Hardy Oil & Gas plc India Supreme Court Ruling (8702B)

TIDMHDY

RNS Number : 8702B

Hardy Oil & Gas plc

25 September 2018

25 September 2018

Hardy Oil and Gas plc

(LSE: HDY)

INDIA SUPREME COURT RULING

Hardy Oil and Gas plc ('Hardy'), the oil and gas exploration and production company focused in India, announces that earlier today the Supreme Court of India (SC) had issued an order upholding the Union of India's (UOI) Civil Appeal 4628/2018 and Petition for Special Leave to Appeal (C) No(s). 31356/2017.

As disclosed previously, the SC had been considering the UOI appeal against an earlier final judgment and order dated 27-07-2016 in FAO No. 59/2016 passed by the High Court of Delhi at New Delhi (HC). The HC had previously ruled that the India High Court did not have jurisdiction to hear the UOI appeal against the merits of an arbitration tribunal's ruling that the relinquishment of the CY-OS/2 exploration licence by the UOI was unlawful. In February 2013, an arbitration tribunal had ordered the reinstatement of the exploration licence to Hardy Exploration & Production (India) Inc. (HEPI) and awarded HEPI compensation (background provided below).

The Special Bench of the SC consisting of Chief Justice D Misra, Justice Dr DY Chandrachud and Justice AM Khanwilkar judged that Indian courts have jurisdiction over the Award, thereby allowing the Civil Appeal filed by UOI to be heard by the High Court.

HEPI had argued before the Special Bench of the SC that:

1. The arbitration agreement within the CY-OS/2 Production Sharing Contract (PSC) specified that the venue of arbitration shall be Kuala Lumpur. The Pre-NELP bid round was the first to invite non-Indian companies to participate with a neutral venue designated for dispute resolution.

2. The arbitration agreement within the PSC makes mention of the Permanent Court of Arbitration at the Hague in three places thereby conferring international influence on the process.

3. The arbitration agreement within the PSC specifies that the arbitration proceedings shall be conducted in accordance with the UNCITRAL Model Law on International Commercial Arbitration 1985 (a departure from reference to Indian domestic law i.e. the Indian Arbitration and Conciliation Act 1996).

   4.   The final hearings of the arbitration proceedings were held at Kuala Lumpur, Malaysia. 

5. The arbitration award was made, signed and handed down (delivered) by the Tribunal sitting in Kuala Lumpur, Malaysia

6. Kuala Lumpur was not a 'convenient place' for all the parties involved in the arbitration process.

7. Hardy presented a number of precedent cases from both the courts of India and England & Wales wherein similar arbitration agreements which contained the term 'venue' was determined to mean 'seat' (of arbitration).

In addition it should be noted that the arbitration clause of the governing PSC states that the decision of arbitration tribunal shall be final and binding upon the parties.

Hardy is reviewing the SC order to assess the further legal options available to the Company. It is likely that the SC order will result in significantly extending the legal process required to conclude the arbitration award.

A copy of the full order is available on the Supreme Court of India's website at:

https://www.sci.gov.in/supremecourt/2016/34525/34525_2016_Judgement_25-Sep-2018.pdf

For further information please visit www.hardyoil.com or contact:

 
 Hardy Oil and Gas plc                     012 2461 2900 
 Ian MacKenzie, Chief Executive Officer 
  Richard Galvin, Treasurer & 
  Corporate Affairs Executive 
 
 Arden Partners plc                        020 7614 5900 
 Ciaran Walsh 
  Paul Shackleton 
 
 Tavistock                                 020 7920 3150 
 Simon Hudson 
  Barney Hayward 
 

CY-OS/2 exploration licence background - Hardy is the operator of the CY-OS/2 exploration block and holds a 75 per cent participating interest. The block is in the northern part of the Cauvery Basin immediately offshore from Pondicherry, India and covers approximately 859 km(2) . The Ganesha-1 discovery well was drilled to a depth of 4,089 m and on testing the well flowed natural gas at a peak rate of 10.7 mmscfd.

Award summary - relinquishment by the Ministry of Petroleum and Natural Gas (MOPNG) of the GOI was illegal; the unincorporated Joint Venture (uJV) shall be entitled to a period of three years from the date on which the block is restored to it, to carry out further appraisal; the uJV shall be paid compensation calculated at the simple rate of 9 per cent per annum on the amount of Rs. 5.0 billion from the date of relinquishment till the date of the award; interest will then accrue at a rate of 18 per cent per annum on the amount of Rs. 5.0 billion until the block is restored to the uJV. As published in Hardy's Annual Report for the year ended 31 March 2018, HEPI's compensation entitlement amounted to US$78.2 million.

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September 25, 2018 06:30 ET (10:30 GMT)