Pearl Petroleum, Dana Gas PJSC & Crescent Petroleum v. Kurdistan Regional Government of Iraq, LCIA Case No. 132527
LCIA · Investment (ICSID and treaty) · Iraq · 30 Jun 2015
Why it matters
This partial final award is significant for its interpretation of exclusive rights in production sharing agreements, the meaning of 'unable to export and market' due to political reasons, and the distinction between assignment and novation. It also addresses the pricing mechanism for petroleum products and the scope of confidentiality exceptions. The award provides guidance on contractual interpretation in the oil and gas sector, particularly in politically sensitive regions.
Summary
The dispute arose from a Heads of Agreement (HoA) dated 4 April 2007 between Dana Gas PJSC and the Kurdistan Regional Government of Iraq (KRG). Dana agreed to provide services in the Khor Mor and Chemchemal areas, including building a gas processing plant and pipeline. In return, Dana was entitled to own and sell condensate and LPGs recovered from the gas stream. The HoA provided that if Dana was unable to export and market these products due to government acts or political reasons, the KRG would purchase them at international FOB Med market prices. Dana later assigned its rights to Pearl Petroleum, a subsidiary, and sold minority stakes to MOL and OMV. The KRG challenged the validity of the assignment and claimed damages for delays and breaches. The Tribunal, composed of Lord Hoffmann (presiding), Lord Collins, and John Beechey, issued a partial final award on 30 June 2015. It declared that Pearl has the exclusive right to develop and produce petroleum in the contract areas until the HoA expires. It found that the Claimants were unable to export and market the products due to government acts and political reasons, triggering the KRG's obligation to purchase at FOB Med prices. The Tribunal held that the assignment to Pearl was valid as an assignment but not a novation, so Dana and Crescent remained liable. It rejected the KRG's claims that the assignment was a breach or that the Claimants were accountable for profits from the sale of shares. The award reserved further issues including quantum and costs.
The detail
Parties: Pearl Petroleum, Dana Gas PJSC & Crescent Petroleum v. Kurdistan Regional Government of Iraq, LCIA Case No. 132527
Case number: italaw/cases/5180
Outcome: The Tribunal declared that Pearl has the exclusive right to develop and produce petroleum in the Khor Mor and Chemchemal areas, that the Claimants were unable to export and market LPGs and condensate due to government acts/political reasons, and that the assignment to Pearl was valid but not a novation. The KRG's counterclaims were largely rejected.
Applicable law: Heads of Agreement dated 4 April 2007; LCIA Rules; English law (place of arbitration London)
Issues in play: The dispute involved interpretation of contractual terms in the Heads of Agreement, particularly the exclusive right to develop petroleum, the obligation to purchase products when unable to export, and the validity of assignment versus novation.
Read the full decision at italaw ↗
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