THE AUTHOR:
Esen Aydin, Legal Content Manager at Jus Mundi
Arbitration Aftermath with Zeyad Abouellail and Esen Aydın: Your trusted source for the latest post-award developments in the dynamic world of investor-State and commercial arbitration. Back with a fresh perspective, Zeyad focuses on cases involving States, ministries, and public entities, while Esen handles disputes between private parties. From settlements and compliance with awards to recognition, enforcement procedures, annulment, and beyond. Each week, we bring you global insights and updates to navigate this ever-evolving landscape.
Phillips Petroleum and ConocoPhillips v. PDVSA and others
The Hague District Court Approves Public Sale of Shares for Nearly USD 2 Billion Award Enforcement
ICC Case No. 20549/ASM/JPA (C-20550/ASM)
Institution: ICC (International Chamber of Commerce)
Tribunal’s composition: Laurent Lévy(President), Laurent Aynès (Appointed by the claimant), Andrea Giardina (Appointed by the respondent)
Seat of arbitration: New York City, United States
The Hague District Court authorized the public sale of shares after the deadline to privately sell expires in enforcement proceedings for the Phillips Petroleum and ConocoPhillips v. PDVSA award.
Background
Phillips Petroleum and ConocoPhillips Petrozuata (“ConocoPhillips companies”) are subsidiaries of ConocoPhillips and they participated in the development of two oil projects in Venezuela between 1990 and 2007. These projects, focused on transporting and enriching oil, were later nationalized by the Venezuelan government and transferred to PDVSA.
The ConocoPhillips companies initiated two ICC proceedings on 10 October 2014 against PDVSA, seeking compensation under the discriminatory action provisions of the Agreement and alleging liability for breach of contract. The proceedings were later consolidated.
By a Final Award issued on 24 April 2018, PDVSA was ordered to pay nearly USD 2 billion in damages to ConocoPhillips companies.
Dutch Enforcement Proceedings
By an order dated 25 September 2018, the Hague Court of Appeal recognized the arbitral award and in 2020, ConocoPhillips companies initiated its enforcement. Since May 2020, PDVSA has been subject to an attachment order on its shares in the Dutch company Propernyn for the benefit of ConocoPhillips companies’ claim.
On 30 December 2020, the Hague District Court ruled that all seized shares in Propernyn held by PDVSA could be sold privately for the execution of the arbitral award. The court set a 12-month period for the private sale to take place.
In 2024, the ConocoPhillips parties requested the sale of the shares through a public auction, which PDVSA challenged. The original 12-month period for the private sale of the shares was extended until 1 January 2024, after which the court stated it would determine an alternative method for selling the shares. Consequently, the ConocoPhillips parties requested that the court approve the sale by public auction.
Hague District Court’s Decision on the Public Sale of the Shares
The Hague District Court reaffirmed its discretionary authority to determine the manner of selling the attached shares, prioritizing the method that maximizes execution proceeds. In the 2020 Order, the court expected a private sale to yield the highest return. However, it later found that limited information was available to potential private buyers, reducing the advantages of a private sale. The court also dismissed concerns that US sanctions would deter buyers more in a public sale than in a private one.
Given the history of the execution process and the lack of evidence that a private sale would yield a higher price, the court ruled in favor of a public auction, noting that competitive bidding would likely maximize value. Before authorising the public auction, the court extended the deadline until 1 March 2025 to allow for a final opportunity to complete the private sale.
The court required a minimum six-week notice period for the auction and granted PDVSA’s request to include a restriction in the auction conditions while approving ConocoPhillips companies’ proposed terms. It ruled that if ConocoPhillips or its affiliates submitted the highest bid, they would be prohibited from reselling Propernyn shares or assets to third parties for a higher price within three years.
Texan Minerals and Chemicals v. India Glycols and others
Singapore High Court Partially Annuls SIAC Award
Institution: SIAC (Singapore International Arbitration Centre)
Tribunal’s composition: N/A
Seat of arbitration: Singapore
In a recently published judgment, the Singapore High Court partially annulled a SIAC award, ruling that the tribunal exceeded its jurisdiction by holding two respondents liable for damages.
Background
Texan Minerals and Chemicals (“Texan”) placed purchase orders with IGL Chem International USA LLC (“ICI”) for hand sanitizers manufactured by India Glycols Limited (“IGL”). Texan was later appointed as IGL’s exclusive distributor in North America under a Manufacturer Representation Agreement (“MRA”) signed in February 2021. The agreement required IGL to maintain US Food and Drug Administration (“FDA”) compliant quality standards. Texan raised quality concerns in June 2021, alleging non-compliance with FDA regulations.
Texan later initiated arbitration in March 2023 against IGL, ICI, and Mr. Dharmesh Mehta (“Respondents”), seeking damages for breach of contract, misrepresentation, and breach of warranties.
In an award dated 19 June 2024, the sole arbitrator ordered the Respondents to pay damages to Texan for breach of the MRA. Respondents then commenced annulment proceedings before the Singapore Courts. The Respondents claimed that the arbitrator breached the principle of natural justice (Ground I) and decided on matters beyond the scope of the submission to arbitration (Ground II).
Ground I: Breach of Natural Justice
The Respondents argued that the arbitral tribunal breached the fair hearing rule by deciding that Texan was entitled to recover storage costs as damages. However, the Singapore High Court found no violation of natural justice, emphasizing that the claimants had actively participated in the arbitration and had a full opportunity to present their case. The Respondents’ criticisms of the Tribunal’s reasoning were deemed attacks on the merits rather than valid procedural objections.
Additionally, the Respondents contended that they had not been given the opportunity to address the tribunal on the “break-even presumption” applied in the decision. The court held that the presumption was not material to the Tribunal’s decision-making. Since it was neither a determinative issue nor an essential part of the Tribunal’s reasoning, there was no obligation for the Tribunal to consult the parties on its application before referencing it.
The court ultimately concluded that there was no material irregularity warranting the annulment of the award on Ground I.
Ground II: Excess of Jurisdiction
After reviewing multiple documents and evidence presented in the arbitration, the Singapore High Court concluded that Texan’s claims were directed solely at IGL. It determined that the only issue within the scope of the submission to arbitration was whether IGL had breached the MRA, not whether all respondents, including ICI and Dharmesh, had done so.
While the award found that IGL, ICI, and Dharmesh had breached the MRA, none of the parties had argued in the arbitration that ICI and Dharmesh had undertaken obligations under the MRA. The tribunal’s decision was not based on the premise that IGL’s breach led to liability for all respondents; rather, it expressly found that ICI and Dharmesh had breached the MRA and were liable for damages. However, as the parties had not argued this point, the Court concluded that the tribunal exceeded its jurisdiction in making such a determination. According to the court’s opinion, this was not a mere error in reasoning but a fundamental jurisdictional overreach.
Consequently, the court concluded that the portion of the award imposing liability on ICI and Mr. Mehta was beyond the scope of the submission arbitration. It upheld the claims against IGL but ruled that any findings against the other two claimants had to be set aside due to excess of jurisdiction.
Cargill v. TBF Group and others
New York Court Recognizes English Decision to Enforce the LCIA Award
LCIA Case No. 215018
Institution: LCIA (London Court of International Arbitration)
Tribunal: David Owen (President), Tetyana Nesterchuk (Appointed by the institution), Drew Holiner (Appointed by the institution)
Seat of arbitration: London, United Kingdom
In a recently published judgment, the US District Court for the Southern District of New York granted summary judgment to enforce an English court decision recognizing an LCIA award issued in 2014.
Background
The dispute arose from financing arrangements dating back to 2015, in which Cargill provided funding for Taras Barschchovskiy’s TB Fruit (“TBF”) companies. As the TBF group’s financial reliability declined from 2016 onward, Cargill adjusted repayment arrangements, but the debt continued to grow, and the group was unable to meet its obligations.
Cargill commenced 27 distinct LCIA arbitration proceedings against the TBF companies and Taras Barshchovskiy (“Respondents”) in 2021, which were later consolidated and asked for the payment of the outstanding sums plus default or late interest. The arbitral tribunal found in its Final Partial Award that all the respondents were severally liable for the unpaid debt and ordered the payment of totalling USD 200 million.
Barschchovskiy challenged the award before the High Court on the grounds of serious irregularity, claiming the tribunal was not fair and impartial. The challenge failed and the Court rejected Barschchovskiy’s annulment request. Cargill later obtained an order from the London High Court in 2024 granting its request to enforce the LCIA award.
Proceedings Before the US Courts
Cargill sought recognition and enforcement of the High Court judgment before the New York courts in March 2024 and filed a motion for summary judgment in November 2024. Barschchovskiy did not dispute the facts presented in Cargill’s statement and was, therefore, deemed by the court to have accepted them. He opposed summary judgment solely on the grounds that the court lacked personal jurisdiction over him.
The District Court for the Southern District of New York rejected the argument that personal jurisdiction over the judgment debtor was required to recognize a foreign money judgment. Instead, it held that the key requirement was that the foreign court issuing the judgment had personal jurisdiction over the debtor. Additionally, the court found that Barschchovskiy’s allegations of fraud and lack of integrity in the English High Court’s judgment were vague, unsupported by evidence, and ultimately meaningless.
The court further ruled that Barschchovskiy had failed to raise any valid challenge to the judgment. It also rejected his argument that enforcing the foreign money judgment would violate the Due Process Clause of the U.S. Constitution, affirming that recognition of a foreign judgment does not require personal jurisdiction over the debtor.
In conclusion, the court granted Cargill’s motion for summary judgment and ordered entry of judgment in the amount of $124 million plus interest.
ABOUT THE AUTHOR
Esen Aydın is a Legal Content Manager at Jus Mundi and a PhD candidate at Istanbul University. Her research focuses on private international law and commercial arbitration. She holds two Master’s Degrees in International Arbitration and Dispute Settlement from Istanbul University and SciencesPo, Paris. Prior to joining Jus Mundi, Esen worked as a teaching assistant in Private International Law.
