Niko Resources (Bangladesh) Ltd. v. Bangladesh Petroleum Exploration & Production Company Limited ("Bapex") and Bangladesh Oil Gas and Mineral Corporation ("Petrobangla")

Case summary

At a glance

Parties: Niko Resources (Bangladesh) Ltd. (Barbados) v. Bangladesh Petroleum Exploration & Production Company Limited (BAPEX) and Bangladesh Oil Gas and Mineral Corporation (Petrobangla). The People's Republic of Bangladesh was the First Respondent until the Decision on Jurisdiction.
Case no.: ICSID Case No. ARB/10/18 (Payment Claim). It ran alongside ICSID Case No. ARB/10/11 (Compensation Declaration) before identical tribunals.
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006
Treaty: No treaty. Jurisdiction rested on the arbitration clause (Article 13) of the Gas Purchase and Sale Agreement of 27 December 2006 (GPSA), governed by Bangladesh law.
Tribunal: Michael E. Schneider (President), Campbell McLachlan, Jan Paulsson
Annulment Committee: Eduardo Zuleta (President), Claudia Annacker, Makhdoom Ali Khan
Sector: Oil and gas (natural gas supply, Feni field)
Outcome: Petrobangla was ordered to pay for the gas delivered. The corruption claim was rejected. The Award (24 September 2021) confirmed the earlier decisions, and the application to annul it was dismissed by majority (12 October 2023).
Amount: Principal: USD 25,312,747 plus BDT 139,988,337. Interest to 20 November 2020: USD 13,195,703 and BDT 116,852,605; after that, 180-day average SOFR + 2% (USD) and 5% (BDT), compounded annually. Costs: Petrobangla to pay CAD 1,737,592 and USD 102,483 towards Niko's legal costs. Of the arbitration costs of USD 1,116,627.96, the Respondents bear USD 982,089.56 and must pay Niko USD 423,775.58. Annulment: the Applicants bear the costs of the proceeding (USD 329,116.45); each side bears its own legal fees.

The dispute

Niko Resources (Bangladesh) Ltd., a Barbados subsidiary of the Canadian company Niko Resources Ltd., concluded a Joint Venture Agreement (JVA) with BAPEX on 16 October 2003 to develop the marginal or abandoned Chattak and Feni gas fields. Gas from Feni was delivered to Petrobangla from November 2004. The price, USD 1.75 per Mcf, was fixed in the GPSA of 27 December 2006. Petrobangla left most of the invoices unpaid, relying in particular on an injunction issued by the Bangladesh Supreme Court in the BELA environmental proceedings after two blowouts at Chattak in 2005. Niko sued for payment under the GPSA's ICSID clause. The respondents raised jurisdictional objections (including that BAPEX and Petrobangla had not been designated under Article 25(1) of the ICSID Convention and that Niko's Canadian parent had been convicted of bribery), then a force majeure defence, and from March 2016 a claim that the JVA and GPSA had been procured by corruption and were void.

Key holdings

The Tribunal declined jurisdiction over the State of Bangladesh. It upheld jurisdiction over Petrobangla and BAPEX for Niko's payment claim under the GPSA, holding that the arbitration clause binds the two joint venture partners individually. Whether Niko may claim the full amount or only its own share was reserved for the merits. Decision on Jurisdiction ¶¶ 541, 574–575
Petrobangla owes Niko USD 25,312,747 plus BDT 139,988,337 for gas delivered from November 2004 to April 2010. The force majeure defence based on the Bangladesh court injunction fails: the injunction was a risk Petrobangla had assumed, and it took no adequate action against it. Simple interest runs at six-month LIBOR + 2% on the US dollar amounts and 5% on the taka amounts. Decision on the Payment Claim ¶¶ 266, 276, 292
Compound interest is admissible in ICSID arbitration even for contract claims, and needs no specific evidence because compounding is a commercial reality. Without proof that a shorter interval was justified, interest is compounded annually. Petrobangla was ordered to pay the amounts due, with pre-decision interest of USD 5,932,833 and BDT 49,849,961, into an escrow account. Decision on Implementation ¶¶ 136, 147, 164, 167
The respondents frustrated the escrow arrangement without justification. Because the Tribunals have exclusive jurisdiction under the ICSID Convention, Bangladesh court injunctions (2005 and 2016) do not excuse non-payment. Petrobangla must pay Niko forthwith and free of any restrictions. Third Decision on the Payment Claim ¶¶ 78, 91, 107, 110
The corruption claim is unfounded. The JVA was not procured by corruption and remains valid and binding. The GPSA was not procured by corruption either, and there is no basis to revise the payment decisions. The vehicle and travel expenses given to the State Minister, for which Niko Canada was convicted in Canada, came after the JVA and did not contribute to obtaining the GPSA. Decision on the Corruption Claim ¶¶ 2004, 2008, 2010
The Award confirmed all earlier decisions and updated the interest, replacing LIBOR with 180-day average SOFR + 2%. On costs, each party bears its own costs of the jurisdiction phase, because the Tribunal upheld the critical objection excluding the State. The respondents bear all costs of the payment phase and of the share of the corruption phase allocated to this case. Award ¶¶ 349–366, 375
The application for annulment was dismissed. Four grounds were rejected unanimously. The fifth, that BAPEX and Petrobangla had not been designated to ICSID, was rejected by majority: the Tribunal's reading of Article 25(1), which allows implicit designation communicated to the Centre by the investor, is a tenable interpretation of a debatable point and not a manifest excess of powers. A dissenting opinion is attached. Decision on Annulment ¶¶ 205–218, 231–232