The Hindu : Business : India wins major arbitration case in Malaysia

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Tuesday, Jan 13, 2009
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India wins major arbitration case in Malaysia

J. Venkatesan

India will gain about Rs. 1,200 crore through additional ‘profit petroleum’.

NEW DELHI: India on Monday won a major arbitration case in the High Court of Malaysia, Kuala Lumpur, in the $55 million commercial dispute between Oil and Natural Gas Corporation and Cairn Energy Pty Ltd.

Allowing India’s appeal, the High Court set aside an award passed by an Arbitral Tribunal in favour of Cairn Energy relating to Rava production sharing contract. According to advocate R. Sasiprabhu, who represented the Indian government, as a result of this decision India would be benefited to the tune of about Rs. 1,200 crore through additional ‘profit petroleum’.

It was the case of Government of India that the companies, namely, Cairn Energy, Videocon Petroleum and Rava Oil (Singapore) Pte Ltd, had suppressed the government’s share of ‘profit petroleum’ by wrongly deducting ‘ONGC carry’ payments, while calculating the profit. The Rava field was originally explored and developed by ONGC prior to the execution of the production sharing contract in October 1994.

The Indian government and ONGC had bargained with the companies that ONGC should be reimbursed a part of its past costs to the tune of $55 million. However, as a result of wrong calculation, the Indian government did not get a share of profit petroleum when it was due and it also did not get the right share when finally it was given its share.

During the arbitration, out of the five issues, the tribunal decided four in India’s favour and one in favour of the companies. The correctness of the award on the ‘ONGC carry issue’ was challenged in the High Court, which, on Monday, held that the award could not be sustained as it suffered from a manifest error of law. While setting aside the award, the court directed Cairn Energy to pay the cost of litigation to the Indian government.

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