International Arbitration Newsletter - October 2021 | Regional Overview: Asia Pacific

Australia

Australian Court upholds application to revoke award

An interim award issued by an UNCITRAL tribunal, ruling on the labor costs of the Gorgon gas project, was revoked by an Australian court on the grounds that the issue of liability was reopened after its determination in an earlier award.

The dispute relates to the Gorgon gas project operated by Chevron and ExxonMobil, as well as other parties. CBI Constructors (CBI) and Kentz agreed to provide labor for the project with a payment of US$1.6 billion in 2011, while such amount tripled to US$5.1 billion due to the subsequent delays.

The labor cost had been disputed between the parties since 2016 while Chevron declared its overpayment to both CBI and Kentz. In 2017, CBI and Kentz initiated UNCITRAL arbitration before the Australia’s Institute of Arbitrators and Mediators against Chevron, objecting the overpayment claimed by Chevron and raising a counterclaim arguing that Chevron still owed additional fees due to the delays.

In 2018, the tribunal ruled in favor of CBI and Kentz over the labor cost in an interim award, but it did not uphold CBI and Kentz´s claim that the labor costs shall be paid on a rate basis instead of being paid as “actual costs”. As a result,  CBI and Kentz changed their claim on the quantum and, despite Chevron objecting to this new pleading, the tribunal found in favour  of CBI and Kentz in a second interim award in 2020, reasoning that the “actual cost” was an issue of quantum instead of liability.

Chevron brought the case before the Supreme Court of Western Australia to which the Court agreed that CBI and Kentz´s claim on quantum shall be a liability issue, to which the tribunal had exhausted its jurisdiction in the first interim award, and that therefore, it shall not be raised in such phrase. Notably, the challenge of the second interim award is of “jurisdictional” nature, rather than about procedural fairness.

South Korea

Samsung heavy industries settles ICC arbitration in gas platform dispute

Samsung Heavy Industries (Samsung) –a subsidiary of the Samsung Group, has settled with Japanese oil company Inpex over an ICC arbitration valued US$600 million. The arbitration was launched for a project contracted by both parties to construct an offshore facility in Australia.

In 2012 Samsung entered into a contract with Inpex for the construction of the largest floating offshore gas-processing platform in the Australian coast, which was a part of the Ichthys LNG project in Darwin, valued at US$40 billion. In 2019 Samsung completed the construction of the platform, with a delay of more than 3 years. Inpex refused to pay the remaining US$116 million stipulated in the contract.

In 2021 Samsung initiated two arbitration proceedings against Inpex respectively claiming for the payment of the outstanding remaining contract amount, as well as applying to confirm the wrongfulness of Inpex’s bond call. Inpex launched, in response, a counterclaim valued at US$480 million.