Originally from:
The Practice of International Litigation - 2nd Edition - Looseleaf
The Practice of International Litigation - 2nd Edition - Electronic
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A Challenge by any Other Name: The Gulf Petro Case
Lawrence W. Newman and Michael Burrows
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.
Factual Background
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.
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.
