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KRG: Dana Gas Has Aggressive Stance

Oil and Gas Dana Gas in KurdistanThe Kurdistan Regional Government (KRG) refers to a decision of the English Commercial Court of 20 November 2015.  The Court’s decision does not relate to the substantive merits of the claims and counterclaims in the on-going arbitration between the KRG and Dana Gas PJSC, Crescent Petroleum Company International Limited and Pearl Petroleum Company Limited (collectively, “the Claimants”).

The order relates to an interim payment of $100 million decided by the Tribunal last year on a provisional and reversible basis,  because of the purportedly precarious financial condition of Dana.

Following this interim order in October 2014, the Claimants made an application to the Court in December 2014.  The Claimants’ application was set aside by the Court in January 2015 due to the Claimants’ failure to comply with provisions of the United Kingdom State Immunity Act 1978 applicable to the KRG.  The Court awarded indemnity costs to the KRG and against the Claimants.

After this, the Claimants re-issued their application to the Court.   The KRG feels that this further escalation was unnecessary and could have been avoided.  Dana was fully aware of KRG’s financial difficulties and its need to maintain its effective fight against ISIS terrorism and support for the more than 1.8 million refugees and internally displaced persons in the Kurdistan Region.  Regrettably, rather than working constructively with the KRG to find a way forward in the light of the prevailing circumstances as other International Oil Companies have done, Dana maintained its aggressive stance and pursued its application to the Court.

The KRG strongly resisted Dana’s application. Following a hearing on 28-30 October 2015, the Court made a further order based on the arbitral tribunal’s October 2014 interim order.  Further issues arising from the Court’s order, including any application for permission for appeal, will be addressed subsequently.  The Court emphasized that the arbitral tribunal’s interim order, which formed the basis for the Court’s order, did not contain a decision on the parties’ substantive rights.

In particular, the Court’s decision does not address the merits of, and has no effect on, the KRG’s substantial counterclaims against Dana and others in the on-going arbitral proceedings.  Those counterclaims have now been partially and provisionally quantified by the KRG’s experts at more than $3 billion.  Whereas the Claimants have previously sought to dismiss the KRG’s counterclaims as fabrications, the Claimants have now been forced to accept the plausibility of those counterclaims.

The KRG has incurred significant damages as a result of the failure of Dana and its affiliates and principals to honour their obligations.  The KRG will continue vigorously to pursue its claims for damages and other relief against the Claimants in all appropriate fora.

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