004 | RL-12 |
Spader | Spader et al. Case, American-Venezuela Commission, 1903 | CLA-203 |
SPP v Egypt | Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award, 20 May 1992 | CLA-117 |
Spyridon Roussalis v Romania | Spyridon Roussalis v Romania, ICSID Case No. ARB/06/1, Award, 7 December 2011 | CLA-77 |
Suez | Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios | CLA-299 |
Dr. Hamid G. Gharavi
Ms. Nada Sader
DERAINS & GHARAVI
25, rue Balzac
75008 Paris, France
Tel. + 33 1 40 55 51 00
Emails: hgharavi@derainsgharavi.com
nsader@derainsgharavi.com
Mr. Peter
M. Wolrich
Mr. Geoffroy Lyonnet
Mr. Jerome Lehucher
Ms. Marie-Claire Argac
Ms. Lisa Arpin-Pont
Ms. Olena Stasyk
CURTIS, MALLET-PREVOST, COLT & MOSLE LLP
6, avenue Velasquez
75008 Paris, France
Tel. +33 1 42 66 39 10
Emails pwolrich@curtis.com
glyonnet@curtis.com
jlehucher@curtis.com
margac@curtis.com
larpin-pont@curtis.com
ostasyk@curtis.com
Ms. Gabriela Alvarez Avila
CURTIS, MALLET-PREVOST, COLT & MOSLE LLP Ruben Dario 281, Piso 9 Col. Bosque de Chapultepec 11580 Mexico, D.F.
Mexico
Tel. +52 55 5282 1100
Email galvarez@curtis.com
Mr. Yerzhan Mukhitdinov
CURTIS, MALLET-PREVOST, COLT & MOSLE LLP
101 Park Avenue
New York, New York 10178, USA
Tel. +1 212 696 6000
Email ymukhitdinov@curtis.com
3.1 This Contract shall be effective from the moment of its state registration with the authorised State Agency upon obligatory issuance of the certificate of the registration of this Contract ("Effective Date of this Contract").
3.2 The Exploration period shall be for a period of 5 years (up to 2007) beginning from the Effective Date of this Contract and the Production period shall be for a period of 25 years (up to 2032) beginning from the date of commercial Production for each deposit.
3.3. The Validity term of this Contract shall include the Exploration and Production periods in accordance with Section 3.2 plus all extensions unless this Contract is earlier terminated as provided in this Contract.
3.4 The Validity Term of this Contract can be extended in accordance with the terms and conditions of this Contract and the procedures provided by the current legislation of the State.
3.5 In case of Production, the Contractor shall have the exclusive right to extend the Validity Term of this Contract for such period of time as the Contractor requires to realise the full commercial Production of the Deposit(s) and such extension shall be agreed by the Parties by written amendment to this Contract.
3.6 In case the Validity Term of this Contract is extended, this Contract must be amended in writing by both Parties, provided that such amendments do not contradict the terms and conditions of this Contract.
9.1 The period of Exploration shall consist of five consecutive years as agreed in this Contract and the Contractor shall have the right to extend the period of Exploration twice with a duration of each period of up to two years in accordance with the Legislation on Subsoil Use. The Parties shall in advance determine the areas for continued Exploration in the Contract Area and agree on the respective amendments to the Work Program.
10.1 In the event that the Contractor discovers a Hydrocarbon Deposit which in its sole opinion is economically and technically suitable for Production, it shall immediately inform the Competent Authority and shall within 120 days prepare a report for an estimation of its reserves for submission to the authorised State Agency for confirmation of the reserves of the Deposit.
10.2 The Exploration Stage can be extended as provided in Section 9.1 for the period the Contractor determines necessary to properly evaluate the Deposit.
10.3 The authorised State Agency shall, pursuant to the procedure established by the legislation on Subsoil Use, provide a State expert evaluation of the reserves of the Deposit.
10.4 After confirmation by the authorised State Agency as provided in Section 10.3 above, the Contractor shall within 120 days prepare a feasibility study of the efficiency of the development of the discovered Deposit ("Development Plan") within the framework of the Work Program and shall submit it to Competent Authority.
10.5 A Commercial Discovery gives the exclusive right to the Contractor to proceed to the Production stage.
10.6 Upon a Commercial Discovery the Contractor shall be entitled to reimbursement of its expenses in connection with Exploration and shall be reimbursed during Production of the Commercial Discovery in accordance with this Contract and the Legislation of the Republic of Kazakhstan.
10.7 If, as a result of Exploration, there is no Commercial Discovery, the Contractor shall have no right to reimbursement of its expenses incurred by the Contractor during Exploration. However, the Contractor shall have the right to deduct those expenses against any revenues or income received in connection with activities under this Contract.
25.1 Assignment of rights and obligations under this Contract to a Third Party, other than pledging the right for Subsoil use, shall be allowed only upon written consent of the Competent Authority. The Competent Authority may not deny assignment of the Subsoil use right to a Subsidiary, if the Contractor has given to the Competent Authority a guarantee of full performance of the obligations under the Contract jointly and severally with the Subsidiary.
25.2 The expenses related to the assignment of rights and obligations under this Contract shall be borne by the Contractor and shall not be reimbursed by the State.
25.3 If the Contractor assigns such rights and obligations under this Contract to a Subsidiary, registered in the territory of the Republic of Kazakhstan, then such Subsidiary will have all the rights and obligations and exemptions under this Contract.
25.4 As long as the Contractor keeps any participation in the Contract, the Contractor and the Third Party to whom the Contractor has assigned its rights and obligations, shall bear joint and several liability under the Contract.
26.1 This Contract and other agreements signed on the basis of this Contract shall be governed by the law of the State unless stated otherwise by the international treaties to which the State is a party.
26.2 The Contractor shall comply with the international standards for protection of the environment in the Contract Area.
27.1 The Parties shall take all measures to resolve all disputes and arising from the Contract by negotiations.
27.2 Referral to Arbitration. In the event that any dispute cannot be resolved by amicable settlement within sixty (60) days after notice in writing of such by one Party to the other Party, the Parties agree that their exclusive means of dispute resolution shall be (a) to submit the matter to arbitration for final settlement in accordance with the then current Rules of Conciliation and Arbitration of the International Centre for Settlement of Investment Disputes ("ICSID") if the Competent Authority has become a party to the ICSID Convention at the time a proceeding is instituted, or (b) to submit the dispute for resolution according to the Arbitration (Additional Facility) Rules of ICSID if the Competent Authority has not become a party to the ICSID Convention at the time when any proceeding is instituted. Any arbitral tribunal constituted pursuant to this Contract shall consist of three arbitrators, one appointed by the Contractor and one appointed by the Competent Authority, and a third arbitrator, who shall be president of the Tribunal and shall not be a resident of Kazakhstan, appointed by agreement of the Parties, or failing such agreement, by the Chairman of the Administrative Council of ICSID. In the event that the Contractor or the Competent Authority fails to appoint an arbitrator within ninety (90) calendar days after the notice of registration of a request for arbitration has been sent the remaining arbitrators shall be appointed in accordance with the Rules under ICSID.
27.3 If for any reason the request for the arbitration proceeding is not registered by ICSID or if ICSID fails or refuses to take jurisdiction over any matter submitted by the Parties under this Section 27, such matter shall be referred to and resolved by arbitration in accordance with the United Nations Commission on International Trade Law ("UNCITRAL") Arbitration Rules in effect at the date of submission of the matter. The seat of Arbitration shall be London, England. In such event the Parties hereby consent to the jurisdiction of the London Court of International Arbitration and all the provisions of this Article 27 shall equally apply to such arbitration.
27.4 Proceedings. The English language shall be used throughout the arbitral proceedings and the proceedings shall be held in London, England unless Otherwise agreed by the Parties. The Parties shall be entitled to be legally represented at the arbitration proceedings, however the absence or default of a Party shall not prevent or hinder the arbitration proceedings at any stage. All notices given by one Party to the other in connection with the arbitration shall be given in accordance with this Contract.
27.5 Arbitral Award. Any arbitral award made in respect of any matter submitted to arbitration pursuant to Section 27.2 shall be final and binding upon the Parties. Any award of a monetary sum shall be rendered in hard currency, free of any tax or any other deduction. The award shall include interest from a date determined by the arbitrators, at a commercial rate to be fixed by the arbitrators. Within three (3) months from the date determined by the arbitrators, full payment of any arbitral award shall be made. The arbitral award may provide for specific performance or any other remedy awarded by the arbitral tribunal.
27.6 Costs. The costs of the arbitration, including legal costs, shall be borne by the unsuccessful Party or, if neither Party is wholly successful, shall be borne by the Parties in such proportions as may be specified in the arbitral award or, if no such specification is made, shall be borne by the Parties in equal shares. Any costs, fees or Competent Authority charges incidental to enforcing the arbitral award shall, to the maximum extent permitted by law, be borne by the Party against whom such enforcement is made.
27.7 Enforcement and Consent. Each of the Parties hereby consents to submit to ICSID any dispute, controversy or claim arising out of or in connection with this Contact. Each of the Parties agrees that any judgement rendered by the arbitrators against it and entered in any court of record in London, England or any other competent court, may be executed against its assets in any jurisdiction. The Parties consent to being sued for enforcement of the award and any costs, fees or other charges for which they may be liable under this Article. Each of the Parties hereby agrees that all of the transactions contemplated by this Contract shall constitute and shall be deemed to constitute an investment within the jurisdiction of ICSID. The Competent Authority warrants that it is a structural subdivision and agent of the Government of the Republic of Kazakhstan.
27.8 Furthermore, it is hereby agreed that the Contractor is a resident of Lebanon, or in the event of assignment as a national of the resident country of the assignee, and therefore the Contractor shall be treated as a resident of Lebanon, or other country if appropriate, for purposes of the ICSID Convention.
27.9 Waiver of Immunity. Each of the Parties expressly and irrevocably waives any claim to immunity (including, but not limited to, sovereign immunity, immunity from service of process, immunity of property from award) from suit, execution, set-off, attachment or other legal process under any applicable law or in respect of any arbitral award rendered.
27.10 Continued Performance. If a matter is submitted to arbitration pursuant to Section 27.3 of this Contract the Parties shall, during the period of such arbitral proceedings and pending the resolution of such matter or the making of the arbitral award, continue to perform their respective obligations under this Contract so far as circumstances will allow and such performance shall be without prejudice to any final agreement, judgement or award made in respect of that matter. To the extent that the circumstances do not allow the performance of obligations under this Contract then the period for the performance of those obligations and any obligations relevant thereon shall be extended by the period between the date of the notice of arbitration to the date of compliance with the award.
28.1 The provisions of the Contract shall remain unchanged during the Validity Term of this Contract.
28.2 Changes and additions to the Legislation of the Republic of Kazakhstan that deteriorate the position of the Contractor, made after the conclusion of the Contract shall not apply to the Contract.
28.3 In case of any changes and additions specified in Section 28.2, the Parties will, by a written agreement amend the Contract accordingly as to restore the initial economic interests of the Parties.
28.4 The Contractor shall enjoy all guaranties and protections provided by the Law on Foreign Investments.
29.1 The Competent Authority will mandatorily suspend the Contract if there was a direct threat to life or to health of people working or living in the zone of impact of works, conducted under the Contract.
29.2 The Competent Authority shall have the right to suspend the validity of this Contract in cases:
- of performance by the Contractor of the activity which is not stipulated by the Contract;
- of violation by the Contractor during its activity of the current legislation of the State regarding protection of Subsoil and environment and safety of works;
- of violation by the Contractor during its activity of the procedure regarding payment of taxes and other obligatory payments established by this Contract;
- of assignment by the Contractor in full or in part of the rights under the Contract to a Third Party with [sic] in violation of Article 25 of this Contract;
- of interruption by the Contractor of production within the framework of the Work Program for a period exceeding 180 (one hundred and eighty) days except for the cases related to Acts of God (force-majeure);
- of violation of the terms and conditions related to the observance of confidentiality of the geological and geophysical information under this Contract.
29.3 In case of suspension of the effect of this Contract, the Competent Authority shall notify the Contractor in writing about the reasons of such suspension and shall establish a reasonable period of time for their elimination. The Contractor shall have the right, in the event that it finds it impossible to eliminate the reasons for the suspension within the time period established by the Competent Authority, to apply to the Competent Authority for a longer time, providing justification for the additional time requirements and then the Competent Authority will consider the extension if the Competent Authority considers the justification reasonable. Provision of such extension for the Contractor may not be unreasonably denied.
29.4 Upon elimination of such reasons for the suspension of the Petroleum Operations and the Contract, the Petroleum Operation and the Contract shall be immediately resumed.
29.5 The Contract shall be terminated ahead of schedule only in the following cases:
- if the Contractor refuses to eliminate the reasons which caused the decision to suspend Exploration and Production, or if it does not eliminate such reasons within the time period sufficient for their elimination.
- if the Contractor fails to commence Petroleum Operations within the terms established by the Contract and does not provide a reasonable explanation;
- if it is impossible to eliminate the reasons which caused the suspension of Petroleum Operations, related to a threat to health and life of people.
-if the Contractor substantially violates[5] the obligations established by the Contract or Work Program;
- if the Contractor is recognised as bankrupt according to the current legislation of the State, except for the case when the right of Subsoil use is the subject of a pledge according to the current legislation of the State.
29.6 If either Party to the Contract commits a material breach of the Contract, the other Party to the Contract shall have the right to demand that such breach be remedied within a reasonable specified period of time. If such breach is not remedied within such period of time, the complaining Party shall have the right to terminate this Contract by giving ninety (90) days’ written notice to the defaulting Party. However, if the defaulting Party contests such material breach of the Contract, no termination shall occur unless an unremedied material breach shall have been judged by the final award of arbitration in accordance with Article 27 of this Contract.
29.7 The effect of this Contract may be terminated before the expiry of its Validity Term on the initiative of the Contractor at any time and on any ground, including ahead-of-schedule relinquishment of the whole Contract Area.
29.8 The Contract shall terminate for the reasons specified in Section 29.5 of the Contract, 60 days after the Contractor receives a written notice from the Competent Authority stating that the Contract is terminated ahead of time based on the decision of the Court.
29.9 The Parties shall not be exempt from performing current obligations which are already due upon termination of this Contract and which remain unfulfilled upon termination of this Contract. Upon termination of this Contract for any reason, including at the initiative of the Contractor as described in Section 29.7, the Contractor shall not be liable for any obligation which is not yet due, including any unexpended portion of its Work Program.
29.10 The authorised State Agency on emergencies shall have the right to submit proposals to the Competent Authority to suspend the Contract in the event of repeated violations by the Contractor of norms and rules of safe conduct of work.
Under the Work Program, the following scope of works was performed in 2006:
1. Drilling of persalt wells is almost completed (except for the one, as per recommendations of the Designer’s supervision ad MEMR CDC).
2. Main stage of logging and CDP-3D seismic survey is completed: field works, processing and interpretation. Based on the results of these works, new data on structural and tectonic structure of the entire section were obtained (persalt, subcornice and subsalt) and prospective objects are to be drilled in the licensed area (including the main block - Southeastern flank) (Figure 5).
3. Lab analyses of core, bottomhole and surface samples are almost finished. Thereby, a basis for reserves estimation of all subsalt pay strata of the field upon pilot exploitation completion (December 2007) are almost completed.
During the extension period, it is planned to complete works on follow-up exploration of persalt, subcornice and subsalt complexes of formations in the Caratube field and adjacent territories of the licensed area: required drilling and logging suite, testing and lab analyses and other works, necessary for implementation of the Caratube field development stage.
[...]
As per the extension work program for 2007-2009, main emphasis will be laid on follow-up exploration and study of lower parts of the section: subcornice and subsalt complexes (Figure 6).
Main geologic-geophysical objectives of this stage:
1. Delineation and defining of potential structures of subcornice and subsalt complexes, prospectivity of which was confirmed by oil shows in wells ## G-69, G-25, G-38 and others.
2. Performance of Full Logging Suite (including hydrodynamic survey and geotechnical study) and a complex of lab analyses of core, samples from well productive strata.
To implement the aforesaid geologic-geophysical tasks, construction of deep wells is planned:
1. Subcornice complex:
- 2 wells (TD 2800-3200 m) in the western part of the license territory. Total drilling volume is 6000 linear m.
2. Subsalt complex:
- 2 wells (TD 4800-5200 with penetration of subsalt horizons P1, P2) in the area of a big subsalt uplift (N-S trend). Total drilling volume is 10000 linear m.
3. Implementation of this program also provides for a certain volume of drilling to study persalt and salt section within the Caratube licensed area:
- 4 wells/4500 linear m.
Thus, implementation of the Work Program during the extension period for 2007-2009 will almost complete the following stages:
1) Exploration stage
2) Pilot exploitation stage
3) Stage of final reserves estimation in the Caratube field
4. And it will give a start to the stage of commercial exploitation of the field within the Caratube licensed area up to 2032 as per the Contract.
5. It cannot be excluded that under certain circumstances, if additional surveys are required, pursuant to RoK Law "On subsoil" (Article 43), exploration extension for more 2 years is possible.13
As the results of this audit demonstrate, despite the continued nonperformance of the terms of the Contract and of the work programs by the Contractor ("Caratube International Oil Company LLP"), the Technical Council of the Authorized Agency (i.e. TU "Zapkaznedra") annually approves work programs and, moreover, carries over part of the unfulfilled obligations of the current year to the following year. This shows the Competent Authority, i.e. the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan’s lack of appropriate monitoring of the activities of the subsoil user and failure to take measures to rectify noncompliance with the terms of the Contract.
Given the preceding, on the basis of Article 83 of the Constitution of the Republic of Kazakhstan, Article 25 of the Law of the Republic of Kazakhstan "On the Prosecutor’s Office",
YOU ARE INVITED to:
Review this recommendation on the elimination of disregard of the rule of law, in order to:
1. Take measures to notify Caratube International Oil Company LLP of the necessity to address the abovementioned breaches for the elimination of the discovered legal breaches and for prevention in the future.
2. Settle an issue of unilateral termination of the Contract in connection with the existing breaches of obligations provided in the work programs.
The Ministry of Energy and Mineral Resources of the Republic of Kazakhstan as the authority empowered to execute and fulfill subsoil use contracts, according to Article 70 of the Law of the Republic of Kazakhstan On Subsoil and Subsoil Use, hereby notifies you that:
You have violated the following terms and conditions of Contract for Exploration and Production of Hydrocarbons within the Blocks XXI-20-C (partly) and XXN-21-A (partly) including the Karatube Field (oversaline) in Baiganin District, Aktobe Region, No. 954 of May 27, 2002:
- the working program has not been fulfilled (cl. 8.1);
- Iong-term environmental forecast under the Contract has not been submitted to the Competent Authority (cl. 7. 2.18);
- risk, property and liability insurance program has not been submitted for approval of the Competent Authority (cl. 18.1);
- the program for annual remittance of 3% of capital costs to the liquidation fund has not been fulfilled in full (cl. 19.5).
Therefore, you are required to remedy all Contract violations specified above within one month and to provide the Competent Authority with all the appropriate documents confirming that the violations have been remedied. You are also required to report on the measures taken in order to remedy and prevent failure to fulfill your contractual obligations.
Should you fail to remedy the above Contract violations, in accordance with the Law of the Republic of Kazakhstan On Subsoil and Subsoil Use, the Competent Authority may unilaterally dissolve the Contract for Exploration and Production of Hydrocarbons within the Blocks XXI-20-C (partly) and XXN-21-A (partly) including the Karatube Field (oversaline) in Baiganin District, Aktobe Region, No. 954 of May 27, 2002.
The Ministry of Energy and Mineral Resources of the Republic of Kazakhstan, as the competent authority for execution and performance of subsoil use contracts, in accordance with Article 70 of Law No. 2828 of the Republic of Kazakhstan "On Subsoil and Subsoil Use" dated January 27, 1996 (hereinafter referred to as the Law) has sent you a notice of your violation of the terms of Contract No. 954 of May 27, 2002 for the exploration and production of raw hydrocarbons within the blocks XXIV-20-C (partial) and XXIV-21-A (partial), including the Caratube suprasalt field in the Baiganinsky district of the Aktyubinsk Region (The Ministry of Energy and Mineral Resources reference No. 14-02-2498 of March 25, 2007). You received this notice on March 28, 2007.
The notice stated the timeframes for submission of the information on the reasons for your failure to fulfil the contractual obligations, as well as on remediation of the violation and the actions taken. Appropriate information and the documents confirming remediation of the violations have not been submitted to the Competent Authority within the timeframe established.
For this reason, in accordance with Article 45-2, clause 2 of the Law, the Competent Authority is hereby requesting immediate termination of operations under Contract No. 954 of May 27, 2002, pending decision on unilateral termination of the contract.
Given that the delivery receipt of the registered letter [i.e. the Notice of 25 March 2007], by which the notice of violation of contractual obligations was sent to the Contractor, has no precise information as to on whom it was served and in order to comply with the procedures prescribed by Section 29 of the Contract, the Ministry of Energy decided to resend to the Contractor the notice of violation of the Contract and of the resuming of operations under the Contract, having duplicated it by fax.
[…] [Y]ou are in violation of your obligations under Contract No. 954 of May 27, 2002 for the exploration and production of hydrocarbons within the blocks XXIV-20-C (partial) and XXIV-21-A (partial), including the Caratube post-salt field in the Baiganinsky district of the Aktyubinsk Region (hereinafter referred to as the Contract).
For this reason, you shall:
- within ten days of receipt of the present notice, submit to the Competent Authority the information on the reasons for your failure to fulfil the contractual obligations;
- Within one month of receipt of the present notice, remedy the failure to fulfil the obligations under the Contract and submit all the required documents to confirm such remediation.
In event of your failure to fulfil the requirements of the present notice within the allowed time, the Competent Authority will take the steps to terminate the Contract as provided for by the legislation of the Republic of Kazakhstan.
The Tribunal decides and orders that:
1. The Tribunal does not have jurisdiction over the Claimant’s claims herein.
2. Costs: The Claimant pay the Respondent USD 3.2 million, comprising USD 3 million for its legal costs and USD 200,000 to recoup part of monies paid for ICSID deposit.
1. The application of Caratube International Oil Company LLP for annulment of the Award issued by the Tribunal on June 5, 2012 is dismissed.
2. Each of the Parties shall bear its own legal fees and expenses, and Caratube International Oil Company LLP shall bear the direct costs of the proceeding, comprising the fees and expenses of the Committee and the costs of using the ICSID facilities, in their entirety.
3. The stay of enforcement of the Award is declared automatically terminated in accordance with Rule 54(3) of the ICSID Arbitration Rules.
Members of the Tribunal:
Dr. Laurent Levy Prof. Laurent Aynes Dr. Jacques Sales
ICSID Secretary :
Ms. Milanka Kostadinova
Assistant to the Tribunal:
Dr. Silja Schaffstein
Attending on behalf of the Claimants:
Dr. Hamid G. Gharavi, Derains & Gharavi Ms. Nada Sader, Derains & Gharavi Mr. Sergey Alekhin, Derains & Gharavi
Attending on behalf of the Respondent:
Mr. Peter M. Wolrich, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Geoffroy Lyonnet, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Gabriela Alvarez Avila, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Jerome Lehucher, Curtis, Mallet-Prevost, Colt & Mosle LLP
82. [...] Claimants request the Arbitral Tribunal to order the Republic of Kazakhstan to:
82.1. Disclose any role it had, whether as direct or indirect funder or instigator, as well as all associated internal and external documents (be it emails, letters, memos, notes, minutes, invoices, instructions and the like), in relation to the two websites, www.justicefornovikova.com and www.rakhataliyev.com, the "protests" that occurred in London on June 19, 2014, including correspondence with the company Envisage Promotions Ltd. and/or any other company, individual or the like and to take all measures required for the immediate closure of these websites;
82.2. Justify the fierceness and timing of the prosecution by Kazakhstan of the allegations of murder against the Houranis and the associated lobbying before Lebanese authorities, including Ministers, prosecutors and ambassadors regarding the investigations relating to the death of Ms. Anastasya Novikova, which were closed multiples times;
82.3. Undertake that Kazakhstan will refrain from taking any direct or indirect measures or any action that would aggravate the dispute and/or jeopardize the integrity and the legitimacy of this arbitration and the equality of the Parties, including any assault or the like or threats and intimidation against the Hourani family and any potential witnesses and their families, including Messrs. Issam Hourani, Omar Antar, Kassem Omar, Hussam Hourani, and Nader Hourani (Mr. Devincci’s cousin) and Ms. Hiam Hourani (Mr. Devincci’s sister); and
82.4. Undertake that Kazakhstan comply with the fundamental principle of the presumption of innocence of the Hourani family and of the prohibition of unlawful attacks on one’s honor and reputation, and refrain from taking any direct or indirect measures or any action that would violate these principles, including but not limited to refraining from directly or indirectly organizing, instructing, funding, encouraging and/or the like of protests, articles, books, and websites alleging murder perpetrated by Hourani family.
Members of the Tribunal:
Dr. Laurent Levy Prof. Laurent Aynes Dr. Jacques Sales
ICSID Secretary:
Ms. Milanka Kostadinova
Attending on behalf of the Claimants:
Dr. Hamid G. Gharavi, Derains & Gharavi
Ms. Nada Sader, Derains & Gharavi
Mr. Sergey Alekhin, Derains & Gharavi
Ms. Elina Vilchinskaya, Derains & Gharavi
Mr. Fadi Hajjar, Derains & Gharavi
Mr. Etienne Vimal du Monteil, Derains & Gharavi
Parties:
Mr. Devincci Hourani
Attending on behalf of the Respondent:
Mr. Peter M. Wolrich, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Geoffroy Lyonnet, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Gabriela Alvarez Avila, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Jerome Lehucher, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Mira Suleimenova, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Anna Kouyate, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Marie-Claire Argac, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Inna Khlystova, Curtis, Mallet-Prevost, Colt & Mosle LLP
Witnesses:
Mr. Andrey Kravchenko Prof. Martha Olcott
Parties:
Mr. Marat Beketayev, Ministry of Justice of the Republic of Kazakhstan Mr. Almat Madaliyev, Ministry of Justice of the Republic of Kazakhstan Mr. Kazbek Shaimerdinov, Ministry of Justice of the Republic of Kazakhstan Mr. Kairgeldy Sakenov, General Prosecutor Office of the Republic of Kazakhstan
2. Claimants request the Arbitral Tribunal to order to Republic of Kazakhstan to:
2.1. Withdraw as "partie civile" from the criminal proceedings launched with Ms. Novikova’s family on July 24, 2012 against three (i.e. Messrs. Issam, Devincci and Hussam Hourani) out of the four (being Mr. Rakhat Aliyev) persons specifically accused of the murder of Ms. Novikova, and cease any direct or indirect interference with or before the Lebanese authorities in relation to these criminal proceedings, unless expressly required by the Lebanese judges in relation to Kazakhstan’s status as "partie civile," including encouraging directly or indirectly, be it financially or otherwise, members of the family of Ms. Novikova or any third parties to initiate, maintain or provide testimonies in the criminal proceedings against the Hourani family, until a Final Award is rendered, or to order any other measures that the Tribunal deems appropriate.
2.2. Proceed with investigations, before all organs of the State, including the KNB, the Prosecutor General’s Office, and the Ministry of Interior in relation to their direct or indirect involvement with the websites (www.justicefornovikova.com and www.rakhataliyev.com) and the demonstrations carried out in London on June 19, 2014 against the Hourani family and to report as soon as possible in writing to the Tribunal as to the conclusions:
- If Kazakhstan confirms that the State has direct or indirect involvement with the websites and the demonstrations, ORDER Kazakhstan to take all the measures for the immediate closing of all the websites;
- If Kazakhstan finds that the State has no direct or indirect involvement therewith, ORDER Kazakhstan (i) to make a declaration that Kazakhstan has no involvement in the websites or the demonstration held in London on June 19, 2014, and that it condemns these acts as being in violation of the presumption of innocence, for Mr. Devincci Hourani to use if and when appropriate and (ii) to make all necessary investigations to find out who is at the origin of same, including with Ms. Novikova’s family, who Kazakhstan has access to, and to take every measure necessary so that the instigators and/or authors of these websites and demonstrations cease the same;
2.3. Undertake that Kazakhstan will refrain from taking any direct or indirect measures or any action that would aggravate the dispute and/or jeopardize the integrity and the legitimacy of this arbitration and the equality of the Parties, including any assault or the like or threats and intimidation against the Hourani family and any potential witnesses and their families, including Messrs. Kassem Omar, Hussam Hourani, and Nader Hourani (Mr. Devincci’s cousin) and Ms. Hiam Hourani (Mr. Devincci’s sister);
2.4. Undertake that Kazakhstan comply with the fundamental principle of the presumption of innocence of the Hourani family and of the prohibition of unlawful attacks on one’s honor and reputation, and refrain from taking any direct or indirect measures or any action that would violate these principles, including but not limited to refraining from directly or indirectly organizing, instructing, funding, encouraging and/or the like of protests, articles, books, and websites alleging murder perpetrated by Hourani family; and
2.5. To order any other measures that the Tribunal deems appropriate, including any variations to the above requested orders.
• Order that all of the Stolen Documents, including the 11 Stolen Documents, are inadmissible in this Arbitration;
• Order specifically that the Privileged Stolen Documents, including the 4 Privileged Stolen Documents, are inadmissible in this Arbitration;
• Order that Claimants, as well as their experts and witnesses, may not rely upon, refer to or make use of any of the Stolen Documents, including the 11 Stolen Documents;
• Order specifically that Claimants, as well as their experts and witnesses, may not rely upon, refer to or make use of any of the Privileged Stolen Documents, including the 4 Privileged Stolen Documents;
• Declare that the summaries of the 11 Stolen Documents in Claimants’ Letter are inadmissible and will not be taken into account or relied upon by the Tribunal and cannot be relied upon by Claimants; and
• Should the Tribunal grant Claimants an opportunity to respond to this letter prior to the Tribunal’s decision on admissibility, order Claimants to address only the issue of the admissibility of the Stolen Documents without any further reference to or discussion of the contents of those documents.
On the basis of the foregoing, Claimants respectfully request that, with respect to Claimants’ Document Request No. 2:
i. Respondent be ordered to produce the Non-Privileged Email (i.e. the earlier non-privileged version of the Client-Attorney Email identified by Claimants) and alternatively, that Claimants be allowed to place on the record this Non-Privileged Email, which should be declared admissible for the reasons set out in the Tribunal’s decision of July 27, 2015;
ii. Respondent be ordered to produce a privilege log, as originally ordered by the Tribunal, for all documents in respect of which the Respondent can establish the existence of attorney-client privilege; and
iii. Respondent be ordered to produce all Documents that are not attorney-client privileged, redacting, if necessary and with full explanations, the portions of the documents that are privileged.
[...] the Republic respectfully requests the Tribunal to:
◦ Declare that the Requested Email, including both the Cover Email and the Attached Documents, is inadmissible on the record and will not be taken into account or relied upon by the Tribunal and cannot be relied upon by Claimants in the Arbitration; and
◦ Should the Tribunal grant Claimants an opportunity to respond to this letter prior to the Tribunal’s decision on admissibility of the Requested Email, order Claimants to address only the issue of the admissibility without any further reference to or discussion of the contents of this document.
Based on the foregoing, Claimants:
- (i) Submit that the launch of any further criminal procedures or the expansion thereof, or investigations since the Decision on Provisional Measures dated December 4, 2014, targeting the Houranis, in London, the U.S. or elsewhere, would constitute a breach of Kazakhstan’s obligation not to aggravate this dispute and/or jeopardize Claimants’ preparation of the Hearing, and (ii) request the Tribunal to order Respondent to disclose any such criminal complaints and/or investigations;
- Request the Tribunal to order Respondent to produce any direct and/or indirect communications between government officials, including the KNB, and Mr. Adonis Derbas and/or Mr. Serik Medetbekov that led Mr. Medetbekov to send the messages to Mr. Adonis Derbas referred to in his voice message of August 25, 2015. These documents are relevant and material to further demonstrate that Kazakhstan is still harassing the Hourani family worldwide and moreover to protect Claimants’ procedural safeguards; and
- Request the Tribunal to direct Respondent to refrain from taking any measures that would further aggravate the dispute or impair in any way the right of Claimants to prepare their claims and defenses in view of the upcoming submissions and hearings.
(i) Reject in their entirety Claimants’ requests for provisional measures;
(ii) Reject Claimants’ Supplementary Document Request in its entirety;
(iii) Strike Ex. C-348 to Ex. C-350 from the record; and
(iv) Should the Tribunal decide to entertain Claimants’ allegations that Adonis Derbas is somehow seeking to extort the Houranis upon instructions of the Republic, the Republic respectfully requests that the Tribunal order forensic analysis of all the communications involving the Houranis, Adonis Derbas and Serik Medetbekov. This should include the production of all the "WhatsApp" and other messages of Devincci Hourani’s mobile phones to check all relevant elements. Such production could be made in the hands of the Tribunal which would order a forensic expert to proceed with all the appropriate examinations.
The Republic further respectfully requests that it be awarded the costs it has incurred in connection with Claimants’ requests for provisional measures, including but not limited to legal fees and expenses and expert fees and expenses.
(i) to dismiss Respondent’s request contained in its letter of October 2, 2015; (ii) to adhere to the agreed-upon procedure of calling and examining the opposing Party’s witnesses as embodied in Procedural Order No. 1; and (iii) and not to allow post facto defenses of Kazakhstan and supporting oral testimonies such as those of Dr. Thapar and Professor Slim, moreover that have been contradicted by the acts and omissions of Kazakhstan contemporaneous with the facts in dispute and/or which are irrelevant to the points in dispute, to divert the Tribunal’s attention from the material points in dispute.
- grant in full Claimants’ Supplementary Document Production Request as detailed at paragraph 7 of Claimants’ Letter dated September 14, 2015;
- preserve Exhibits C-348 to C-350 on the record;
- reject Respondent’s request for the Tribunal to order a forensic analysis of all communications between, inter alia, Messrs. Devincci Hourani and Adonis Derbas; and
- strike out from the record Exhibit R-182 introduced by Respondent with its September 28, 2015 letter.
Members of the Tribunal:
Dr. Laurent Levy Prof. Laurent Aynes Dr. Jacques Sales
ICSID Secretary:
Ms. Milanka Kostadinova
Assistant to the Tribunal:
Dr. Silja Schaffstein
Participating on behalf of the Claimants:
Dr. Hamid G. Gharavi, Derains & Gharavi Ms. Nada Sader, Derains & Gharavi Mr. Sergey Alekhin, Derains & Gharavi Ms. May Khoury, Derains & Gharavi Ms. Iryna Glushchenko, Derains & Gharavi
Participating on behalf of the Respondent:
Mr. Peter M. Wolrich, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Geoffroy Lyonnet, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Gabriela Alvarez Avila, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Jerome Lehucher, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Jeremy Eichler, Curtis, Mallet-Prevost, Colt & Mosle LLP
If for any reason the Tribunal were to grant Claimants’ request, the Republic requests, as a simple matter of due process, that it be accorded the right to respond to these documents properly after the hearing and requests the Tribunal to grant to Republic the following:
1) The right to provide a written reply with respect to these documents;
2) The right to produce documents and expert evidence in rebuttal;
3) The right to conduct its own forensic expertise of HS-38 as to the signing by Hussam Hourani of this document, including an order from the Tribunal requesting Claimants to produce whatever original documents the forensic expert requires for this purpose.
In light of the Republic’s objection, we respectfully submit that Claimants should not be allowed to use these new documents in any manner until the Tribunal shall have decided the matter.
Members of the Tribunal:
Dr. Laurent Levy, President Prof. Laurent Aynes, Co-Arbitrator Dr. Jacques Sales, Esq., Co-Arbitrator
ICSID Secretariat:
Ms. Milanka Kostadinova, Secretary of the Tribunal
Assistant to the Tribunal:
Dr. Silja Schaffstein
On behalf of the Claimants:
Counsel:
Mr. Hamid Gharavi, Derains & Gharavi
Ms. Nada Sader, Derains & Gharavi
Mr. Sergey Alekhin, Derains & Gharavi
Mr. Solomon Ebere, Derains & Gharavi
Ms. May Khoury, Derains & Gharavi
Ms. Iryna Glushchenko, Derains & Gharavi
Mr. Iacopo Maravigna, Derains & Gharavi
Ms. Anastasia Medvedskaya, Derains & Gharavi
Mr. Lukas Palecek, Derains & Gharavi
Ms. Carmela Viccaro, Derains & Gharavi
Ms. Maritsa Aronstein, Derains & Gharavi
Parties:
Mr. Devincci Salah Hourani
Witnesses:
Mr. Omar Antar Mr. Issam Hourani Mr. Harvey Jackson Mr. Kassem Omar
Experts :
Mr. Sven Tiefenthal Mr. Colin Johnson, Grant Thornton Ms. Pascale Pasquer, Grant Thornton Mr. Sylvain Quagliaroli, Grant Thornton
On behalf of the Respondent:
Counsel:
Mr. Peter M. Wolrich, Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Geoffroy Lyonnet, Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Gabriela Alvarez-Avila, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Jerome Lehucher, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Mira Suleimenova, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Svetlana Evliya, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Anna Kouyate, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Yerzhan Mukhitdinov, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Marie-Claire Argac, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Lisa Arpin-Pont, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Olena Stasyk, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Abraham Sosa, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Jeremy Eichler, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Elizabeth Sadiq, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Veronica Akimkanova, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Naira Barsegyan, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Vincent Bouvard, Curtis, Mallet-Prevost, Colt & Mosle LLP
Parties:
Mr. Erlan Tuyakbayev, Director of the Department of State Property Rights of the Ministry of Justice of the Republic of Kazakhstan
Mr. Kazbek Shaimerdinov, Senior Expert of the Department of State Property Rights of the Ministry of Justice of the Republic of Kazakhstan
Mr. Rustem Umurzakov, Senior Assistant to the Prosecutor General of the Republic of Kazakhstan
Witnesses:
Mr. Bolat Akchulakov, General Director of Almex Petrochemical LLP
Mr. Askar Batalov, General Director of Kazinvest Adviser LLP
Mr. Samir Derekh, Honorary Consul of the Syrian Arab Republic in Kazakhstan Mr. Aleksandr Kim, Retired
Mr. Andrey Kravchenko, Deputy Prosecutor General of the Republic of Kazakhstan Ms. Natalya Galantsova, Public notary Mr. Mirbulat Ongarbaev, Retired
Ms. Olga Seminishina, General Director of K&C Audit Consulting LLP
Experts:
Professor Hadi Slim, Professor of Law at Francois-Rabelais University; Member of the Beirut Bar Association
Professor Kulyash Ilyasova, Professor and Chief Researcher at Caspian University Mr. Suresh Chugh, IFM Resources, Inc.
Dr. Mihir Sinha, IFM Resources, Inc.
Ms. Victoria Baikova, IFM Resources, Inc.
Dr. Mangat Thapar, International Geophysical Company, Inc.
Mr. Vladimir Brailovsky, Econom^a Aplicada, S.C.
Court Reporter:
Mr. Trevor McGowan, Court Reporter - The Court Reporter Ltd.
Interpreters:
Ms. Helen Bayless, Interpreter (Russian)
Ms. Ekaterina Dersin, Interpreter (Russian)
Ms. Olga Tammi, Interpreter (Russian)
Mr. Magdy Rizk, Interpreter (Arabic)
Ms. Sarah Rossi, Interpreter (French)
Question 1 : What are the implications of Exhibit C-155 of June 1, 2004 according to which Devincci Hourani (i) undertook to "pay, from his own personal income gained as net profit from the sale of the mentioned production, to [JOR] annual instalments of 20 % of the loan amount in addition to 14% interest rate on the above 20%" and (ii) undertook in addition "to pay all loans with the 14% annual interest within 10 years from the beginning of the 2nd year of commercial production."
Question 2 : What conclusion should the Tribunal draw from (i) the testimony of Samir Ali Derekh (who testified to be the Honorary Consul of Syria in Kazakhstan), who testified that the Hourani family were modest people who operated a restaurant in either Almaty or Astana when they arrived in Kazakhstan in the late 80’s or early 90’s, and (ii) the testimony of either Issam or Devincci Hourani, who affirmed that they came from a wealthy Palestinian family?
Question 3 : The Parties are invited to specify whether and how an Annual Work Program (AWP) may modify the obligations set forth in the Minimum Work Program (MWP), and, if so, what specific obligations as extended by the successive AWPs would be breached.
Question 4 : The Respondent may wish to specify which breaches of the extended MWP were committed, namely between 27 May 2007 and the Notice of the Termination of the Contract (assuming that the Respondent could not complain of violations of contractual obligations prior to the extension of the Contract). The fact that this question is addressed more specifically to the Respondent does of course not bar the Claimants from addressing it.
Question 5 : Why do neither Respondent nor CIOC make any reference, in correspondence between them prior to September-October 2007, to the Notice of Breach of March 25, 2007?
In particular:
- why did CIOC not respond to the Notice of Breach of March 25, 2007 before October 3, 2007?
- what probative value should be given to the computer log and the acknowledgement of receipt of the Notice of Breach of March 25, 2007?
- why did the Republic not react, prior to September 2007, to CIOC’s failure to respond to the Notice of Breach of March 25, 2007?
Question 6 : The Contract was extended for two years by the signing of Amendment N° 3 of July 27, 2007, just four months after the Notice of Breach of March 25, 2007 and seven months before the Notice of Termination of February 1, 2008? What comments do the Parties submit on that chronology?
Question 7 : Did the Claimants, in the period preceding the signing of Amendment N° 3 of July 27, 2007, misrepresent to Respondent that a good quality 3D seismic study had been completed? (Assuming, which is in dispute, that the 3D seismic study was defective).
Question 8 : What did the testimonies bring forth with respect to CIOC’s readiness, capacity and willingness to drill deep wells (location, financing, etc.)?
Question 9 : Based on the facts of this case, with respect to the activities carried out by the Claimants during the time the Contract was performed, were such activities in conformity with the Contract and do they qualify as activities of exploration, development and/or production? If it were admitted arguendo that the performance of the Contract by the Claimants was unsatisfactory during the period from 27 May 2002 until 27 May 2007, what is the position of each Party as to how the Claimants’ performance of the Contract has or would have evolved during the extended period until 27 May 2009, as well as a possible further two-year extension of the Contract until 27 May 2011? What legal consequences do the Parties draw from the foregoing?
Question 10 : Explain and comment on the curve presented by Mr. Tiefenthal with respect to the expected oil production starting from the production phase (see Mr. Tiefenthal’s Reserves Report, Figure No. 27): what would have happened during the period between the beginning of 2008 and the commencement of production to justify the ascent of that curve, compared to the results achieved by CIOC at the time of the termination of the Contract?
Question 11 : Is it possible to request the reparation of moral damages with respect to the loss of an investment within the framework of Article 25 of the ICSID Convention? If not, before which court or tribunal should this reparation be requested, assuming that the existence of moral damages is established?
- declare that Kazakhstan has breached its obligations toward Claimants under Customary International Law, the FIL, the BIT and/or the Contract;
- order Kazakhstan to pay damages in favor of Claimants as a result of its breaches in an amount provisionally quantified at above 1 billion US dollars, representing loss of profits and/or loss of shareholder value, representing the fair market value of the seized assets, and for any alternative or supplementary claims that Claimants may raise;
- award moral damages in favor of Claimants for injury to its reputation and for the harassment and percussion they have been, and continue to be, subjected to by Kazakhstan;
- order Kazakhstan to immediately cease its breaches and adverse actions against Claimants;
- order Kazakhstan to pay in favor of Claimants the costs of this arbitration, including all expenses that Claimants have incurred, including all of the fees and expenses of the arbitrators, ICSID, legal counsel, experts and consultants, as well as internal costs;
- order Kazakhstan to pay interest pre-award and post-award at a rate of LIBOR +2 per cent, compounded semi-annually, on the above amounts as of the date these amounts are determined to have been due to Claimants; and
- order any other relief that the Tribunal deems appropriate.
584. Claimants respectfully request the Arbitral Tribunal, without prejudice to any other/further claims Claimants might be entitled to in this arbitration, to:
584.1. Find that it has jurisdiction over Mr. Devincci Hourani’s claim under the FIL, and Caratube’s claims under the FIL and/or the Contract;
584.2. Find that Respondent has breached its obligations towards Claimants under international law, the FIL, the Contract and/or Kazakh law;
584.3. Order Respondent to pay Claimants damages in the amount of USD 941.05 million for lost profits due to Respondent’s breaches of its obligations under international law, the FIL, the Contract and/or Kazakh law, which resulted in the taking of Claimants’ investment;
584.3.1. Alternatively, should the Tribunal deem that Claimants are not entitled to compensation on the basis of lost profits, to award Claimants compensation on the basis of the loss of opportunity or chance of making these profits, which Claimants submit is 99% (or any other figure the Tribunal deems appropriate);
584.4. Order Respondent to compensate Claimants in the amount of USD 50,000,000 their moral damages resulting from Respondents’ [sic] breaches;
584.5. Order Respondent to pay Claimants the costs of this arbitration, including all expenses that they have incurred, and including all of the fees and expenses of the arbitrators, ICSID, legal counsel, experts and consultants, as well as Claimant’s [sic] expenses in pursuing this arbitration;
584.6. Order Respondent to pay Claimant [sic] compound interest at a rate of LIBOR +2 compounded semi-annually, to be established on the above amounts as of the date these amounts are determined to have been due to Claimant [sic];
584.7. Order Respondent to pay the above amounts outside of the Republic of Kazakhstan without any right of set-off to Mr. Devincci Hourani, as Claimant and/or majority shareholders; and
584.8 Order any other and further relief as the Arbitral Tribunal shall deem appropriate.
For the reasons set forth above and to be developed during the further course of these proceedings, all of Claimants’ claims should be rejected in their entirety for lack of jurisdiction. The Republic respectfully requests that the Tribunal decide to bifurcate these proceedings and decide the issues of jurisdiction in a separate Award. In the event that the Tribunal were to find jurisdiction with respect to the claims asserted by either of the Claimants, those claims should nevertheless be dismissed for the substantive reasons set forth above and in this Counter Memorial. Should the Tribunal nonetheless find that the Republic has any liability to either of the Claimants, which the Republic firmly denies, the Tribunal should reject Claimants’ exaggerated damage claims. In addition, Claimants should be ordered to reimburse the Republic for all reasonable costs and expenses relating to this Arbitration including without limitation legal fees and expert fees.
For the reasons set forth above, in the Republic’s Counter Memorial and at the Hearing, CIOC and Devincci Hourani’s claims should be rejected in their entirety for lack of jurisdiction. In the event that the Tribunal were to find jurisdiction with respect to the claims asserted, those claims should nevertheless be dismissed for the substantive reasons put forward by the Republic. Should the Tribunal nonetheless find that Claimants are entitled to damages, which the Republic firmly denies, the Tribunal should reject the exaggerated damage claims of Claimants and only award damages for sunk costs as demonstrated by the Republic. In addition, Claimants should be ordered to reimburse the Republic for all reasonable costs and expenses relating to this Arbitration, including without limitation legal fees and expert fees, and to pay the Republic interest on the amount awarded to the Republic at a reasonable commercial rate as from the date of the Award.
For the reasons set forth in the course of this Arbitration, the Republic respectfully requests that the Tribunal:
A) dismiss Claimants’ claims based upon the Republic’s preliminary objections on any one or more of the following grounds:
• Claimants’ claims constitute an abuse of process;
• Claimants’ claims are time-barred;
• Claimants’ claims are precluded on the basis of the res judicata principle; and/or
• Claimants’ claims are precluded on the basis of the collateral estoppel principle;
B) if the Tribunal were to find that Claimants’ claims are not to be dismissed on any of the above-mentioned grounds, dismiss:
• CIOC’s claims on any one or more of the following grounds: (i) CIOC did not meet the requirements of Article 25(2)(b) of the ICSID Convention; and/or (ii) CIOC did not make an investment within the meaning of Article 25(1) of the ICSID Convention;
• Devincci Hourani’s claims on the ground that Devincci Hourani did not make an investment within the meaning of Article 25(1) of the ICSID Convention; and
• Claimants’ claims under the FIL on any one or more of the following grounds: (i) Claimants did not make an investment under the FIL; (ii) Claimants do not qualify as a Foreign Investor under the FIL; (iii) there is no binding offer to ICSID arbitration in the FIL; and/or (iv) the FIL was repealed and cannot serve as a basis for ICSID jurisdiction;
C) if the Tribunal were to find that Claimants’ claims are not to be dismissed on any of the grounds mentioned in A) or B) above, dismiss all of Claimants’ claims on any one or more of the following grounds:
• CIOC obtained the extension of the Contract through misrepresentation; and/or
• The Republic rightfully terminated the Contract both as a matter of substance and procedure;
D) if the Tribunal were to find that it has jurisdiction, that CIOC did not obtain the extension of the Contract through misrepresentation and that the Republic wrongfully terminated the Contract:
• determine that Claimants are not entitled to any material damages on the ground that the termination of the Contract did not cause the Claimants any harm;
• in the alternative, dismiss Claimants’ claim for damages for Lost Profits and Lost Opportunity on the ground that Claimants failed to meet their burden of proof with respect to the existence and quantum of such damages;
• also in the alternative, determine (i) that CIOC’s material damages could under no circumstances exceed its sunk investment costs in the amount of USD 4.2 million or (ii) that Devincci Hourani’s material damages could under no circumstances exceed his sunk investment costs in the amount of USD 6,500 under the Full Reparation Standard or 92% of CIOC’s material damages under the FMV Standard, provided that there shall be no double recovery between CIOC and Devincci Hourani;
• reduce any material damages awarded to Claimants by at least 50% to account for their contribution to their alleged losses;
• reduce any damages awarded to Devincci Hourani to account for CIOC’s liability estimated at over USD 30 million; and
• dismiss Claimants’ claim for moral damages;
E) dismiss any and all other requests for relief made by Claimants, including inter alia Claimants’ requests for interest and for an award of costs as well as Claimants’ request that any amounts due to Claimants be paid to Devincci Hourani outside of the Republic without any right of setoff;
F) order Claimants to jointly and severally pay to the Republic all costs and expenses it incurred in relation to this Arbitration, including without limitation the fees and expenses of the Tribunal, legal fees and expert fees, plus interest; and
G) grant the Republic any other relief that the Tribunal deems to be appropriate.
The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.
26.1 This Contract and other agreements signed on the basis of this Contract shall be governed by the law of the State unless stated otherwise by the international treaties to which the State is a party.
26.2 The Contractor shall comply with the international standards for protection of the environment in the Contract Area.
The complete exclusion of standards of international law as a consequence of an agreed choice of law pointing towards a domestic legal system would indeed lead to some extraordinary consequences. It would mean that an ICSID tribunal would have to uphold discriminatory and arbitrary action by the host State, breaches of its undertakings which are evidently in bad faith or amount to a denial of justice as long as they conform to the applicable domestic law, which is most likely going to be that of the host State. It would mean that a foreign investor, simply by assenting to a choice of law, could sign away the minimum standards for the protection of aliens and their property developed in customary international law. Such a solution would hardly be in accordance with one of the goals of the Convention, namely ‘.promoting an atmosphere of mutual confidence and thus stimulating a larger flow of private international capital into those countries which wish to attract it’.
[…]
The weight of the arguments outlined above strongly militates in favour of the preservation of the international minimum standards, even in the absence of a reference to international law in a choice of law clause. Apart from the highly undesirable results that may arise from a complete disregard for international law and the incompatibility of such a course of action with the purpose and overall system of the Convention, it is doubtful whether this problem can be adequately dealt with in terms of choice of law. The mandatory rules of international law, which provide an international minimum standard of protection for aliens, exist independently of any choice of law made for a specific transaction. They constitute a framework of public order within which such transactions operate. Their obligatory nature is not open to the disposition of the parties. This assertion is quite different from questions of applicable law under the conflict of laws. International law does not thereby become the law applicable to the contract. The transaction remains governed by the domestic legal system chosen by the parties. However, this choice is checked by the application of a number of mandatory international rules such as the prohibition of denial of justice, the discriminatory taking of property or the arbitrary repudiation of contractual undertakings".22
This provision [Clauses 27.2 and 27.3 of the Contract] shows that the Parties fully intended that all disputes arising from this Contract would be resolved via the means provided for in the Contract and not through the Treaty. This freely negotiated provision memorializes the agreement of the parties presently before this Tribunal and as such it is evidence of their mutual intent to be bound by an agreement to settle all disputes arising from the Contract in one of two arbitral fora. Specifically, the Contract provides that such disputes should be resolved in an ICSID arbitration or, if for some reason ICSID arbitration is not possible, in an ad hoc arbitration under the UNCITRAL Rules. The Parties’ careful planning and clear intent to commit to settling disputes arising from the Contract pursuant to the Contract is abundantly shown by the fact that not only is ICSID arbitration included, UNCITRAL arbitration is also included as a back-up provision. The comprehensive structure of this dispute resolution mechanism proves that the Parties intended to leave nothing open to surprise and intended to provide a mechanism to resolve all disputes arising from the Contract.
(Exh. R-24, para. 58).
[…] if you find that this was a contractual wrongful termination as opposed to a sovereign act, is that there is an exclusive jurisdiction clause in the contract, and we submit that that clause should apply to ordinary contractual claims. This Tribunal does have jurisdiction over treaty claims, but we submit that any decision on ordinary contractual claims would be ultra vires as this Tribunal has been constituted.
[…]
Finally, we’ve also maintained as a jurisdictional objection that CIOC has waived its right to bring contract claims in the treaty arbitration, to the extent that you were to find that these are contract claims as opposed to treaty claims, and that’s because of the exclusive jurisdiction clause in the contract which I mentioned to you earlier by which CIOC waived its right to bring claims arising from the contract in a treaty claim forum as opposed to a contract claim forum.
(Exh. C-351, p. 190, lines 13-21 and p. 194, lines 10-19)
The other point that I should mention in passing: they are implying that the reason they didn’t bring the suit under the contract was because it was so obvious that there was jurisdiction under the ICSID Convention. Well, we all know very well that if you are suing under a BIT under the ICSID Convention, the state cannot make counterclaims in the same proceeding, whereas if you are suing under a contract, the state can make counterclaims in the same proceeding. My own interpretation is that that was the reason why the contract wasn’t raised as a source of jurisdiction. And in this new case there will be counterclaims by the state -- I can assure you of that -- and that’s something which obviously they hoped to avoid by trying to convince the Tribunal that there was ICSID jurisdiction. But that’s speculation.
(Exh. C-352, p. 84, lines 9-24)
The Respondent reserved the right to request bifurcation of jurisdictional issues after the first round of pleadings. If this matter is raised by the Respondent and accepted by the Claimants or the Tribunal, an alternative calendar shall be prepared at that time.
Any objection that the dispute or any ancillary claim is not within the jurisdiction of the Centre or, for other reasons, is not within the competence of the Tribunal shall be made as early as possible. A party shall file the objection with the Secretary-General not later than the expiration of the time limit fixed for the filing of the counter-memorial, or, if the objection relates to an ancillary claim, for the filing of the rejoinder— unless the facts on which the objection is based are unknown to the party at the time.
The Claimant has intentionally and in bad faith abused the arbitration; it purported to be an investor when it knew that this was not the case. This constitutes indeed an abuse of process. In addition, the Claimant is guilty of procedural misconduct: once the arbitration proceeding was commenced, it has caused excessive delays and thereby increased the costs of the arbitration. (Exh. RL-31, para. 159)
In [those] cases, the lack of good faith was present in the acquisition of the investment. In the present case, there was in fact no investment at all, at least at the relevant time, and the lack of good faith is in the assertion of an investment on the basis of documents that according to the evidence presented were not authentic. The Claimant asserted jurisdiction on the basis of a claim to ownership of shares, which the uncontradicted evidence before the Tribunal suggests was false. Such a claim cannot be said to have been made in good faith. If, as in Phoenix, a claim that is based on the purchase of an investment solely for the purpose of commencing litigation is an abuse of process, then surely a claim based on the false assertion of ownership of an investment is equally an abuse of process. (Exh. RL-30, para. 175)
From the above considerations it follows that, even if Devincci Hourani acquired formal ownership and nominal control over CIOC, no plausible economic motive was given to explain the negligible purchase price he paid for the shares and any other kind of interest and to explain his investment in CIOC. No evidence was presented of a contribution of any kind or any risk undertaken by Devincci Hourani. There was no capital flow between him and CIOC that contributed anything to the business venture operated by CIOC. (Exh. CLA-8, para. 455)
From the time of its establishment JOR was the main capital provider to CIOC. It was contributing to CIOC before CIOC finalised the transfer of the Contract from CCC and before JOR itself was formally registered in Lebanon. At the time Devincci Hourani purchased his share in CIOC, JOR provided CIOC with open credit lines of USD 15 million. The loan was granted at 14% interest p.a. but CIOC never paid any interest under the loan agreements. (Tr., day 4, p. 169) The interest was ultimately cancelled. (Exh. CLA-8, para. 453)
From the above it follows that the evidence presented does not confirm that Devincci Hourani’s alleged contribution to CIOC as his investment included a substantial personal guarantee of CIOC’s debt to JOR. His alleged personal guarantee referred to a loan that was annulled by the parties. Even assuming that the loan was still in place, it was already secured on the same assets and revenue stream. Devincci Hourani’s alleged personal guarantee did not contribute anything to the economic arrangement existing between CIOC and JOR. (Exh. CLA-8, para. 450)
[...]
Another aspect of Devincci Hourani’s ‘personal guarantee’ of CIOC’s debts is that no evidence was provided that JOR ever tried to enforce the security against him or against CIOC, once the problems with the Caratube project started. (Exh. CLA-8, para. 448)
[T]he Respondent’s jurisdictional objection based on Abuse of Process by the Claimant does not, in legal theory, operate as a bar to the existence of the Tribunal’s jurisdiction; but rather, as a bar to the exercise of that jurisdiction, necessarily assuming jurisdiction to exist.
The Recommendations have also chosen a cautious approach to procedural unfairness or abuse. In arbitration, party autonomy to a large extent reigns and parties and their counsel should be given wide discretion in determining their strategies. Costs, psychological influences, relational elements, cross-cultural considerations, persuasiveness, political constraints and other aspects may be responsible for not instituting certain claims or for not raising certain causes of action or is