PT TRANSPORTASI GAS INDONESIA V CONOCOPHILLIPS (GRISSIK) LTD AND ANOTHER

[2016] EWHC 2834 (Comm), Queen's Bench Division, Commercial Court, Sir Jeremy Cooke, 10 November 2016

Arbitration - Inconsistency in the award - Infringement of Indonesian law - Serious irregularity - Public policy - Enforcement of award - Arbitration Act 1996, sections 33, 46, 66 and 68

By a Gas Transportation Agreement (GTA) entered into on 12 February 2001 and novated on 2004, Conoco agreed to pay TGI a Contract Tariff of US$0.69 per million standard cubit feet per day (mscf) to carry gas through TGI's pipeline in Indonesia. The GTA was governed by Indonesian law. With effect from 11 August 2010 the Indonesian gas regulator BHP raised the required tariff to US$0.74/mscf, and TGI increased the price accordingly. BHP's decision was reached following 17 meetings between TGI and BHP at which TGI sought the rise. In May 2014 Conoco commenced UNCITRAL arbitration over the tariff. Its case was that TGI had breached the GTA by replacing the Contract Tariff with the Regulated Tariff in that: there were warranties in the GTA under which TGI warranted that the GTA was valid and enforceable; and TGI had not acted in good faith by seeking to secure the increase in tariff. TGI's defence was that the Regulated Tariff for access to the pipeline as laid down by BHP was mandatory. The tribunal awarded damages to Conoco of US$74 million plus interest and costs, based on the difference between the Contract Tariff and the Regulated Tariff. The tribunal accepted that the Contract Tariff was not enforceable following the introduction of the Regulated Tariff, and that Indonesian law laid down mandatory requirements. However, the tribunal concluded that there had been a breach of the terms of the GTA and that Indonesian public policy did not prevent an award of damages. TGI sought to have the award set aside on the ground that the tribunal had considered the matter from the point of public policy - which had not been argued - rather than from simple inconsistency between the BHP regulation and the GTA.