Petrobangla to fight thru' WB arbitrators
Petrobangla has finally decided to contest the case filed by Chevron with the International Centre for Settlement of Investment Dispute (ICSID), an autonomous arbitration institute of the World Bank, to settle the dispute over payment of a gas-business charge.
The state-run petroleum corporation has also decided to withdraw its case filed with the local court against Chevron.
The issue of 4 percent payback on account of wheeling charge is a longstanding issue between the two sides in the gas-exploration business, as the company declines to pay the charge for pipeline use.
Initially, both the parties tried to resolve the issue through negotiation, but now they agreed to go for international arbitration.
Chevron claimed that the 4 percent wheeling charge is applicable only if it uses Petrobangla's pipeline to supply gas to other parties. But Chevron has been supplying gas from three gas fields--Jalalabad, Moulvibazar and Bibiyana--only to Petrobangla.
When contacted, Chevron in a written statement said, “In instituting the case, Chevron is in full compliance with the Production Sharing Contracts (PSCs), the Gas Purchase and Sales Contracts (GPSAs) and all applicable laws governing its operations in Bangladesh.
The PSCs, which are based on Petrobangla's own Model PSC, provide for ICSID arbitration, and both the parties are signatories to the ICSID Convention.”
But Petrobangla, which has been deducting the amount from its payment to Chevron against its gas purchase, earlier had filed a counter-case terming the US company's claim invalid. Both the cases are pending.
In such a situation, suddenly Petrobangla decided to withdraw the case pending with the local court and go for arbitration.
According to official sources, the ICSID has fixed August 5 for hearing on the dispute to held in the Hague. Petrobangla has hired eminent lawyer Dr Kaman Hossain to contest the case.
When contacted, Chief Adviser's Special Assistant for Power and Energy Ministry Tamim said in the changed situation, Petrobangla has to withdraw the local court's case and move to the international arbitration court.
He said the decision was made as per advice of the Petrobangla's legal consultant, Dr. Kamal Hossain.
He also said any dispute under PSC has to be settled through international arbitration.
About the arbitration, Chevron said the company sought ICSID arbitration in March 2006 only after the parties (Petrobangla and Chevron) were unable to amicably settle this longstanding dispute.
Chevron Bangladesh president Steve Wilson said his company stands by its contractual position, and believes that the Bangladesh government “should respect the sanctity of the PSCs and the international law and norms by complying with the ICSID Convention, to which it is a signatory”.
He, however, expressed his company's willingness to meet to discuss alternative options to settle the account, but parallel to the ongoing ICSID arbitration, as the company believes that “it is in the best interest of both parties to resolve this issue without further delay”.
According to the Petrobangla officials, if it is defeated, it will have to pay back about $ 40 million, the amount it has deducted from Chevron as wheeling charge.
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