OS 253 of 2019; Lasco Development (15) Limited v Total E & P PNG Limited and Exxonmobil PNG Antelope Limited and Exxonmobil PNG Elk Limited and Pac LNG Assets Limited, Pac LNG International Limited, Pac LNG Investments Limited, Pac LNG Overseas Limited, Pac LNG Holdings Limited and Exxonmobil PNG Limited and Hon Dr. Fabian Pok in his capacity as Minister for Petroleum and Davis Steven, Attorney General, as nominal defendant pursuant to s3 Claims By and Against The State Act for the Hon. Sir Robert Dadae, in his capacity as Governor General of Papua New Guinea and Independent State of Papua New Guinea (2019) N7987

• Jurisdiction: Papua New Guinea
• Judge: Hartshorn J
• Judgment Date: 19 July 2019
• Court: National Court
• Citation: (2019) N7987
• Year: 2019
• Judgement Number: N7987

Full Title: OS 253 of 2019; Lasco Development (15) Limited v Total E & P PNG Limited and Exxonmobil PNG Antelope Limited and Exxonmobil PNG Elk Limited and Pac LNG Assets Limited, Pac LNG International Limited, Pac LNG Investments Limited, Pac LNG Overseas Limited, Pac LNG Holdings Limited and Exxonmobil PNG Limited and Hon Dr. Fabian Pok in his capacity as Minister for Petroleum and Davis Steven, Attorney General, as nominal defendant pursuant to s3 Claims By and Against The State Act for the Hon. Sir Robert Dadae, in his capacity as Governor General of Papua New Guinea and Independent State of Papua New Guinea (2019) N7987

National Court: Hartshorn J

Judgment Delivered: 19 July 2019

N7987

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS 253 of 2019

BETWEEN:

LASCO DEVELOPMENT (15) LIMITED

Plaintiff

AND:

TOTAL E & P PNG LIMITED

First Defendant

AND:

EXXONMOBIL PNG ANTELOPE LIMITED

Second Defendant

AND:

EXXONMOBIL PNG ELK LIMITED

Third Defendant

AND:

PAC LNG ASSETS LIMITED, PAC LNG INTERNATIONAL LIMITED, PAC LNG INVESTMENTS LIMITED, PAC LNG OVERSEAS LIMITED, PAC LNG HOLDINGS LIMITED

Fourth to Eighth Defendants

AND:

EXXONMOBIL PNG LIMITED

Ninth Defendant

AND:

Hon. Dr. FABIAN POK in his capacity as Minister for Petroleum

Tenth Defendant

AND:

DAVIS STEVEN, Attorney General, as nominal defendant pursuant to s. 3 Claims By and Against The State Act for the Hon. Sir Robert Dadae, in his capacity as Governor General of Papua New Guinea

Eleventh Defendant

AND:

INDEPENDENT STATE OF PAPUA NEW GUINEA

Twelfth Defendant

Waigani: Hartshorn J.

2019: 7th June

: 19th July

Application for a stay of proceedings pending an arbitration

Cases Cited:

Delta Constructions Pty Ltd v. Administration of the Territory of Papua New Guinea [1965-66] PNGLR 381

Mauga Logging Co Pty Ltd v. Okura Trading Ltd [1978] PNGLR 259

Huon Electrical Ltd v. RD Tuna Cannery Ltd (2000) N2005

Rustproof Ltd v. Eastpac (2015) N7038

Cape Distribution Ltd v. Cape Intermediate Holdings Plc [2016] EWHC 119 Kumul Consolidated Holdings v. Kurkuramb Estates Limited (2017) N7429 Independent State of Papua New Guinea v. Independent Timbers & Stevedoring Ltd (2018) N7700

Counsel:

Mr. M. Goodwin, for the Plaintiff

Mr. A. Edo, for the First Defendant

Mr. I.R. Molloy and Mr. D. Hill, for the Second, Third and Ninth Defendants

Mr. A. Mana, for the Fourth to Eighth Defendants

19th July, 2019

1. HARTSHORN J. This is a decision on a contested application for a stay of proceedings pending an arbitration.

Background

2. The plaintiff (Lasco) submits that the facts are amongst others that:

a) Interoil Corporation (Interoil) was granted 100% ownership in several petroleum prospecting licences (PPL’s) in Papua New Guinea;

b) Under an Amended and Restated Indirect Participation Agreement dated 25th February 2005 (2005 IPI Agreement), in exchange for investment funds, Interoil gave rights in PPL’s to investor parties;

c) In November 2010 Petroleum Retention Licence 15 (PRL 15) was issued and is covered by the 2005 IPI Agreement;

d) Interoil consented to investor parties converting their interests in PRL 15 from indirect participation to direct licence interests. Lasco now holds and has the right to register a 0.5% license interest in PRL 15;

e) ExxonMobil PNG Ltd succeeded to Interoil’s rights and obligations. ExxonMobil PNG Ltd disputes this and says that ExxonMobil Canada Holdings ULC (ExxonMobil Canada) succeeded to Interoil’s rights and obligations;

f) Lasco unsuccessfully requested Interoil/ExxonMobil’s assistance to register its 0.5% interest;

g) Lasco had its interest registered on the Oil and Gas Register, but this registration has been removed.

h) Lasco commenced this proceeding by originating summons and seeks amongst others a declaration that its 0.5% interest in PRL 15 be registered on the Oil and Gas Register and that the interest of ExxonMobil PNG Antelope Limited, the second defendant, in PRL 15, be reduced. A mandatory injunction requiring Lasco to be included in certain agreements for the Papua LNG project is also sought;

i) Two weeks after this proceeding was commenced, ExxonMobil filed competing proceedings in Texas, USA and seeks to enjoin Lasco and the two antecedent Lasco entities which funded and nominated Lasco in an arbitration in Texas, USA;

j) ExxonMobil also filed a Demand for Arbitration on 22nd April 2019 with the International Center for Dispute Resolution office in Houston, Texas;

k) The second, third and ninth defendants (referred to as applicants or ExxonMobil Parties) on 23rd April 2019 filed an application to stay this proceeding until determination of legal proceedings and arbitration proceedings in Texas, USA, claiming that the parties to the 2005 IPI Agreement have agreed to the determination of one issue relevant to this matter in that jurisdiction. Lasco objects to this application.

This application

3. This application is by the ExxonMobil parties and is supported by the other defendants which made an appearance. It is for a stay of proceedings pending an arbitration proceeding commenced pursuant to section 14.10 2005 IPI Agreement. The application is principally pursuant to s.4 Arbitration Act Chapter 46.

4. Lasco opposes the application on the grounds that:

a) The United States proceedings are in direct conflict with s. 4 Compensation (Prohibition of Foreign Legal Proceedings) Act 1995 (PNG Compensation Act), which prohibits the taking or pursuing in foreign courts of legal proceedings or arbitration in relation to compensation claims arising from mining projects and petroleum projects in Papua New Guinea;

b) Papua New Guinea is not a signatory to the New York Convention under which the proceedings and arbitration in the United States is purported to be brought, and any judgment of the Court or arbitral award in the United States is unenforceable in Papua New Guinea;

c) The Houston Arbitration cannot be carried on under the Arbitration Act because that arbitration is to be carried on in Houston under Texas law and not under Papua New Guinea law. The applicant’s stay application is incorrectly brought under the Arbitration Act;

d) The appearance or notice of intention to defend of the applicants is unconditional. They have not filed a conditional appearance and sought to oust the jurisdiction. They have submitted to the jurisdiction of Papua New Guinea and this proceeding;

e) The arbitration clause in section 14.10 2005 IPI Agreement is not available to the defendants to invoke as the 2005 IPI Agreement was completely performed on registration of the transfer of the license interest of Lasco. The 2005 IPI Agreement was discharged by completion and no consideration under it remains executory;

f) Lasco is not a party to the 2005 IPI Agreement and the United States proceedings and arbitration are not properly brought against Lasco. Lasco has standing as the license interest holder to bring this proceeding in Papua New Guinea on a broader range of issues including licensing regulatory issues exclusive to Papua New Guinea;

g) The claimant in the United States proceedings and arbitration has no standing to bring an action in the United States or elsewhere. ExxonMobil Canada has suffered no loss in this matter and no longer has the right to consent to conversion and registration of any license interest in PRL 15. Any action contemplated in the United States should have been brought in the name of the current licence holders of PRL 15, and ExxonMobil Canada has no standing to claim any relief in any jurisdiction in this matter;

h) Section 14.6 2005 IPI Agreement does not give the State of Texas in the United States exclusive jurisdiction, and it is merely a non-exclusive jurisdictional provision which does not exclude the current proceedings in Papua New Guinea;

i) Based on the principles of Forum Non Conveniens, Texas, United States is not the appropriate forum to have this matter adjudicated, and the Papua New Guinea National Court is the only appropriate venue for the hearing of this matter;

j) The actions complained of are in essence executive actions of the Papua New Guinea Government at the request of the defendants. Mandamus will follow if the Government does not recognise the rights as declared. The cancellation action, being an executive action of the Government of Papua New Guinea is not amenable to orders of a foreign court under international conflicts of law principles.

Consideration

5. The first consideration is whether the arbitration proceeding to which the applicants refer in their application offends against the PNG Compensation Act. The application is stated to be brought pending an arbitration proceedings and not any other proceedings.

6. Lasco submits that amongst others, the arbitration is in direct conflict with s. 4 PNG Compensation Act as it fall within the definitions of “compensation claim” and “compensation proceedings” in a “foreign court”, Lasco has not submitted to the jurisdiction of the United States Court or arbitration, and any judgment of the United States Court or arbitration is unenforceable in Papua New...