International Arbitration Newsletter - February 2020 | Regional Overview: Asia Pacific

China

Treaty claim against Mongolia filed by Chinese investors rejected

On 16 December 2019, three Chinese state-owned entities, Beijing Shougang Mining Investment Company together with its two affiliates, filed an appeal with the Second Circuit to overturn a judgment handed down by the US District Court for the Southern District of New York, which upheld an award that rejected the Chinese Companies’ claim to dismiss an investment treaty award favoring Mongolia.

In 2002, one of the Chinese Companies formed a joint venture (JV) with a Mongolian partner to develop an iron ore deposit (Deposit) in the Tumurtei region of northern Mongolia with the other two of the Chinese Companies becoming the shareholders of the JV in 2004. In 2006, the export license of the JV was revoked and to regain the license, the Chinese Companies launched a series of lawsuits but eventually the license together with the land use rights for the deposit were owned by a Mongolian state-owned metallurgy company.

In 2010 on the basis of the 1991 China-Mongolia bilateral investment treaty, the Chinese Companies launched a claim asserting that their investment was expropriated. A tribunal issued an award in 2017, ruling that the relevant dispute was not arbitratable. To set aside such award, the Chinese Companies filed an  application with the District Court, but the application was  rejected in November 2019 because they had failed to prove the ultra vires of the arbitrators in issuing the award. Currently the Chinese Companies have  lodged an appeal to the Second Circuit to seek for remedy to allow both parties back to arbitration.

India

Telecoms claim against India rejected

A USD 400 million investment treaty claim filed by Cyprus-registered Tenoch Holdings together with its Russian owners, Maxim Naumchenko and Andrey Poluektov against India has been totally rejected by a tribunal of the Permanent Court of Arbitration in July 2019 under the 1976 UNCITRAL rules.

In 2009, the approval for granting telecommunications licenses to local mobile phone company named ByCell, which Tenoch held 74% interest through a Swiss holding company, was withdrawn by India. In 2012, under the state’s bilateral treaties respectively with Cyprus and Russia (BITs), the Claimants lodged a claim against India alleging that the licensing procedures for ByCell was far from satisfying the standards set by Indian law and treaties and was subject to severe arbitrary and discriminatory treatment. Besides, India was accused of detriment of the Claimants’ reasonable expectations and violating the equitable treatment provisions of the BITs as well.

South Korea

Samsung wins claim against New York-listed drilling company

Pacific Drilling, a New York-listed company which operates drillships, has been ordered by a London-seated tribunal to pay compensation of USD 320 million to Samsung Heavy Industries, a Korea shipbuilder, for the termination of a contract for an ultra-deepwater drillship.

In 2013 subsidiaries of Pacific Drilling concluded a contract with Samsung to construct an eighth drillship named Pacific Zonda,  for delivery in March  2015. In October 2015, Pacific Drilling terminated the contract due to Samsung failure to handover the vessel punctually. At that time, Pacific Drilling had paid USD 181 million in advance. Subsequently Samsung filed a counterclaim for USD 387 million as the remaining unpaid purchase price as well as the corresponding interest and cost, claiming that the contracthad been wrongfully terminated.

Singapore

Philippines-based company loses SIAC claim

On 9 January 2020, Jadestone Energy, a Singapore-based oil and gas production company announced that its subsidiary Mitra SC-56 had won the claim against Total E&P Philippines BV. The award ordered Total to pay the claimed damages and bear 75% of the legal costs expensed by Jadestone for the arbitration.

In 2012, Jadestone entered into a farmout agreement with Total for a block in the Sulu Sea off the Philippines (Block). As the operator of the Block, Total held 75% interest of the Agreement while Jadestone retained 25%.

In the late 2017, Jadestone lodged a claim against Total for breaching the Agreement as well as failing to drill an exploration well on the deepwater Halcon prospect located in the Block. Jadestone announced that the tribunal affirmed Total’s breach of contract and ordered it to pay the damages of more than USD 110 million and bear 75% of the legal costs of about USD 4.3 million accordingly.

Vietnam

Total loses SIAC claim over Philippine project

In November 2019, the application filed by Vinh Son-Song Hinh Hydropower (VSH), a Vietnamese energy company, to dismiss anaward involving USD 93 million rendered by a Vietnam International Arbitration Center (VIAC) tribunal in favour of a consortium consisting of PowerChina Huadong Engineering Corporation of China and China Railway 18th Bureau Group (Consortium) was upheld by the Hanoi People’s Court.

The dispute was related to an Upper Kon Tum hydropower project in the Vietnamese central highlands province of Kon Tum performed by VSH and the Consortium under a contract valued USD 70 million. In 2014, the Consortium terminated the Contract and lodged claim against VSH at VIAC for the amount owed.  VSH filed counterclaim alleging that the Consortium continually requested to increase the cost  and misseddeadlines, and sought various interim relief measures, including but not limited to suing two foreign arbitrators personally. However, all of these measures were rejected.

In April 2019, the tribunal issued a unanimous award ordering VSH to pay USD 93 million. Thiswas challenged by VSH before the Court upon the enforcement. The Court held that it was improper for the tribunal to change the seat of the hearing to Singapore as well as Osaka and to issue the award without VSH attending the hearings.