“Whilst the wording of paragraph 3(ii) of Appendix D appears to accord with the purpose of the IM [Investment Multiple] as submitted by the Claimants, there is a fundamental difficulty in construing the wording in such manner. That difficulty is the actual outcome (i.e. the ‘net effect’) were the IM to be calculated by taking into account the entire Development Costs (i.e. uncapped by the CRL) as opposed to taking into account only that part of the Development Costs which is recoverable under Article 13 of the PSCs (i.e. capped by the CRL).”
“On balance, I reject the suggestion that the Tribunal reached that conclusion as a result of a serious irregularity. It cannot be irregular for a Tribunal to consider the pleaded contractual basis of a claim and reject it as a matter of construction. True it is that the defendant did not expressly plead the construction point, but since the claimant was relying on clause 27.3, it always retained the responsibility to ensure that its claim did indeed arise under that clause.”
“The essential function of an arbitrator … is to resolve the issues raised by the parties. The pleadings record what those issues are thought to be and, at the conclusion of the evidence, it should be apparent what issues still remain live issues. If an arbitrator considers that the parties or their experts have missed the real point … then it is not only a matter of obvious prudence, but the arbitrator is obliged, in common fairness or, as it is sometimes described, as a matter of natural justice, to put the point to them so that they have an opportunity of dealing with it. …the adequacy of the turning area was not at the conclusion of the evidence - even though it was a possible issue at the commencement of the arbitration - any longer a live issue. The arbitrators clearly thought otherwise. They should have so informed the parties.…” (b) Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd[1985] 2 EGLR 14 , 15, in which Bingham J (as he then was) said: “If an arbitrator is impressed by a point that has never been raised by either side, then it is his duty to put it to them so that they have an opportunity to comment. If he feels that the proper approach is one that has not been explored or advanced in evidence or submission, then again it is his duty to give the parties a chance to comment. If he is to any extent relying on his own personal experience in a specific way then that again is something that he should mention so that it can be explored. It is not right that his decision should be based on specific matters which the parties have never had the chance to deal with. Nor is it right that a party should first learn of adverse points in a decision against him. That is contrary both to the substance of justice and to its appearance.”
“These principles apply to unargued points of law or construction as they do to unargued questions of fact. In such cases, whilst it is not necessary for the tribunal to refer back to the parties each and every legal inference which it intends to draw from the primary facts on the issues placed before it, the tribunal must give the parties “a fair opportunity to address its arguments on all of the essential building blocks in the tribunal’s conclusion” (ABB AG v Hochtief Airport[2006] 2 Lloyd’s Rep 1 , paragraph 72).”
“In determining the amount of notional income tax to be deducted in the applicable cash flows specified in paragraph 2 of this Appendix, a notional income tax liability in respect of the Contract Area shall be determined for each Company, as if the conduct of Petroleum Operations by the Company in the Contract Area constituted the sole business of the Company and as if the provisions of the Income Tax Act, 1961, with respect to the computation of income tax at a fifty percent (50%) rate applicable to Petroleum Operations on the basis of the income and deductions provided for in Article 15 of this Contract were accordingly applicable separately to the Contract Area, disregarding any income, allowances, deductions, losses or set-off of losses from any other Contract Area or business of the Company.”
“9.6. In the Tribunal’s view, when calculating the Investment Multiple, the income tax rates actually applicable to the Companies are to be applied. It has been the Claimants’ submissions – albeit in the context of determining the scope of Development Costs to be used when calculating the IM – that “[t]he purpose of the [Investment Multiple] is to increase the Government’s share of Profit Petroleum as the Contractor’s profitability increases (i.e. as the returns on investment from the Fields grow beyond the costs required to develop them)” and that “[i]n simple terms, the more profitable the production becomes, the greater the Government’s share of the profits”
“In determining the amount of notional income tax to be deducted in the applicable cash flows specified in paragraph 2 of this Appendix, a notional income tax liability in respect of the Contract Area shall be determined for each Company, as if the conduct of Petroleum Operations by the Company in the Contract Area constituted the sole business of the Company and as if the provisions of the Income Tax Act, 1961, with respect to the computation of income tax at a fifty percent (50%) rate applicable to Petroleum Operations on the basis of the income and deductions provided for in Article 15 of this Contract were accordingly applicable separately to the Contract Area, disregarding any income, allowances, deductions, losses or set-off losses from any other Contract Area or business of the Company” (emphases added by the Claimants in their December 2012 Submissions). In the Tribunal’s view, the above provision does not refer to a notional income tax rate of 50% as contended for by the Claimants. This provision only refers to a “notional income tax liability” (emphases added by the Tribunal). Whether this however also reflects an agreement between the parties to the PSCs on a notional income tax rate is open and as a matter of construction, needs to be determined. 9.8 The Tribunal is of the view that, as a matter of construction and as the provisions of the PSCs provide no further clarity or guidance as to whether the parties to the PSCs agreed a notional income tax rate of “50%”, it is appropriate to consider the pre-contractual negotiations and documents exchanged between the Parties prior to their entering into the PSCs. In this regard, the Tribunal notes it is now agreed that the income tax rate actually applicable at the time the PSCs had been entered into, was 50%. This appears to suggest that the reference to “50%” in paragraph 7 of Appendix D was a reference to the income tax rate actually applicable and was not meant to notionally fix the rate. If the Parties had intended to agree on such a notionally fixed rate, there would have been some documents on the record showing the Parties actually negotiated a notionally fixed rate. However, there is none and the Claimants have not referred the Tribunal to any documents which support their assertion that the Parties negotiated and agreed a notionally fixed rate. In fact, the Claimants in their “Final Fiscal Proposal: Tapti” stated clearly that: (l) In the event the income tax rate reduces below 50%, then the lower rate shall be applicable. There is nothing on the record showing that the Claimants, after they had made the above Final Fiscal Proposal in respect of Tapti, amended the basis of the above offer by instead proposing a notionally fixed rate of 50%. In these circumstances and absent any evidence to the contrary, the Tribunal accepts the Respondent’s submission that the Claimants did offer in their Final Fiscal Proposal that “in the event the income tax rate reduces below 50%, then the lower rate shall be applicable”, an offer which the Respondent accepted. 9.9. Against this background, the Tribunal is satisfied that the reference in paragraph 7 of Appendix D is merely an illustration of the actually applicable income tax rate which, at the time the PSCs had been entered into, was 50%. […]” (Emphasis and use of italics for quotations in original; citations omitted)
“3.7 The Respondent in its submission that the CRL requires the completion by the Claimants of all the works set out in Appendix G of the PSC relied to a large extent in support of this submission on the pre-contractual correspondence and documentation. 3.8. Although the pre-contractual correspondence and documentation provides part of the factual background to the conclusion of the PSC, the Tribunal cannot accept the Respondent’s submission that it is permissible to construe the PSC by reference to the earlier correspondence and documentation. The PSC is the agreement between the parties and its true construction must be found within the four corners of the document. That is the case in both Indian and English law, and, the case is a fortiori where, as in the PSC, there is in Article 34 an Entire Agreement provision. Article 34.1 provides: “This Contract supersedes and replaces any previous agreement or understanding between the Parties, whether oral or written, on the subject matter hereof, prior to the Effective Date of this Contract.”” (Italics in original) “This Contract supersedes and replaces any previous agreement or understanding between the Parties, whether oral or written, on the subject matter hereof, prior to the Effective Date of this Contract.””
“on the findings of fact in the award, can we show that the Tribunal’s conclusion on estoppel was obviously wrong as a matter of English law?”; in other words, he submitted that this was one of the rare cases in which the facts found were simply inconsistent with an estoppel being made out if the law had been correctly understood and applied. The central plank of this submission was that the Tribunal had concluded that discussions at the Management Committee and Operational Board meetings did not show a consistent mutual or shared understanding when it said at paragraph 24.20(b) that “the documentary evidence set out above does not appear to show a consistent basis on which the [Operating Board] and/or [Management Committee] stated the CRL was to apply or not.”
“…however, the Claimants’ witness Mr Nigel Shaw, who had not filed any witness statement and had not given evidence prior to the release of the CRL Award, confirmed, in particular in cross-examination at the November 2014 Hearing, that there was in fact a consistent common understanding regarding the basis on which the parties to the Tapti PSC decided to which Development Costs the CRL applies, namely that the CRL applies to Development Costs incurred on works listed in either the IPOD or Appendix G.”
“In light of the Tribunal’s decision in respect of Issue [x] above, the Tribunal considers that this issue no longer falls for determination”
“If [the Claimants are not precluded from advancing their alternative claim for Development Costs in respect of Panna Mukta on the basis of Appendix G This was Issue 30, which was decided in the Claimants’ favour. ], are the Claimants entitled to Development Costs in respect of Panna Mukta on the basis of Appendix G?”
“[t]he Claimants are estopped from submitting that the Development Costs related to works that are inside Appendix G / the IPOD are outside of the CRL”
“Keeping in view the public interest and to protect the interests of the Government, it has been decided by the Government that in case statutory or contractual amounts due to the Government as calculated by contractors in terms of provisions of respective PSCs or relevant laws are not deposited in a timely manner as specified in the respective PSCs or agreed between the parties, the Government of India or its nominee shall withhold payments until such time as the default is remedied by contractors.”
“What the Kirkpatrick case is ultimately about, however, is the distinction between referring to acts of state (or proving them if their occurrence is disputed) as an existential matter, and on the other hand asking the court to inquire into them for the purpose of adjudicating upon their legal effectiveness, including for these purposes their legal effectiveness as recognised in the country of the forum. It is the difference between citing a foreign statute (an act of state) for what it says (or even for what it is disputed as saying) on the one hand, something which of course happens all the time, and on the other hand challenging the effectiveness of that statute on the ground, for instance, that it was not properly enacted…”
“150. Having discussed the four possible rules which may be said to fall under the umbrella of the Doctrine, it is appropriate briefly to identify the characterisation of the various rules. I agree with Lord Mance that the first rule is a general principle of private international law. The rule was characterised by Upjohn J in In re Helbert Wagg & Co Ltd’s Claim[1956] Ch 323 , 344-345 as: “the elementary proposition that it is part of the law of England, and of most nations, that in general every civilized state must be recognized as having power to legislate in respect of movables situate within that state and in respect of contracts governed by the law of that state, and that such legislation must be recognized by other states as valid and effectual to alter title to such movables.”
“111. Serbia's position is that the “continuator”/”successor” issue is non-justiciable because (a) it trespasses on the ambit of the Crown's prerogative in matters of foreign affairs, and the recognition of a foreign state; (b) there is no settled principle of customary international law which is part of English law on the point, so that it involves making a decision solely by reference to public international law, and (c) there are no judicial or manageable standards by which a court or arbitrator can reach a decision. 115. In Ecuador v Occidental [Ecuador v Occidental Exploration & Production Co[2005] EWCA Civ 1116 ;[2006] QB 432 ] the Court of Appeal (Lord Phillips of Worth Matravers MR, Clarke and Mance LJJ) considered jurisdictional issues that arose under an agreement to arbitrate under UNCITRAL Rules that both parties agreed was validly made by them. Provision for the arbitration had been made in a bilateral investment treaty between Ecuador and the United States. The treaty provided that nationals and entities of one state would have direct dispute resolution rights against the other state in respect of investment disputes, by inter alia UNCITRAL arbitration. 116. The arbitrators considered and rejected an objection by Ecuador that the dispute fell outside the categories of claim specified in the treaty. Ecuador then applied to the Court under section 67 to set aside the Award. The issue was whether the Court had jurisdiction to determine this application. It was argued on behalf of Occidental that the Court did not have jurisdiction because determining the section 67 application would involve interpreting the provisions of the investment treaty which were…non-justiciable in an English court. Before dealing with the decision of the Court of Appeal on that point, I observe that there is no suggestion in the judgment that the arbitrators could not deal with Ecuador's objection or should not have dealt with it because the interpretation of the treaty was non-justiciable or non-arbitrable. Indeed the approach of the Court of Appeal is inconsistent with such a suggestion. 117. I turn to the decision of the Court of Appeal. The Court stated that determining the application would involve interpreting the provisions of the investment treaty and, in other contexts, this would be non-justiciable and impermissible. However, it also stated (at [31]) that the context is always important in deciding whether a principle of non-justiciability applies. It held that the court has jurisdiction to determine an application which involves interpreting the provisions of an international treaty where this is necessary to determine a person's rights and duties under domestic law. 118. In the Ecuador case, this was so because the investment treaty provided for arbitration and was intended to facilitate the parties' agreement to arbitrate: see[2006] QB 432 at [32], [37], [41] and [46]. … 119. The Court in the Ecuador case rejected the argument that a matter that was justiciable in an arbitration should be treated as non-justiciable by the Court when it arises in the context of a section 67 application. It stated (at [41]): “If issues regarding jurisdiction are justiciable before the arbitrators, we do not find it easy to see why they should be regarded as non-justiciable before the English court.” 120. In doing so the Court of Appeal appears to have accepted that “justiciability” in a Court differs from “justiciability” or “arbitrability” before an arbitral tribunal. Given the importance of arbitral tribunals as dispute resolution mechanisms in relation to the commercial transactions of sovereign states, and the unavailability of sovereign immunity or act of state defences to a state which has agreed to submit a dispute to arbitration, this is not surprising. […] 124. If, after the arbitrator has dealt with the matter, the court cannot exercise its powers under section 67 because to do so involves a question which in other contexts would be non-justiciable, there would be a significant gap in the court's supervisory powers. The non-justiciability of the issue would mean the court would not be in a position either to uphold the challenge and set aside the Award or to conclude that the challenge is not well founded. The arbitrator's provisional determination would thus be deprived of substance and rendered illusory. But under the 1996 Act the Court is given the power to decide whether the Award, as a provisional determination pursuant to section 30, should stand. […] 126. Serbia's position on non-justiciability also involves both the arbitrator and the court having to accept its assertion that it was not a party to the underlying contract and the arbitration agreement. There is also force in the response…that it would be wrong to “allow a State to escape liability under a commercial contract merely by pronouncing that it was not an original party to the contract, and then sheltering behind a cloak of non-justiciability in order to prevent an arbitration or adjudication based on the true legal position”
“21(3) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than in the statement of defence or, with respect to a counter-claim, in the reply to the counterclaim.” “30 A party who knows that any provision of, or requirement under, these Rules has not been complied with and yet proceeds with the arbitration without promptly stating his objection to such non-compliance, shall be deemed to have waived his right to object.”
“whereas sovereign immunity is capable of being waived, the principle of act of state or non-justiciability is not. If the court lacks jurisdiction to determine an issue, such jurisdiction cannot be conferred upon it by the parties, and the court is in principle obliged to investigate the question itself even if the parties do not wish to do so, or even if it would otherwise be an abuse of process for a party to ask the court to do so.”
“In the event the Respondent succeeds in respect of the GAIL Withholding Counterclaim, then the Petroleum produced and saved would need to be increased by the sum of…USD 15,086,684 for Financial Year 2004/05. The figure referred to by the Respondent [of US$30,089,799 ] is incorrect: only the sum of USD 15,086,684 is attributable to this issue with the remaining sum of USD 15,003,115 being attributable to the Price Ratchet Dispute…”
“Consequently, the Tribunal finds that the Respondent is entitled to an order “direct[ing] the Claimants to […] recompute the Profit Petroleum by accounting all the components of sales”and to produce records showing whether the Claimants have charged marketing margin in those years it had sold Petroleum to third party customers. In this regard, the Tribunal is not persuaded by the Claimants’ submission that the parties are agreed the Marketing Margin Counterclaim only concerns Financial Years 2005/06 and 2006/07 as it is unclear on the evidence that marketing margin was only charged in respect of Financial Years 2005/06 and 2006/07.”
“Directs: (a) in respect of the Marketing Margin Counterclaim, the Claimants to recompute the Profit Petroleum by accounting for all the components of sales including the marketing margin with consequential adjustments to the Parties’ corresponding share of Profit Petroleum to follow.” (a) in respect of the Marketing Margin Counterclaim, the Claimants to recompute the Profit Petroleum by accounting for all the components of sales including the marketing margin with consequential adjustments to the Parties’ corresponding share of Profit Petroleum to follow.”
“.. the Tribunal is, however, unable to come to a conclusion at this juncture on the merits of the Respondent’s Tapti Production Loss Counterclaim so far as South Tapti is concerned. That is because such determination turns on whether the Claimants were justified in insisting on there being an agreement on an increase in the CRL as a pre-condition for drilling the two infill wells in South Tapti. The Tribunal will determine whether the Claimants were so justified, in the context of any application the Claimants may make for an increase in the CRL. In the event no such application is made, the Tribunal will determine whether the Claimants were so justified on the basis of the submissions filed and the evidence to date. Accordingly, the Tribunal reserves for further consideration its decision in respect of this aspect of the Respondent’s Tapti Production Loss Counterclaim.”
“74.61 Reserves for determination whether the Claimants were justified in insisting on there being an agreement on an increase in the CRL as a pre-condition for drilling the two infill wells in South Tapti either in the context of any application the Claimants may make for an increase in the CRL or in the event no such application is made, on the basis of the submissions filed and the evidence adduced to date. ….. 74.63 Dismisses all other claims and counterclaims”