Tepe Insaat Sanayii as v Boru Hatlari IIe Petrol Tasima as (also known as Botas Petroleum Pipeline Corporation)

JurisdictionJersey
CourtRoyal Court
JudgeSir Michael Birt,Birt
Judgment Date22 February 2016
Neutral Citation[2016] JRC 47
Date22 February 2016

[2016] JRC 47

ROYAL COURT

(Samedi)

Before:

Sir Michael Birt, Commissioner, sitting alone.

Between
Tepe Insaat Sanayii AS
Representor
and
Boru Hatlari IIe Petrol Tasima AS (also known as Botas Petroleum Pipeline Corporation)
First Respondent
Turkish Petroleum International Company Limited
Second Respondent
Botas International Limited
Third Respondent1
Nacap BV
Party Cited

Advocate E. Moran for the Representor.

Advocate P. G. Nicholls for the Respondents.

Authorities

Tepe -v- Botas [2016] JRC 012 A.

Arbitration (Jersey) Law 1998.

Norsk Hydro ASA v State Property Fund of Ukraine and others [2009] BusLR 558.

Jomair Leasing Limited v Hourigan [2011] JRC 042.

Veka AG v T A Picot (CI) Limited [1999] JLR 306.

State Immunity Act 1978.

IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation [2005] EWHC 726(Com).

Jakobsson v Offshore Nautical Sales Limited [2003] JLR 71.

Watkins v Egglishaw [2002] JLR 1.

Flynn v Reid [2012] (2) JLR 226.

In re Elgindata (No.2) [1992] 1 WLR 1207.

Centre Trustees CI Limited v Van Rooyen [2009] JRC 133.

Café de Lecq Limited v R A Rossborough (Insurance Brokers) Limited [2012] JRC 154.

Marange Investments (Proprietary) Limited v La Générale des Carrières et des Mines SARL [2013] JRC 119 A.

Crociani v Crociani [2013] JRC 250.

Mars UK Limited v Teknowledge Limited [1999] 2 Costs LR 44.

Boyd v Pickersgill and Le Cornu [2000] JLR 310.

General of Berne Insurance Co v Jardine Reinsurance Management Limited [1998] 1 WLR 1231.

Companies — consideration of supplementary matters arising out of judgment dated 19 January 2016 plus costs.

THE COMMISSIONER:

1

On 20 th January, 2016, I sat to consider a number of supplementary matters arising out of the judgment of this Court issued on 19 th January, 2016, Tepe -v- Botas [2016] JRC 012A (“the Judgment”). There has been a slight delay in issuing the judgment because the parties at one stage requested me to defer finalising it because they hoped to agree on the terms of the Act necessary to reflect the Judgment. However, that transpired not to be possible and I am accordingly now delivering the judgment.

Background
2

The detailed history of this matter is set out in the Judgment but, in order to explain the issues which I have to resolve, I would summarise the key aspects of that history as follows. Expressions defined in the Judgment have the same meaning in this judgment even where I do not explain that definition in this judgment.

3

Tepe has the benefit of two sets of arbitration awards (“the Awards”) against Botas. The first set is known as the Stations Awards, the first of which was on 5 th June, 2009, and the third of which was on 26 th August, 2011. The overall outcome was that the arbitration panel awarded Tepe sums totalling US$52.5 million plus compound interest on such damages and ordered the return of certain securities (“the Stations Securities”) which Tepe had provided pursuant to the underlying contract. The arbitration panel also ordered payment of all commissions accruing in relation to the Stations Securities until their return. As at the date of the representation to this Court in December 2014, the total amount due under the Stations Awards was US$64,732,608 and the Stations Securities had an aggregate value of US$5,604,664.

4

The second set of awards are referred to as the Lot A Awards, the first of which was on 18 th October, 2010, and the third of which was on 21 st May, 2013. These too awarded certain sums to Tepe and ordered Botas to return the various securities provided by Tepe in support of the underlying contract (the “Lot A Securities”). As at the date of the representation in December 2014, the amount due under the Lot A Awards was US$27,818,670 and the aggregate value of the Lot A Securities was US$15,930,519. The Stations Securities and the Lot A Securities are together referred to as “the Securities”.

5

Botas has not paid any of the sums due under the Awards nor has it returned any of the Securities.

6

Botas is wholly owned by the State of Turkey (“the Republic”). Botas is in turn the sole owner of two companies incorporated in Jersey, namely the second respondent (TPIC) and the third respondent (BIL). The shares in those two companies are referred to as “the Shares”.

7

When Tepe instituted its proceedings in Jersey seeking leave to enforce the Awards as judgments, it obtained an interim arrêt over the Shares and over any amounts owed by TPIC or BIL to Botas (“the Debts”).

8

At the hearing which gave rise to the Judgment, the following main issues fell for decision:-

  • (i) Botas submitted that the Awards should not be enforced in Jersey because the procedure followed by the arbitration panels had been unfair towards Botas, thereby engaging Articles 44(2) and (3) of the Arbitration (Jersey) Law 1998 (“the Arbitration Law”).

  • (ii) Botas submitted that the Court had no jurisdiction to make any order in respect of the Shares because the Republic had an interest in and/or control of the Shares such as to engage the principle of sovereign immunity (“the sovereign immunity issue”).

  • (iii) The Court had no jurisdiction – or if it had it should not exercise it – in respect of the Debts as they were situated outside Jersey (“the Debt issue”).

  • (iv) The Court had no jurisdiction – or if it had it should not exercise it – in respect of the Securities because they too were situated outside Jersey.

9

In the Judgment, the Court found as follows on these points:-

  • (i) It rejected all of Botas' criticisms of the procedure followed by the respective arbitration panels. It held that none of the grounds in Article 44(2) and (3) of the Arbitration Law for refusing to enforce the Awards was made out. The Awards were therefore enforceable in this jurisdiction.

  • (ii) The Republic was not entitled to sovereign immunity in respect of the Shares. The Court would therefore confirm the interim arrêt over the Shares.

  • (iii) The Court should not confirm the interim arrêt in respect of the debts because an arrêt has proprietary effect and there is no jurisdiction to grant an arrêt in respect of a debt situated outside the jurisdiction unless it is clear that the arrêt would be recognised under Turkish law as discharging the obligation of TPIC/BIL to Botas.

  • (iv) The Court held that it had jurisdiction to make an in personam order directing Botas to return the Securities in accordance with the Awards and that in its discretion it was appropriate to do so notwithstanding that the Securities were situated outside the jurisdiction.

Issues for decision
10

It seems to me that the issues raised by one or other of the parties at the hearing on 20 th January can be considered conveniently under the following headings:-

I shall consider each of these in turn.

  • (i) The form of the Act to give effect to the Judgment.

  • (ii) Should there be a stay of the arrêt over the Shares pending appeal and if so, on what terms?

  • (iii) Should there be a stay pending appeal of the order to return the Securities?

  • (iv) Should there be a stay of the order discharging the interim arrêt over the debts pending a cross-appeal by Tepe?

  • (v) Should there be limited protective measures pending appeal?

  • (vi) Costs (including whether there should be an order for an interim payment).

(i) Form of the Act
11

Each side has produced a draft Act for consideration. Advocate Nicholls submitted that the form of any order giving effect to an arbitration award must simply mechanistically give effect to the exact terms of the award. Thus paragraph 1 of his draft Act was as follows:-

“That the Representor be given leave to enforce the Stations Awards and the Lot A Arbitration Awards (as defined in the judgment dated 19 January 2016) (together the “Awards”) in the same manner as a judgment or order of the Royal Court in the terms set out in Schedules 1 – 6 of this Order.”

Schedules 1 – 6 then set out the key aspect of each partial award comprising in total the Awards. Thus, he submitted that no reference should be made in the Act to any specific sum now due under the Awards or to the return of the Securities.

12

In support of his submission, he referred to the English case of Norsk Hydro ASA v State Property Fund of Ukraine and others [2009] BusLR 558. In that case an arbitration award had been made against ‘The Republic of Ukraine, through the State Property Fund of Ukraine’ and another party. The award remained unsatisfied and Norsk Hydro applied for permission to enforce the award as a judgment. The respondents to that application were named as (1) the State Property Fund of Ukraine, (2) the Republic of Ukraine and (3) the other party to the arbitration. The order was granted ex parte.

13

The Republic of Ukraine subsequently applied to set aside the ex parte order on the ground that there was no jurisdiction to enforce an award made against one party against two different parties. Advocate Nicholls referred in particular to paragraphs 17 – 19 of the judgment of Gross J which were as follows:-

“17. Section 100 and following of the Arbitration Act 1996 provide for the recognition and enforcement of New York Convention Awards. There is an important policy interest, reflected in this county's treaty obligations, in ensuring the effective and speedy enforcement of such international arbitration awards; the corollary, however, is that the task of the enforcing court should be as ‘mechanistic’ as possible. Save in connection with the threshold requirements for enforcement and the exhaustive grounds on which enforcement of a New York Convention Award may be refused (sections 102 – 103 of the 1996 Act), the enforcing court is neither entitled nor bound to go behind the award in question, explore the reasoning of the arbitration tribunal or second-guess its intentions. Additionally, the enforcing court seeks to ensure that an award is carried out by making...

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