International Arbitration Newsletter - June 2019 | Regional Overview: Asia Pacific

Australia

Engineering company posts bond before Australian court in Vietnamese mining dispute

Engineering company Jacobs Engineering Group has posted US$95 million in security with  the Federal Court of Australia to secure a temporary stay of enforcement of a SIAC award in favour of the Vietnamese operator Nui Phao Mining Company (NPMC), a subsidiary of Vietnamese natural resources group Masan– representing damages awarded in a dispute related to a mine and mineral processing project in Thai Nguyen province in northern Vietnam.

NPMC commenced arbitration against the Jacobs entity in 2015, asserting claims worth more than US$136 million. The SIAC tribunal issued a partial final award finding against Jacobs and ordering it to pay US$95 million in damages.

NPMC has also asserted a claim for interest worth around US$55 million, which Jacobs says it intends to dispute. The Vietnamese company is also expected to seek recovery of costs and attorneys’ fees.

South Korea

South Korea hit with treaty claim notice from Canadian national

An unidentified naturalised Canadian citizen and investor has filed a notice of intent against South Korea for a US$3 million claim under the Korea-Canada free trade agreement after his property was included in a redevelopment project in Seoul.

The investor (reported as “Mr A,”) a 57-year-old who emigrated to Canada from Korea in 2006, purchased a three-storey building in Seoul’s Jung-gu district. In November last year, that site was slated for a redevelopment project. Korean construction company Daelim announced in April that it had been awarded a €232 million contract to build an apartment complex on the site.

According to news reports, Mr A said that Korean authorities had unlawfully included his property in the redevelopment process. He also argues the project is not for public purposes and that he would not receive proper compensation.

South Korean banking group defeats ICC claim fund

South Korean banking group Hana Financial Group has defeated an ICC claim reportedly worth US$1.4 billion brought by US private equity firm Lone Star Funds and LSF-KEB, the Belgian holding company of the former distressed-debt investor.

The dispute arose from the sale of Lone Star’s 51% stake in Korea Exchange Bank (KEB) to Hana in 2012. Five years later, a planned sale of the stake to British bank HSBC for US$6.3 billion fell through when Korea’s Financial Services Commission began investigating allegations that Lone Star manipulated stock prices in KEB downwards before acquiring its majority shareholding.

In 2010, Lone Star agreed to sell the stake to Hana for US$4.1 billion. However, the sale was delayed after a South Korean court fined Lone Star US$21 million for stock price manipulation. Hana subsequently agreed to a revised purchase price of US$3.5 billion in late 2011, with the sale completing in the following year after receiving regulatory approval. Lone Star brought its ICC claim against Hana in 2016, alleging Hana colluded with Korea’s Financial Services Commission to help engineer a price reduction, which Hana denied.

Hyundai Heavy Industries settles ICC arbitration with Qatar Petroleum

South Korean engineering group Hyundai Heavy Industries (HHI) has settled an ICC arbitration in which it faced claims worth US$8.4 billion from Barzan Gas Company, a subsidiary of state-owned Qatar Petroleum, over repairs to an offshore gas project. It is understood that HHI is set to pay around US$222 million to settle the case. 

The dispute arose from a US$900 million contract awarded to HHI in 2011 to build the offshore part of the Barzan Gas Project, a natural gas facility around 80 kilometres northeast of Ras Laffan Industrial City in Qatar.

The contract – governed by Qatari law – provided for the installation of 300 kilometres of subsea pipelines, 100 kilometers of subsea cables and three offshore platforms.

After work was completed in 2015, Barzan said it found gas leaks in the pipeline welds and sought to have the entire line rebuilt with corrosion-resistant alloy rather than carbon steel.

Pakistan

Saudi Arabian steelmaker brings UNCITRAL claim against Pakistan

Saudi Arabia’s Al-Tuwairqi group is pursuing a UNCITRAL claim brought under the Organisation of Islamic Cooperation investment agreement worth US$500 million against Pakistan over a project to develop the country’s largest steel complex.

The case is being administered by The Permanent Court of Arbitration at The Hague.

The dispute relates to delays in the development of a steel plant at a 220-acre site at Bin Qasim near the coast of the Arabian Sea. The investor set up Al-Tuwairqi Steel Mills Limited to manage the plant as a joint venture with South Korean steelmaker POSCO. However, in 2014 the joint venture ceased operating the plant, alleging Pakistan had reneged on a promise to provide gas at a discounted rate to enable it to compete in the international market. Pakistan said the discounted rate requested by the venture would amount to a subsidy of approximatelyUS$171 million over five years.

Singapore

Singapore Appeal court sets aside SIAC award

The Singapore Court of Appeal has set aside an SIAC award against a Sri Lankan state-owned Rakna Arakshaka Lanka (RALL) entity in a dispute over a floating armoury.

The Court of Appeal quashed a lower court’s ruling that RALL was too late to bring a jurisdictional challenge against the award in favour of Avant Garde Maritime Services (AGMS), a Sri Lankan maritime security company owned by retired army major Nissanka Senadhipathi.

The dispute relates to a public-private partnership between RALL and AGMS to carry out certain projects, including the establishment of a floating armoury near the coastal city of Galle in Sri Lanka. Set up on the vessel MV Mahanuwara, it was the only floating armoury authorised by the Sri Lankan government to operate in its territorial waters in the Indian Ocean.

Investigations into the state entity’s dealings with AGMS resulted in the vessel being detained over suspicions that the floating armoury project had been procured through bribes paid by AGMS to RALL’s former chairman, Palitha Fernando, and others.

The Appeal court ruled that the SIAC tribunal erred by continuing with the arbitration after a settlement had terminated its mandate.