A Challenge by any Other Name: The Gulf Petro Case - Part 4 Chapter 15 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
Over the past few years, the Gulf Petro Trading Co. v. Nigerian National Petroleum Corp. case has been closely watched by many in the international arbitration community. The Fifth Circuit’s recent decision in the matter was able to avoid addressing the more scurrilous aspects of the cases, yet remains an important decision because it includes a number of lessons concerning the enforcement of international arbitration awards.
The parties to the dispute were Petrec International, Inc. (“Petrec”) (a wholly owned subsidiary of Gulf Petro Trading Company, Inc. a Texas oil field services company, and, with Petrec referred to as “Gulf Petro”), and Nigerian National Petroleum Corporation (“NNPC”), which is owned by the government of Nigeria. They entered into a joint venture in 1993 under which Petrec was to undertake reclamation and salvaging of slop oil discarded by NNPC in the course of its daily operations in Nigeria. The agreement called for the creation of a Nigerian company, Petrec (Nigeria) Limited (“PNL”), which was to be jointly capitalized and owned by Petrec and NNPC. Petrec and NNPC agreed to submit any disputes arising out of the agreement to arbitration.
After NNPC allegedly failed to contribute its share of capital to PNL and refused to provide access to the areas needed to conduct the salvaging operations, Petrec initiated arbitration proceedings with the Chamber of Commerce and Industry of Geneva in 1998. The arbitration panel issued a “Partial Award” on July 5, 2000, finding that Petrec had standing to pursue its claims and that NNPC had failed to contribute its share of capital to PNL.
In January 2001, the panel held a hearing for the purpose of determining the quantum of Petrec’s damages. At this hearing, NNPC challenged the panel’s jurisdiction and Petrec’s standing by producing a copy of a Texas certificate of incorporation showing that an entity identified as “Petrec International Inc.” had been incorporated in Texas on February 28, 2000, well after execution of the joint venture agreement and the demand for arbitration. On October 9, 2001, the panel issued a “Final Award,” holding that Petrec lacked capacity to maintain its claims against NNPC.
Petrec challenged the Final Award in the federal court of Switzerland on grounds that it violated Swiss arbitration law and public policy, but the Swiss court upheld the panel’s decision in April 2002. Petrec next filed a lawsuit in the Northern District of Texas, seeking, inter alia, confirmation of the Partial Award, in which the panel had found in Petrec’s favor on some aspects of the question of NNPC’s liability, and a determination of damages. The district court dismissed the action for lack of subject matter jurisdiction.