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

JurisdictionJersey
CourtRoyal Court
JudgeSir Michael Birt,Jurats Nicolle,Kerley,Birt
Judgment Date19 January 2016
Neutral Citation[2016] JRC 12A
Date19 January 2016

[2016] JRC 12A

ROYAL COURT

(Samedi)

Before:

Sir Michael Birt, Commissioner, and Jurats Nicolle and Kerley

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 Respondent
Nacap BV
Party cited

Advocate EE. Moran, for the Representor.

Advocate P. G. Nicholls for the Respondents.

Authorities

Arbitration (Jersey) Law 1998.

Cukurova Holdings AS v Sonera Holding BV [2014] UKPC 15.

State Immunity Act 1978 of the United Kingdom.

State Immunity (Jersey) Order 1985.

United Arab Emirates v Abdel Ghafar [1995] ICR 65.

Kensington International Limited v Republic of Congo [2003] EWHC 2331.

Compania Naviera Vascongado v SS Cristina [1938] AC 485.

USA and Republic of France v Dollfus Mieg et Cie SA and the Bank of England [1952] AC 582.

Juan Ysmail & Co v Government of the Republic of Indonesia [1955] AC 72.

Rahmatullah v Ministry of Defence [2014] EWHC 3846 (QB).

Fox and Webb ‘The Law of State Immunity’.

Dicey Morris and Collins, The Conflict of Laws (15th edition).

Jurisdictional Immunities of the State (Germany v Italy; Greece intervening) ICJ Reports 2012.

AIG Capital Partners Inc v Republic of Kazakhstan [2005] EWHC 2239.

SerVass Inc v Rafidain Bank [2013] 1 AC 595.

Law No.4046 Concerning Arrangements for the Implementation of Privatisation.

Law No.2004 on Enforcement and Bankruptcy, Article 82.

Yuar Talih, Yuar Alper Yuar Cuneyt, Treaties on Enforcement and Bankruptcy Law.

La Generale des Carrières et des Mines v F G Hemisphere Associates LLC [2012] 2 CLC 709.

Belhaj v Straw [2015] 2 WLR 1105.

UN Convention on Jurisdictional Immunities of States and their Property.

Fox and Webb, The Law of State Immunity, 3rd Edition.

Rahimtoola v Nizam of Hyderabad [1958] AC 379.

FG Hemisphere -v- DR Congo [2011] JLR 486.

FG Hemisphere v DR Congo [2010] JLR 524.

New York Life Insurance Co -v- Public Trustee [1924] 2 Ch. 101.

Kwok Chi Leung Karl -v- Estate Duty Commissioners [1988] 1 WLR 1035.

Mobile Telesystems Finance SA -v- Nomihold Securities Inc. [2011] EWCA Civ 1040.

Goldtron Limited -v- Most Investment Limited [2002] JLR 424.

Fraser v Oystertec Plc [2004] EWHC 1582 (Ch).

Hale -v- Victoria Plumbing Limited [1966] 2 QB 746.

Masri v Consolidated Contractors International (UK) Limited (No. 2) [2009] QB 450.

Companies — representations requiring the Court to consider various matters and certain aspects of the principle of sovereign immunity.

INDEX
Subject Paragraph
Introduction 1–2
Background to the awards 3–18
These proceedings 19–20
Criticisms of the arbitrations 21–53
(i) The applicable principles 21–29
(ii) The Stations Awards 30–41
(iii) The Lot A Awards 42–53
(A) Sovereign Immunity and enforcement against the Shares 54–207
(i) The statutory provisions 54–57
(ii) Court's duty to give effect to sovereign immunity 58–62
(iii) Sovereign immunity at common law 63–75
(iv) Distinction between adjudication and enforcement 76–85
(v) Is section 6(4) or section 13(2)(b) applicable 86–98
(vi) Evidence re control/interest asserted by Republic 99–164
(a) Privatisation 105–111
(b) Applicability of Decree 233 112–137
(c) Parallelism 138–144
(d) Other controls 145–154
1) Decision 2014/6842 146–147
2) Control of Boards of TPIC and BIL 148–150
3) Law 4734 on Public Procurement 151
4) Level of control by Republic over Botas 152–154
(e) Attachment under Turkish law 155–164
(vii) Conclusions on evidence of control/interest 165–168
(viii) Is the control/interest sufficient to attract sovereign immunity? 169–198
(a) Control 176–186
(b) Interest 187–198
(ix) Conclusions on sovereign immunity 199–204
(x) Commercial use 205–207
(B) Debts owed to Botas by TPIC and BIL 208–286
(i) Introduction 208–213
(ii) Nature of an arrêt 214–215
(iii) When may arrêt be granted over debt outside the jurisdiction 216–220
(iv) Test for ascertaining location of a debt 221
(v) Location of debts owed by TPIC and BIL 222–232
(vi) Can court confirm arrêt over debts owed by TPIC and BIL? 233–247
(vii) Subsidiary points in relation to the debts 248–286
(a) Background 248–257
(b) Ordinary course of business 258–273
(c) Set off 274–280
(d) Future liabilities 281–286
(C) Return of Securities 287–294
Summary of Conclusions 295–296
Postscript 297–298

THE COMMISSIONER:

Introduction
1

The Representor (“Tepe”) has the benefit of certain arbitration awards in its favour against the First Respondent (“Botas”). By two Representations it seeks leave under Article 42(1) of the Arbitration (Jersey) Law 1998 (“the Arbitration Law”) to enforce those awards in Jersey against certain assets of Botas including the shares held by Botas in the Second Respondent (“TPIC”) and the Third Respondent (“BIL”), as well as certain debts owned by TPIC and BIL to Botas. TPIC and BIL are both companies incorporated in Jersey.

2

The Representations require the Court to consider, amongst other matters, certain aspects of the principle of sovereign immunity.

The background to the awards
3

Tepe is a construction company incorporated and carrying on business in Turkey. It is part of the Bilkent Holding Group. The Bilkent group of companies was established for the purpose of raising funds to endow Bilkent University.

4

Botas is also a Turkish company. It was constituted by charter. It is wholly owned by the State of Turkey (“the Republic”). Its principal activity is the transportation of crude oil and natural gas by pipeline in Turkey.

5

The Baku-Tbilisi-Ceyhan (“BTC”) pipeline transports crude oil from oilfields in Azerbaijan through Georgia and Turkey to the Ceyhan terminal on the Turkish coast. The pipeline was constructed by a consortium of companies led by BP and known as the Main Export Pipeline (“MEP”) participants. The MEP participants in turn contracted with Botas for Botas to be the main contractor for the construction of the Turkish section of the BTC pipeline. Botas in due course sub-contracted certain elements of the work. Two of these sub-contracts are relevant for present purposes.

6

By a contract dated 20 th September, 2002, Botas engaged Tepe to carry out engineering and constructional works for four pumping stations and an intermediate pigging station forming part of the BTC pipeline (“the Stations Contract”).

7

On the same date Botas entered into a contract with an unincorporated joint venture (“TPN”) between Tepe and a Dutch company Nacap Nederland BV (“Nacap”) whereby TPN agreed to carry out engineering and construction works for a section of the BTC pipeline in Turkey (the “Lot A Contract”).

8

Both contracts were governed by English law and contained provisions for disputes to be referred to arbitration. The arbitration clauses provided that the rules of English law should be applied to the merits of any dispute, the place of the arbitration should be Paris and the language of the arbitration would be English. The arbitration was to be carried out under the rules of the International Chamber of Commerce (“ICC”).

9

Botas terminated the Stations Contract in March 2005 prior to completion of the works. A dispute arose between the parties as to whether Botas was entitled to terminate the contract (amongst other matters). These disputes were in due course referred to arbitration (“the Stations Arbitration”). The arbitration panel for the Stations Arbitration consisted of Dr Mark Blessing (on the nomination of Tepe), Mr (later Mr Justice) Robert Akenhead (upon the nomination of Botas) and Mr Eric Schwartz (upon the joint nomination of the parties) as chairman. Both Tepe and Botas were represented by leading firms of English solicitors together with leading English counsel.

10

The Stations Arbitration involved three phases (liability, quantum and costs) and resulted in three awards (“the Stations Awards”):-

The overall outcome was that the arbitration panel awarded Tepe sums totalling US$52.5m plus compound interest on such damages, ordered the return of the Stations Securities and payment of commissions accruing until the return of the Stations Securities to Tepe and dismissed all the counterclaims of Botas.

  • (i) A first partial award on 5 th June, 2009, dealing principally with liability as well as awarding Tepe the return of retention and milestone bonds which it had provided (the “Stations Securities”).

  • (ii) A second partial award on 31 st January, 2011, dealing principally with quantum and interest.

  • (iii) A third and final award made on 26 th August, 2011, dealing with costs.

11

Botas appealed against the first partial award to the Cour d'Appel in Paris. That court rejected Botas' appeal. Botas further appealed to the Cour de Cassation but that appeal was dismissed on 19 th December, 2012.

12

Botas also appealed against the second partial award to the Cour d'Appel but this was dismissed on 13 th November, 2012. Botas did not appeal this decision further. Finally, Botas also lodged an appeal to the Cour d'Appel against the final award, but later discontinued that appeal.

13

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 together with an order for the return of the Stations Securities, which had an aggregate value of US$5,604,664.

14

In January 2005 Botas also terminated the Lot A Contract prior to completion of the work. Again, a dispute arose between the parties as to whether Botas was entitled to terminate the contract. This dispute was also referred to arbitration (“the Lot A Arbitration”). The panel for the Lot A Arbitration consisted of John Blackburn QC (nominated by TPN), Stephen Furst QC (nominated by Botas) and the chairman Derek Wood QC (jointly nominated by the parties). Both parties...

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