Arbitration Regional Overview: Asia Pacific | International Arbitration Newsletter May 2018

CHINA

Chinese-Costa Rican refinery dispute heard in ICC

An ICC tribunal recently has begun hearing a diplomatically sensitive joint-venture dispute between Chinese and Costa Rican state-owned entities over a cancelled US$1.5 billion project to upgrade an oil refinery. CNPC International, a subsidiary of China National Petroleum Corporation, filed an arbitration before ICC tribunal in August 2017 against Costa Rica’s oil and gas-refining monopolist Refinadora Costarricense de Petroleo for a cancelled USD 1.5 billion project. The project was to upgrade an oil refinery but was suspended in 2013 by order of the Comptroller General’s Office due to environment impact and feasibility studies could not be relied on since one of them was carried out by an affiliate of CNPCI. The arbitration is diplomatically sensitive in view of the priority Costa Rica has given to its relationship with China for celebrating the 10th anniversary of formal relations between the two countries in June 2017.

Chinese solar panel manufacturer faces US$900 million LCIA claim

Chinese solar panel manufacturer, Yingli Green Energy (YGE), is facing a US$900 million LCIA claim from one of its long-term suppliers of polysilicon for use in solar cells. The claimant has not yet been identified.

Dutch court lift asset freeze in M&A dispute of COFCO

A Chinese state-owned food company COFCO acquired the stake of Nidera but soon after discovered a USD 166 million accounting black hole in Nidera’s Brazilian subsidiary. Then COFCO launched an ICC claim against the vendor alleging fraud and the ICC’s emergency arbitrator issued an order that USD 187.5 million be placed in an escrow account. COFCO also applied before a Dutch court to freeze the funds in the vendor’s bank account. However, the Dutch court has ruled that COFCO should not have been permitted to levy attachments in aid of an ICC arbitration, holding that relief granted by an emergency arbitrator should suffice.

INDIA

India´s Supreme court confirms foreign lawyers´ restrictions to only practice in India on a “fly in and fly out” basis

In the latest decision on whether to liberalise India’s legal market, the country’s Supreme Court has said that foreign law firms and lawyers can only practise in India on a “fly in and fly out” basis and have “no absolute right” to conduct international commercial arbitrations there, though it will normally be permitted.

India´s Supreme court clarifies scope of 2015 Arbitration Act amendments

The Indian Supreme Court has ruled on a series of appeals arising from conflicting court decisions ‎on whether amended arbitration legislation passed in India in 2015 has prospective or retrospective application. A two judge bench held that the provisions of the Arbitration and Conciliation (Amendment) Act 2015 will apply to arbitrations that started on or after 23 ‎October 2015 – or by agreement of the parties to arbitrations that started before then. It will also apply to all court proceedings related to arbitration started after that date, regardless of when the underlying arbitration may have started.

KAZAKHSTAN

ECT award enforced in the US

A US court has enforced a US$520 million Energy Charter Treaty award in favour of Moldovan investors Anatolie and Gabriel Stati against Kazakhstan, after refusing for a second time to allow the state to introduce allegations of fraud as a defence. On 23 March 2018 the US District Court for the District Court of Columbia issued an order confirming the award in favour of the Statis and their companies Ascom and Terra Raf.

The Statis and their companies won the award in 2013 when a Stockholm Chamber of Commerce tribunal found that Kazakhstan had violated the Energy Charter Treaty through a series of actions that led to the seizure of their local oil and gas operations. Kazakhstan maintains that the award was tainted by fraud. It alleges that the Statis inflated the value of their investment in a liquefied petroleum plant and manufactured expert evidence to support their claim. The English High Court ruled in June 2017 that Kazakhstan had established a “sufficient prima facie case” that the award had been obtained through fraud. However, the fraud allegations have failed to prevent the award from being upheld at the seat of arbitration in Sweden in 2016. In May 2016, the DC district court refused to allow the state to introduce the fraud claims as a defence to the enforcement action brought by the Statis in 2014. It said the tribunal had not relied on the allegedly fraudulent evidence but had valued the plant based on third-party bids, including a US$199 million bid made by state-owned company KMG.

MALAYSIA

Malaysian Parliament approves amendments for arbitration law

The Malaysian parliament passed a bill for the amendment of the country’s arbitration law on April 5 2018, reflecting the most recent changes to the UNCITRAL Model Law. Among others, the amendment sets out parties’ right to choose the presentation of their choice for international arbitration and creating a framework for the recognition of arbitration agreements in electronic forms. The purpose of the amendment is to make the country a competitive destination for international arbitration.

PAKISTAN 

Two Pakistan state bodies hit with a US$240 million ICC arbitration claim

Pakistan’s largest independent power producer Kot Addu Power Company Ltd. (Kapco) has brought an ICC claim against two state bodies after it was hit with a US$240 million penalty for not providing enough electricity under a 1996 power purchase agreement with its sole customer and largest shareholder, Pakistan’s Water and Power Development Authority (Wapda).  Kapco’s claim names Wapda and CPPA-G, a state-owned entity that administers the power purchase agreement, as respondents. It also says the government of Pakistan has been named as a party to the arbitration as it issued a guarantee to Kapco and has entered into a facilitation agreement with the company.

According to Kapco´s Stock Exchange release, the arbitration proceedings have commenced in Singapore and the company seeks to nullify the liquidated damages imposed under the agreement and seeks to recover the net losses not covered by late payment interests under said Agreement.

PHILIPPINES 

Philippine power dispute heads to Singapore

The partly Chinese-owned private operator of the Philippines' national power grid has brought a SIAC claim against a state-owned electricity company over concession fees. The National Grid Corporation of the Philippines (NGCP) is pursuing a claim against the Philippine state-owned National Transmission Corporation (TransCo). The case is being administered by the Singapore International Arbitration Centre. It is understood that the dispute relates to a concession fee prepayment of US$1.1 billion that NGCP made to TransCo in 2013.

SINGAPORE

Singapore court upholds stay of court proceedings in favour of SIAC arbitration

In a decision published recently, the Singapore High Court granted the request by the judicial managers of Singaporean air-conditioning services company Acesian Star for a stay of court proceedings brought by Japan's Takenaka Corporation in favour of SIAC arbitration. In its judgment, the court ruled that there was no sufficient reason why the dispute should not be referred to arbitration in accordance with the agreement between the parties. Likewise, the court rejected arguments that Acesian Star was not ready and willing to arbitrate because it had not provided assurance that it would be able to bear the costs of the arbitration, since a party is not required to show that it can bear costs incurred by the other side in order to be considered ready and willing for an arbitration, it said.

Guatemalan power plant award upheld in Singapore

A Singapore court has upheld a US$149 million ICC award in a dispute over a power plant in Guatemala – rejecting arguments that the tribunal unfairly restricted one side’s access to evidence and failed in a duty to investigate corruption allegations. In a judgment issued on 26 April 2018, Judge Kannan Ramesh in the Singapore High Court entirely dismissed an application by China Machine New Energy Corp (CMNC) to set aside the award in favour of Jaguar Energy Guatemala, a Delaware subsidiary of Houston-based energy company AEI.

The judge rejected CMNC’s arguments that the award breached natural justice because of the tribunal’s imposition of an “attorney-eyes only” order with respect to certain documents provided by Jaguar; and that it violated public policy because the tribunal had declined to investigate allegations of corruption against a Jaguar representative in Guatemala.

VIETNAM

First ICSID claim filed against Vietnam

Vietnam has been hit by its first ICSID claim brought by a South Korean investor in a real estate project. South Korean national Shin Dong Baig’s claim against Vietnam was registered by ICSID on 19 March 2018 and has been brought under the 1993 Republic of Korea – Vietnam bilateral investment treaty.  The claim will be heard under ICSID’s Additional Facility Rules as Vietnam has still not signed the ICSID Convention.