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

Australia

Spanish Duro Felguera seeks to enforce awards  against Samsung in Australia

Spanish-owned construction company Duro Felguera has applied to the Federal Court of Australia to enforce a pair of awards against the construction arm of South Korea’s Samsung C&T in a billion-dollar dispute over work on a mining project.

A Singapore-seated UNCITRAL tribunal issued partial and final awards earlier this year in an arbitration administered by the Singapore International Arbitration Centre in a dispute related to a contract for the US$7 billion Roy Hill iron ore mining, rail and port project in the Pilbara region of Western Australia. Duro was originally part of a joint venture with Australia’s Forge Group that entered into a subcontract with Samsung to provide work in relation to Roy Hill, including the supply of processing equipment and the design of a bulk-handling system. 

After Forge went into administration, Samsung entered into an interim subcontract with Duro for the remaining works. Samsung brought the arbitration in 2016, asserting claims of around US$900 million, while Duro counterclaimed for around US$220 million including for payments withheld by Samsung after a call on bonds.

The tribunal issued two awards, neither of which are public, allegedly requiring Samsung to pay US$94 million.

Australian gaming company to challenge Cambodian casino award

Australian gaming company Donaco International (Donaco) has said it will challenge the decision of a sole arbitrator in Cambodia at the National Commercial Arbitration Centre in Phnom Penh upholding its Thai partners’ Lee Hoe Property (LHP) termination of a 50-year lease for a casino.

The dispute relates to the Star Vegas Resort & Club in the western Cambodian city of Poipet. Donaco paid US$360 million to acquire the casino in 2015 from LHP, who retained ownership of the land on which the casino sits but granted a 50-year lease on the land to Donaco’s Cambodian subsidiary. Donaco also took out a US$100 million loan from Taiwan’s Mega Bank that was secured against the lease.

The parties fell out in late 2017, with Donaco accusing its partners of breaching a non-compete clause by running their own gambling operations close to Star Vegas. Donaco brought that claim before the Singapore International Arbitration Centre

The sole arbitrator at the National Commercial Arbitration Centre in Phnom Penh ruled the termination was valid. Donaco says it already filed an appeal to the Appeal Court in Phnom Penh against “certain procedural aspects of the arbitration process” and says it will file a further appeal against the award itself. If the lease is effectively terminated, Donaco says it would seek compensation for US$33 million in buildings and fixtures on the property.

China

China plans to allow FTZ-registered foreign arbitration institutions

On 26 August 2019, the State Council of the PRC issued the Overall Plan for the Lingang Area of the China (Shanghai) Pilot Free Trade Zone (Overall Plan), which expands the territory of the Shanghai Free Trade Zone (FTZ) to Lingang area. The Overall Plan also gives support to the establishment of judicial organizations for international commercial disputes in the Lingang Area, Shanghai (Lingang Area). After being registered and filed with the competent authorities, well-known foreign arbitration institutions may establish business organizations in Lingang Area. Thereafter, Chinese and foreign parties may choose such business organization to settle disputes.

Foreign arbitration institutions were previously allowed to establish representative office but they were prohibited to carry out arbitration business. Thanks to the Overall Plan, now the substantive arbitration business with respect to civil and commercial disputes arising from such fields as international business, maritime affairs and investment are permitted. However, the Overall Plan provides only general guidelines on this reform and detailed implementation rules are still pending.

US-Chinese mining dispute heading to ICC arbitration

Colorado-based molybdenum mining company General Moly (GMO) says it has instructed external counsel for a dispute with its largest shareholder, China’s Amer International Group (Amer), for an alleged default under an investment securities purchase agreement, that may end up in ICC arbitration in Hong Kong.

According to GMO, Amer would have defaulted on the agreement by failing to purchase 20 million shares of GMO’s common stock for a purchase price of US$10 million, a purchase obligation triggered by GMO’s receipt of water permits from the Nevada authorites.

GMO alleges that Amer had indicated it was considering terminating the agreement based on alleged uncured material adverse effects and alleged breaches by the US company. These included concerns relating to US-China relations, the delay in obtaining environmental permits and solvency concerns. The US company contends that such assertions to be “inaccurate and wholly without merit”.

India

India´s Liberty House hit by ICC arbitration claim from Rio Tinto over aluminium plant dispute

Anglo-Australian mining group Rio Tinto has launched an ICC arbitration against Indian billionaire Sanjeev Gupta’s Liberty House in a dispute demanding  a US$50 million payment, representing post-closure adjustments relating to the sale of the Dunkerque aluminium plant on France’s northern coast.

Steel and commodities trader Liberty House, which is part of the Gupta family group GFG Alliance, acquired the plant from Rio Tinto in a US$500 million transaction that closed in December last year. The transaction was partly financed by a US$350 million loan from a syndicate of lenders including Bank of America Merrill Lynch and commodities trader Trafigura.

GFG intends the 570-worker plant to be a hub for a manufacturing supply chain in France, particularly for materials in the automotive sector. GFG says that the plant produces 285,000 tonnes of aluminium per year.

The dispute allegedly concerns the calculation of adjustable post-transaction payments, with Rio Tinto arguing it is owed US$50 million.

Indian court enforces SIAC award for Glencore

The Delhi High Court has upheld a motion submitted by Glencore, the British-Swiss commodities trader, to enforce the award against Chennai-based Indian Potash Limited (IPL), whose shareholders include various Indian state farming cooperatives. issued in an expedited procedure by a sole arbitrator in Singapore on the basis of arbitration clause stipulating an non-existent arbitral institution.

Under a 2010 contract, IPL agreed to deliver 40,000 wet metric tonnes of iron ore to Glencore with a condition that the ore would have an iron content of at least 61%, otherwise Glencore would be entitled to reject shipments. The contract also includes an arbitration agreement referring to Singapore as the seat of arbitration, but erroneously providing for any dispute to be settled in accordance with “the Rules of Singapore International Arbitration of the Chambers of Commerce in Singapore.”

Soon afterwards, Glencore entered into a sub-sale agreement with Chinese company Hebei Tianxhu & Steel (Hebei) that included the same minimum iron content. The iron content was found to be 60.4% when shipped two weeks later, and to be 57.7% when it arrived at the port of discharge a month later. Glencore issued a notice rejecting the cargo on the basis of disqualified iron content and amended the contract with Hebei to lower the price with reduced iron content.

As per the request of Glencore, SIAC applied its expedited arbitration procedure.. A final award was issued in 2012 and a costs award three years later.

The judge of the Delhi High Court dismissed all IPL’s four objections, including the argument that the SIAC rules should not be applied to this case. The judge stated that the arbitrator had correctly identified the true intention of the parties to refer to SIAC rules in arbitration clause, which was reasonable and caused no prejudice to IPL.

Pakistan

Pakistan faces attempt to enforce a US$6 billion ICSID award in Washington D.C.

Australian mining joint venture Tethyan Copper Company (TCC), formed by between Chile’s Antofagasta and Canada’s Barrick Gold) has filed an action in the US District Court for the District of Columbia to enforce an ICSID award against Pakistan that compensated it for the denial of a lease to exploit a valuable copper and gold deposit

The dispute relates to an agreement entered by TCC with Balochistan in 2006 to develop Reko Diq, on the basis of what it said were assurances from the federal and provincial governments, only to be later ousted from the project.

The ICSID tribunal had ordered Pakistan to pay over US$4 billion in damages to TCC, plus US$1.7 billion in pre-award interest, finding Pakistan had unlawfully denied TCC a lease to mine copper and gold deposits at the Reko Diq mine, and that the state had committed an unlawful expropriation under the Australia-Pakistan bilateral investment treaty.