ACTION REQUEST IN CHEVRON / PETROBANGLA ARBITRATION

C O N F I D E N T I A L SECTION 01 OF 02 DHAKA 001349 SIPDIS SIPDIS DEPARTMENT PLEASE PASS TO SCA PDAS STEVE R. MANN AND L KARIN KIZER E.O. 12958: DECL: 08/16/2017 TAGS: EINV ECON ETRD EPET PREL KTIA BG SUBJECT: ACTION REQUEST IN CHEVRON / PETROBANGLA ARBITRATION REF: A. DHAKA 1265 ¶B. AUGUST 15 O/I ITEM Classified By: CDA a.i. Geeta Pasi for reasons 1.4(b) and (d). ¶1. (U) This is an action request. Please see paragraphs 8 and 9. ¶2. SUMMARY. (C) Petrobangla finds itself between a rock and a hard place with respect to its upcoming arbitration hearing with the International Centre for Settlement of Investment Disputes (ICSID) scheduled for August 20 in Washington D.C. On one hand, the Bangladesh court has ordered a stay of the arbitration, reinforced by two letters from Petrobangla's attorney threatening sanctions against Chevron and ICSID if the arbitration proceeds. On the other hand, Chevron risks prejudicing its own case before the ICSID tribunal if it does not appear, since the tribunal has determined that it has exclusive jurisdiction and specifically disregarded the Bangladesh court's stay order. Petrobangla's attorney spoke with Econoff to press his view of the case, and Chevron supplied requested documents. Post concurs with EB's suggestion to send a letter expressing concern with GOB efforts to halt the ICSID arbitration. END SUMMARY. PETROBANGLA'S ATTORNEY IS HEARD FROM ==================================== ¶3. (C) Econoff met Md. Azharul Haque, attorney for Petrobangla in the dispute with Chevron Bangladesh at an Embassy function. Barrister Haque approached Econoff to discuss the Chevron dispute. Barrister Haque made two main points. First, he claimed that a previous arbitration had been held in Bangladesh that ruled in favor of Petrobangla and that Petrobangla is merely seeking to have that arbitral decision affirmed through the Bangladesh courts. Second, he suggested that a settlement should be reached to amicably resolve the dispute. ¶4. (C) Barrister Haque confirmed that he is also one of the approximately 18 attorneys on the Anti-Corruption Commission's (ACC) advisory panel. The advisory panel is distinct from the commission's prosecutors; its members act as legal and business consultants to the investigators and prosecutors of the ACC. Chevron's president had voiced his concern that Petrobangla's attorney held this position during Chevron's meeting with CDA a.i. (reported ref A),and that this position has a negative impact on the willingness of Petrobangla and Energy Ministry officers to oppose his opinions. CHEVRON SUPPLIES DOCUMENTS AND COMMENTS ======================================= ¶5. (C) Chevron's Director of Government Relations Ismail Chowdhury met with Econoffs August 14 to supply requested documents that provide the exact language referring disputes to ICSID arbitration in both the Production Sharing contract (PSC) between Chevron and the GOB and the Gas Purchase and Sales Agreement (GPSA) between Chevron and Petrobangla. Copies are being scanned and provided by email to the desk and L. Chowdhury also provided 'side letters' to subsequent GPSAs, which refer to the ongoing dispute and specifically refer to the arbitration clauses in the PSC and GPSA. Chevron's Legal Director Chye Koh also provided Econoff with a copy of a translation (prepared by Chevron) of the Bangladesh Court's Order staying the arbitration. ¶6. (C) Chevron refuted Petrobangla's claim that any prior arbitration had been held in this case, but noted that Petrobangla had produced an 'export report' in 2004 that Barrister Haque has mischaracterized as a binding arbitral report. In the translation of the Bangladesh Court Order provided by Chevron, this "decision of the Sole Expert" figures prominently in the decision granting the temporary injunction against the ICSID arbitration. Regarding possible settlement, Chevron representatives feel that a settlement is less likely now due to Barrister Haque's position on the Anti-Corruption Commission. In fact, Chevron claims Petrobangla and the Energy Ministry have warned that Barrister Haque's position on the ACC is a serious impediment to any settlement, since any settlement which displeases Barrister Haque would expose them to allegations of DHAKA 00001349 002 OF 002 impropriety or even of that Chevron bribed them to settle. NEXT STEPS ========== ¶7. (C) The ICSID hearing is scheduled for August 20, 2007, and Chevron has the written order from the Bangladesh court, as well as letters from Barrister Haque on behalf of Petrobangla, threatening sanctions - including fines and jail - if Chevron participates. Barrister Haque has also provided a letter to ICSID, which specifically threatens it with contempt of court if ICSID proceeds with the arbitration as scheduled. Chevron continues to pursue appeals through the Bangladeshi legal system as of August 16. ACTION REQUEST ============== ¶8. (C) Post agrees with EB's suggestion, Ref B, regarding a letter to the GOB on this matter. Post's preference would be for a letter from Daniel Sullivan, the Assistant Secretary of State for Economic, Energy and Business Affairs. The overarching consideration, however, is that the letter be presented in advance of the August 20 ICSID hearing date and a letter from a lower level would be preferable to nothing if schedules will not allow a letter from the A/S. ¶9. (U) Post suggests the following text for the letter: "The United States Government is aware of the ongoing dispute between the People's Republic of Bangladesh and Chevron which has been referred to arbitration with the International Centre for Settlement of Investment Disputes (ICSID). It is of serious concern to the United States government that the Government of Bangladesh is attempting to block the jurisdiction of ICSID in this matter, despite clear language in the Production Sharing Contract specifying ICSID as the proper venue for such disputes. I would like to point out the risk this situation presents to Bangladesh's commercial reputation, as other companies watch this case closely for signals about the sanctity of contract in Bangladesh and treatment of foreign investors. I also want to emphasize at this point that our concern is not with the merits of the case, only that the contract specifies ICSID as having sole jurisdiction in such matters. I hope that this matter can be resolved through impartial international arbitration, in accordance with Bangladesh's treaty obligations under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States." PASI