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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceedings between

NIKO RESOURCES (BANGLADESH) LTD.
(Claimant)

and

BANGLADESH PETROLEUM EXPLORATION & PRODUCTION COMPANY LIMITED
(“ВАРЕХ”)
(Respondent)

ICSID Case No. ARB/10/11

AWARD

Members of the Tribunal
Mr Michael E. Schneider, President
Professor Campbell A. McLachlan KC
Professor Jan Paulsson

Secretary of the Tribunal
Ms Frauke Nitschke

Date of Dispatch: 18 December 2025

[Page ii]

GLOSSARY AND ABBREVIATIONS ................................................................. IX

1 INTRODUCTION: OVERVIEW OF THE CASE CONCERNING
THE CHATTAK BLOWOUTS AND ITS CONSEQUENCES .....30

2 THE PROTAGONISTS..................................................................................58

2.1 The Claimant ........................................................................................ 58

2.2 The Respondent....................................................................................59

2.3 The Arbitral Tribunal ............................................................................ 61

2.4 The Secretariat ..................................................................................... 62

3 SUMMARY OF THE RELEVANT FACTS................................................... 63

4 THE PROCEDURE ...................................................................................... 72

4.1 The initial phase of the Arbitration leading to the Decision
on Jurisdiction ...................................................................................... 72

4.2 The proceedings leading to the Decision on Liability....75

4.2.1 The initial proceedings in the absence of a
substantive defence by BАРЕХ....................................................75

4.2.2 Addressing BAPEX failure to deal with the merits and
the appointment of the Tribunal Experts..............77

4.2.3 BAPEX's change of position: adaptation of the scope
of the Arbitration and of the procedure .................................... 79

4.2.4 The November 2015 Hearing .................................................... 84

4.2.5 Post-Hearing Events on Liability .............................................. 88

4.2.6 The Decision on Liability............................................................ 94

4.3 The Corruption Claim ........................................................................ 106

4.3.1 The Proceedings on the Corruption Claim ............................ 106

4.3.2 The Decision on the Corruption Claim .................................. 134

4.4 The Arbitrations and Court Proceedings in Bangladesh144

4.4.1 Court proceedings in Bangladesh related to Niko and
the blowouts ................................................................................ 144

[Page iii]

4.4.2 Dealing with the Court Proceedings in the Arbitration
and the Decision on Exclusivity ................................................ 154

4.4.3 The Alam Judgment.................................................................. 169

4.5 The Proceedings following the Decision on Liability until
the Decision on Heads of Recoverable Loss..................................... 172

4.6 The Decision on Heads of Recoverable Loss.................................... 182

4.7 Proceedings following the Decision on the Heads of
Recoverable Loss until the completion of the case ..... 196

4.7.1 The CMC of 8 June 2021: organising the procedure
concerning the Lost Gas and its Valuation and the
Environmental Claims ................................................................ 196

4.7.2 The Respondents' Document Production request 200

4.7.3 PO No 27 and further steps concerning the quantity
of lost gas, its valuation and the Environmental
Claims .......................................................................................... 201

4.7.4 PO No 30 and the October 2021 Pre-Hearing
Conference.................................................................................... 204

4.7.5 The November 2021 Hearing .................................................. 212

4.7.6 Post-hearing matters and completion of the
proceedings .................................................................................. 220

5 PRIOR DECISIONS OF THE TRIBUNAL ................................................ 226

5.1 The Decision on Jurisdiction.............................................................. 226

5.2 The Decision pertaining to the Exclusivity of the
Tribunals' Jurisdiction........................................................................ 227

5.3 The Decision on the Corruption Claim ............................................ 228

5.4 The Decision on Liability .................................................................... 228

5.5 The Decision on Heads of Recoverable Loss.................................. 229

6 RELIEF REQUESTED ...............................................................................232

6.1 The Claimant ...................................................................................... 232

[Page iv]

6.1.1 The final version ........................................................................ 232

6.1.2 Earlier versions.......................................................................... 235

6.2 The Respondents/BAPEX.................................................................. 239

6.2.1 The final version ........................................................................ 239

6.2.2 Earlier versions.......................................................................... 240

7 QUANTITY OF THE GAS LOST................................................................ 244

7.1 Overview of the issues........................................................................ 244

7.2 The assessment in the Government's Gas Loss Reports
and the claim in the Money Suit ...................................................... 244

7.3 Methodologies .................................................................................... 265

7.4 The evidence ...................................................................................... 273

7.5 Parameters and remaining issues of liability .................................. 276

7.5.1 Graphical Representation........................................................ 276

7.5.2 Reservoir Pressure .................................................................... 280

7.5.3 Geology, stratigraphy and lithology ...................................... 300

7.5.4 Shale stringers............................................................................ 305

7.5.5 The causes of the Chattak 2A blowout and liability
for the subsequent loss of gas .................................................. 310

7.5.6 Niko's liability for gas lost after the completion of the
Chattak 2B relief operation ...................................................... 317

7.6 Flow Rate assessment........................................................................ 368

7.6.1 Overview of the Parties' positions .......................................... 368

7.6.2 Period 1 – Q1: Chattak 2 initial flare ...................................... 375

7.6.3 Period 1 – Q2 and Q3: Chattak 2 after bridging until
the Chattak 2A blowout ............................................................377

7.6.4 Period 2 – Q1: Chattak 2A initial flare .................................. 428

[Page v]

7.6.5 Period 2 – Q2 and Q3: Flow from the Reservoir after
the Chattak 2A bridging............................................................431

7.6.6 Period 3: the post 9 October 2005 gas loss for which
Niko is liable................................................................................ 436

7.6.7 Overall gas loss based on Flow Rate assessment 481

7.7 Material Balance Assessment............................................................ 482

7.7.1 The range of OGIP estimates .................................................. 482

7.7.2 Limits to the Tribunal's examination: agreed EUR
quantity, estoppel and shifted burden of proof ...486

7.7.3 The factors critical for the OGIP and EUR estimates500

7.7.4 Reservoir mapping – the productive area........................... 504

7.7.5 Compartmentalisation: three gas bearing sands or
one? .............................................................................................. 508

7.7.6 Net Pay and GWC .................................................................... 516

7.7.7 Water or gas saturation (Sw and Sg), resistivity and
the GWC........................................................................................ 521

7.7.8 The Tribunal's conclusion on the OGIP of the
Reservoir ...................................................................................... 531

7.7.9 Calculating the loss based on the OGIP................................ 532

7.8 Conclusion on the quantity of lost gas............................................ 535

8 VALUATION OF THE GAS LOST ............................................................ 537

8.1 The presentation of the valuations .................................................... 537

8.2 The loss of BAPEX ............................................................................ 539

8.2.1 BAPEX's revenue .................................................................... 539

8.2.2 The timing of the loss................................................................ 545

8.2.3 The currency ............................................................................ 548

8.3 The loss of the Government................................................................ 549

8.3.1 The positions of the Parties and their evolution .. 549

[Page vi]

8.3.2 Substitution for fuel at the highest alternative price
or additional gas? ......................................................................556

8.3.3 The comparison between the GPSA price and the PSC
prices ............................................................................................ 558

8.3.4 Making the GPSA price and the PSC prices
comparable.................................................................................. 560

8.3.5 Mitigation and production uncertainties................................ 563

8.4 Interest.................................................................................................. 565

9 ENVIRONMENTAL LOSSES .................................................................... 570

9.1 The context of the Environmental Losses ...................................... 570

9.1.1 The Tengratila village and its inhabitants.......................... 570

9.1.2 The Blowouts: overview of the events .................................. 575

9.2 Prior Assessments and related evidence ........................................ 603

9.2.1 The Government reports on environmental losses603

9.2.2 The EIA and the Monitoring Reports of the
Government and Crown Agents/Tera .................................... 620

9.2.3 Expert and technical reports and studies ............................ 647

9.3 The identified environmental losses and the claims
remaining to be decided .................................................................. 652

9.3.1 Losses compensated by Niko and other Niko
measures of compensation and restoration ........................652

9.3.2 Claims no longer pursued by BAPEX (Losses of
Agriculture and Fisheries) ........................................................ 663

9.3.3 The Tribunal's Decisions on Claims for
Environmental Losses ................................................................ 665

9.3.4 The claims remaining to be decided........................................ 666

9.4 Atmospheric Pollution ...................................................................... 667

9.4.1 The Parties' positions .............................................................. 667

[Page vii]

9.4.2 The scope of the claim for atmospheric pollution 674

9.4.3 The UNFCCC, the IPCC and the international
framework concerning GHG emissions and climate
change.......................................................................................... 676

9.4.4 Greenhouse Gases, their warming effect and the
complexity of the climate system ............................................ 678

9.4.5 The role of human activities in the increase of the
Earth's temperature.................................................................... 689

9.4.6 Impact of the increasing temperatures and climate
change.......................................................................................... 696

9.4.7 International action to deal with anthropogenic GHG
emissions .................................................................................... 704

9.4.8 Climate change litigation.......................................................... 713

9.4.9 The quantity of GHG emissions for which Niko is
liable ............................................................................................ 730

9.4.10 The impact of the atmospheric pollution from the
Chattak 2 blowout on Bangladesh.......................................... 732

9.4.11 Niko's obligation to repair the damage to the
atmosphere.................................................................................. 740

9.4.12 Atmospheric Pollution owing to the burning trees750

9.5 Other Claims for Environmental Losses ........................................ 752

9.5.1 Damage to vegetation (trees and forest resources)752

9.5.2 Loss of water resources............................................................ 770

9.5.3 Loss of soil resources .............................................................. 787

9.5.4 Loss of the environmental system .......................................... 804

9.5.5 Losses related to human health .............................................. 813

9.5.6 The claim for the costs of Mr Wilson's proposal ..866

9.5.7 Losses to Education and Social Lifestyle ..........................876

[Page viii]

9.5.8 The residual damage from the stress, suffering and
disruption caused by the first blowout ...............................892

9.6 Currency and Interest ........................................................................ 894

10 COSTS.......................................................................................................... 898

10.1 Cost allocation between the two cases ............................................ 898

10.2 The Parties'cost claims concerning the Compensation
Declaration proceedings .................................................................. 899

10.3 The principles guiding the cost decisions ...................................... 902

10.4 The phases of the Compensation Declaration procedure905

10.5 The Arbitration Costs........................................................................ 909

10.6 The Jurisdiction phase........................................................................ 913

10.7 The BAPEX Default phase .............................................................. 914

10.8 The Corruption Claim phase .......................................................... 917

10.9 The Liability phase............................................................................ 921

10.10 The Quantum phase .......................................................................... 926

10.11 Post-Award Interest .......................................................................... 929

10.12 Summary of the Decision on Costs................................................ 930

11 THE TRIBUNAL'S AWARD .................................................................... 933

[Page ix]

GLOSSARY AND ABBREVIATIONS

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¹ Ryder Scott III, paragraph 7.

[Page xxvii]

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[Page xxix]

[Page 30]

1 INTRODUCTION: Overview of the case concerning the
Chattak blowouts and its consequences

1 This is a case of extraordinary complexity and duration. Details of the case
and these proceedings have been set out in the Tribunal's earlier decisions.
In this introduction, the Tribunal provides an overview, highlighting the
principal issues that arose and the circumstances in which they had to be
decided. Further details will be presented below in this Award.

2 The case concerns a project for the development of marginal and abandoned
gas fields in Bangladesh. The Government of Bangladesh designated BAPEX,
a subsidiary of Petrobangla, the national oil gas and mineral corporation, to
conclude a Joint Venture Agreement (JVA) with the Canadian company Niko
Resources (Niko) to develop two such fields, Feni and Chattak. Niko acted as
the Operator at its “sole risk and expense” (the JVA of 16 October 2003).

3 The development of the Feni field was successful. The gas produced was sold
by the Joint Venture to Petrobangla under a Gas Purchase and Sales
Agreement (GPSA) of 27 December 2006. With the exception of two initial
payments, Petrobangla did not pay for the gas it received from the Joint
Venture.

4 In the Chattak field, the first well drilled by Niko (Chattak 2) reached the
targeted sands containing gas (the Reservoir consisting of Sands 1 and 2) and,
after it had continued drilling, suffered an uncontrolled release of gas
(blowout) on 7 January 2005. The blowout ejected gas and debris including
sand, rocks, bricks and parts of the drilling equipment. The debris was
dispersed in the neighbourhood and caused dust deposits in a wider range;
the escaping gas ignited into a high flare and the drilling rig collapsed into the
crater formed by the blowout. After some 40 hours, the wellbore collapsed
(bridged over), the flare extinguished but gas continued to escape from the
Reservoir and at the surface. The first relief well drilled to stop the flow of gas
from the Reservoir (Chattak 2A) also suffered a blowout with similar effects.
The second relief operation (Chattak 2B) was completed on 9 October 2005,
but seepages continued to occur at the surface. Niko proposed that further
wells be drilled, to produce the gas remaining in the Reservoir and to stop any
further seepages; BAPEX did not agree.

5 The loss of gas was assessed by two Gas Loss Committees formed by the
Government after each of the two blowouts and in which both BAPEX and
Niko participated. The two Committees produced their reports in 2005. Niko
agreed with the findings set out in the second report and part of the findings
of the first.

[Page 31]

6 The blowouts caused no casualties but damage to the environment and the
population in the neighbouring village of Tengratila: families suffered losses;
the schools near the blowouts closed temporarily and schooling removed to
temporary accommodation provided by Niko. Niko engaged a group of local
and international consultants who monitored the consequences of the
blowouts. The immediate damage to the population was assessed by the local
authorities and amounts so assessed were paid by Niko. Other damage to the
population and the environment was assessed by three Environmental Losses
Committees formed by the Government, which produced their reports in
2005. Niko disagreed with the conclusions of these Committees and made no
payment with respect to any of the losses assessed by them.

7 The Government and Petrobangla commenced legal proceedings in
Bangladesh against Niko in 2008, seeking compensation as assessed by the
Lost Gas and the Environmental Loss Committees (the Money Suit). As far
as the Tribunal is informed, these proceedings are still pending.

8 Niko initiated two ICSID arbitrations in 2010 against the Government,
Petrobangla and BAPEX, one for a declaration of non-liability for damage
caused by two blowouts (ICSID Case No ARB/10/11, the Compensation
Declaration) and the other for the outstanding payment for the natural gas
delivered (ICSID Case No ARB/10/18, the Payment Claim). Because of some
common features and with the agreement of the parties, identical tribunals
were formed in the two Arbitrations, and the proceedings were conducted
concurrently. While related, the disputes arising out of each of these contracts
nevertheless raised different issues. The two Tribunals 2 rendered eight
Decisions and an Award that completed the proceedings on the Payment
Claim. Some of the Decisions addressed issues that were common to both
cases and others issues specific to only one of the two.

9 In the proceedings on Jurisdiction, the Tribunals noted that the Government
had designated BAPEX to implement the project with Niko and had approved
the JVA; but it did not become party to that contract. The Tribunals concluded
that they did not have personal jurisdiction over the Government, which had
designated Petrobangla and BAPEX, implicitly but necessarily, as agencies in
the sense of Article 25(1) of the ICSID Convention.

10 In the proceedings on Jurisdiction, the Respondents raised a corruption
allegation in a first version (see below) which the Tribunals rejected. Moreover,
the Respondents objected to Niko's acting alone in the claim for payment
under the GPSA for gas deliveries by the Joint Venture. The Claimant sought

² Until the completion of the proceedings for the Payment Claim in 2021, the Tribunals always acted
collectively; nevertheless, the singular was used occasionally.

[Page 32]

a declaration that, under the JVA, BAPEX had to cooperate with Niko (the
Cooperation Claim). In the Decision on Jurisdiction, the Tribunals reserved
the question of the necessary role (or otherwise) of BAPEX. In the subsequent
proceedings on the Payment Claim, Petrobangla identified the amount owed
to Niko and the Claimant accepted this quantification. The amount was no
longer treated as owed to the Joint Venture and BAPEX did not claim any
rights as Joint Venture Partner over the amount claimed by Niko._The
Tribunal confirmed in the Decision on the Payment Claim that the
"entitlement of BAPEX to payments under the GPSA” was not affected by its
decision concerning the amount due to Niko.

11 Niko's share in the invoices for gas delivered by the Joint Venture having been
agreed, the main issues in the proceedings on the Payment Claim
concerned the effect of legal action before the courts of Bangladesh.

12 In 2005 an entity named Bangladesh Environmental Lawyers' Association
(BELA) was granted by the High Court Division of the Supreme Court of
Bangladesh an injunction restraining payments to Niko. In 2009, the
Appellate Division of the Supreme Court linked the injunction to the Money
Suit, extending the injunction “till disposal of the money suit or till amicable
settlement amongst the parties, whichever earlier”.

13 In the Arbitration, Petrobangla relied on the injunction as an impediment
constituting force majeure; it concluded that the GPSA was frustrated and
terminated. The Tribunals found that the impediment existed already when
the GPSA containing the payment obligation was concluded and that, having
made the payment committee in the GPSA, Petrobangla did not take any steps
to remove the impediment. The Tribunals concluded that Petrobangla was not
excused from its payment obligations and confirmed the amounts owed by
Petrobangla to Niko in the Decision on the Payment Claim of 11 September
2014.

14 During the proceedings on the Payment Claim Petrobangla applied for an
attachment in the Money Suit, followed in the Arbitration by a request for
provisional measures in December 2013 and a conditional request for
provisional measures in February 2014. During the hearing on the Payment
Claim in April 2014, the Parties reached an understanding concerning these
applications, which the Tribunals recorded in Procedural Order No 6 of 1 May
2014. The understanding included the withdrawal of the applications for
provisional measures and the commitment of Niko not to dispose directly or
indirectly of its assets in Bangladesh.

15 In view of these commitments and various interim arrangements discussed at
the 2014 Hearing, the Tribunals also invited the Parties to seek an amicable
settlement, which would satisfy the order of the BELA Court and permit

[Page 33]

Petrobangla to meet its payment obligations under the GPSA. They identified
“possible elements of interim arrangements which the Parties may agree on,
or, in the absence of such agreement, the Tribunal may order”.

16 The Parties did not succeed in agreeing on such an interim arrangement. The
Claimant requested a decision from the Tribunals regarding the
implementation of the First Decision on the Payment Claim, proposing several
alternatives, including the use of the funds owed by Petrobangla for
operations in Bangladesh and payment into an escrow account. Petrobangla
argued that Niko may be found responsible for the blowouts and may owe
damages; it would therefore be “unnecessarily prejudice Respondents, and
the sovereign State of Bangladesh, to have to pay or set aside a substantial
sum for Claimant that may not be owed at all”.

17 The Tribunals did not accept this argument, pointing out that the amount for
gas delivered by Niko to Petrobangla was long overdue. Moreover, the debt of
Petrobangla was established, while Niko's liability for the blowouts remained
to be determined. Petrobangla had decided not to bring any claims in the
Arbitration but that any liability of Niko for the blowouts might be due not to
Petrobangla but to others. The Tribunals concluded that there was no
justification for Petrobangla to further withhold the funds owed to Niko.

18 The Tribunals also noted that the Claimant had proposed different
possibilities for using the funds paid by Petrobangla, including use of the
funds in Bangladesh and possible compensation obligations found as result
of the blowout. They adopted therefore with some adjustments the alternative
in the Claimant's proposals that provided for an escrow account. The
Tribunals issued the Decision on the Implementation of the Decision on the
Payment Claim (the Second Decision on the Payment Claim), dated 14
September 2015, ordering payment into an escrow account for which they
defined the modalities. In that decision, the Tribunals also decided the claim
for compound interest.

19 The Parties then agreed on the documentation for the escrow account and the
Tribunals approved it at the November 2015 Hearing. The Respondents did
not execute the escrow documentation. The Claimant requested on 15
December 2015 that the Tribunals issue an award on the Payment Claim,
ordering Petrobangla unconditionally to make payment to Niko of the amount
that the Tribunals had found to be owed. The Respondents stated that the
execution of the escrow documentation required a modification of the 2005
injunction and that they had applied for such a modification. In response to
the Claimant's request for an award, the Respondents requested on 6 January
2016 that the Tribunals maintain in place the Second Decision on the
Payment Claim while the petition for review of the injunction was under

[Page 34]

consideration. On 25 March 2016, together with BAPEX's Memorial on
Damages, Petrobangla and BAPEX separately raised an expanded version of
the corruption allegations (see below); on that basis Petrobangla requested
that the decisions on the Payment Claim be vacated and the Tribunal find
that Niko is not entitled to any payment.

20 Instead of a modification of the 2005 injunction, a new injunction was issued
by the High Court Division on 12 May 2016, further to a writ petition by a
Professor Shamsul Alam, acting as “public interest litigant” (the 2016
injunction). The injunction directed the Respondents and the Government
not to give any kind of benefit and not to make any payment to the Claimant.

21 Considering these developments, the Tribunals noted that the creation of an
escrow account was frustrated through no fault of the Claimant. As the
objectives of the payment into an escrow account could not be achieved in the
manner contemplated and no other interim arrangement had been proposed,
the Tribunals saw no other manner of implementing the prior decisions on
the Payment Claim save by requiring Petrobangla to make direct payment to
Niko. They did so by the Third Decision on the Payment Claim of 26 May
2016.

22 On 30 June 2016 the Respondents applied for a reconsideration of this
Decision. The Tribunals decided in Procedural Order No 16 of 14 November
2016, without determining the admissibility of the application, that, if it were
admissible, the application would have to be denied.

23 The relation of the Tribunals' jurisdiction with that of the courts of
Bangladesh was again raised by the Claimant's application of 19 May and 1
June 2016, seeking a declaration that the Tribunals have exclusive
jurisdiction over (i) the validity of the JVA and the GPSA, (ii) Niko's liability
and (iii) interim or provisional matters, including any injunction, stay of
payment, attachment or other relief. Responding to this application, the
Tribunals referred to their Decision on Jurisdiction, including jurisdiction
ratione materiae concerning the JVA and the GPSA. In the First Decision on
the Payment Claim, the Tribunals explained that their jurisdiction “is
exclusive with respect to the merits on the dispute validly brought before
[them]". They confirmed the exclusive nature of their jurisdiction in the Third
Decision on the Payment Claim. In response to the Claimant's last
application, the Tribunals issued their Decision Pertaining to the
Exclusivity of the Tribunals' Jurisdiction of 19 July 2016 (Exclusivity
Decision), confirming that they “have sole and exclusive subject matter
jurisdiction with respect to all matters which have validly been brought before
[them]". They explained that this exclusive substance matter jurisdiction did
not prevent a court in Bangladesh to be seized by a person not party to the

[Page 35]

ICSID proceedings; it however bound the courts in Bangladesh, when deciding
the claim of such a person, to conform its decision to that of the ICSID
Tribunals in all those matters for which the ICSID Tribunals have exclusive
jurisdiction.

24 The proceedings on the Payment Claim were suspended when the
Respondents raised the expanded version of the Corruption Claim. After the
Corruption Claim had been decided, the Claimant requested on 7 October
2020 that the Tribunals decide the reserved question of costs and issue an
award on the Payment Claim. The Respondents objected to the separation of
the two proceedings and the issue was heard during the November 2020
Hearing. The Tribunals determined that the proceedings be separated and
that those on the Payment Claim be completed by an award. They examined
the cost claims and determined the part of the costs to be allocated to the
proceedings on the Payment Claim. In its Award of 24 September 2021, the
Tribunal in ICSID Case No ARB/10/18 confirmed the earlier decisions of the
two Tribunals and ordered payment of the amounts due to Niko plus interest
and a share of Niko's costs.

25 As a matter of public record, on 21 January 2022 Petrobangla and BAPEX
filed an application for annulment of the Award on the Payment Claim,
invoking grounds relating to (i) corruption in the procurement of the GPSA,
(ii) the Tribunal's treatment of the Alam Decision, (iii) the Exclusivity Decision
and (iv) the nature of the relief granted by that decision and (v) the decision
concerning designation of Petrobangla and BAPEX as agencies of the State of
Bangladesh, according to Article 25(1) of the Convention. By a publicly
available Decision on Annulment of 12 October 2023,³ the Committee
dismissed the application on all grounds unanimously, except with respect to
the decision concerning designation where the dismissal was by majority.

26 In the proceedings on the Compensation Declaration Niko presented its case
on liability for the two blowouts, accompanied by documentary evidence,
witness testimony and expert reports. During a first phase of the Arbitration
on the Compensation Declaration, BAPEX took the position that it had never
invoked Niko's liability for the two blowouts and that there was no dispute
between BAPEX and Niko. As a result of this position taken by BAPEX, the
Claimant's argument and evidence in support of its request for a
Compensation Declaration had not been contested by the Respondents in any
substantive manner. At the same time BAPEX continued to request the

³ Decision on Annulment, 12 October 2023, available at
https://www.italaw.com/cases/documents/11003.

[Page 36]

Tribunals, based on other grounds, to dismiss the Claimant's request for a
declaration of non-liability.

27 Given the technical nature and the complexity of many of the issues arising
in the context of the Compensation Declaration, the Tribunals did not wish to
proceed in the absence of a critical review of the technical issues arising from
the Claimant's case. In the circumstances, the Tribunals decided by
Procedural Order No 7 of 17 October 2014, to appoint experts for (i) the well
design and drilling of the Chattak 2 well and the design and execution of the
relief well operation for Chattak 2A; (ii) the quantum of gas lost as a result of
the Chattak2 and Chattak 2A blowout control incidents; and (iii) the air
quality and greenhouse gas emissions due to these incidents and resulting
monetary loss or damage.

28 The Tribunals consulted the Parties on the choice of the experts, their
mandate and the procedure to be followed; they appointed experts in each of
the three fields and finalised with them their terms of reference. Their reports
were provided to the Parties on 10 June 2015.

29 After several changes of their counsel representing them in these proceedings,
the Respondents changed counsel again and appointed on 9 July 2015 the
counsel who continued to represent them during the remainder of the
proceedings. The new counsel stated that prior counsel had made grave errors
in judgment and had failed to understand the nature of these proceedings.
Adding that circumstances had changed and the hitherto uncooperative party
was about to cooperate, they requested the Tribunals to “restore” party
“equality of arms” and BAPEX's right to be heard.

30 The Parties commented on the reports of the Tribunals' experts and submitted
reply comments. With its comments, BAPEX also submitted for the first time
in the Arbitration observations from three experts in relation to matters
related to the Compensation Declaration. It withdrew the observations of one
of these experts and submitted redacted versions of the other observations.
The Tribunals held that the previously submitted observations remained on
the record. BAPEX also informed the Tribunals that it had filed a Notice of
Dispute with Niko.

31 The procedure was adjusted to provide additional time for the new counsel to
comment on the reports of the Tribunal-appointed experts. The Respondents
requested provisional measures concerning the expert opinions and withdrew
the requests after an exchange of correspondence. Two Ministers of the
Government intervened and requested a procedural consultation in their
presence in London. The Claimant accepted that the Ministers be present at
the meeting as observers; but as they had not been designated as agents,
counsel or advocates, it objected that the Ministers should not address the

[Page 37]

Tribunals given that the Government was no longer a party in the Arbitration.
As no convenient date could be found, the meeting did not take place.

32 After several consultations and meetings, the procedure was adjusted to meet
the requests of the Respondents' new counsel and the scope of a hearing on
the merits was defined. The Tribunals noted that BAPEX's recent submissions
had referred to a broad scope of obligations and laws that had to be considered
when determining whether Niko “breached no obligation or law as concerns
the two blowouts”. The Tribunals accepted at the request of the Claimant to
extend the proceedings to the full scope of possible breaches causing liability.
The Respondents stated that they were ready to argue the liability issue but
required additional time for quantum. The procedure therefore was divided in
a phase on liability and another phase on damages.

33 Considering the Parties' argument concerning the scope of the hearing on
liability that had been fixed for November 2015, the Tribunals defined the
issues for that hearing. That hearing was held in London in November 2015
at which primarily witnesses and experts were heard. It was agreed that the
legal issues that had been envisaged for that hearing and, in particular, the
issue of breaches of obligations, applicable laws and standards possibly
relevant as bases for liability would be addressed by the parties in written
submissions and that their oral closing argument on the liability phase would
be heard subsequently in the course of a 2-day hearing.

34 Following the November 2015 Hearing, the Respondents filed a request for the
production of documents relating to the drilling of the wells and the
environmental monitoring. The Tribunals heard the Parties about the scope
and basis of this request. They then were informed about a site visit hosted
by Niko on 5 and 6 February 2016 in the absence of the Tribunals. The
Claimant provided access to the documents at the site. The Tribunals
discussed with the Parties the request and recorded the agreement reached,
identifying the documents which the Claimant accepted to produce.

35 Following the filing of the post-hearing briefs, the hearing for oral closing
argument on liability was held on 22 – 23 In February 20016 in Paris for full
legal argument on liability. At that hearing the remaining issues concerning
the document production request were addressed and the steps for their
resolution adopted. The February 2016 Hearing completed the proceedings
on liability; no further submissions were foreseen.

36 Further to the agreed timetable, BAPEX produced its Memorial on Damages
on 25 March 2016 and included in it a new version of the corruption claim,
asserting that the JVA was procured by corruption. In a separate submission
of the same date, Petrobangla filed a similar claim with respect to the GPSA.

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37 The Corruption Claim centred initially on a Toyota Land Cruiser⁴ that Niko had
purchased for the Joint Venture, recorded in the name of BAPEX and delivered
to the Minister for Energy and Mineral Resources on 23 May 2005; the delivery
became public, the Minister resigned on 18 June 2005, and the car was returned
to BAPEX on 20 June 2005. In the Arbitration, the Claimant produced an Agreed
Statement of Facts, recording Niko's punishment by a fine of CAD 9.499 million
for having sought the Minister's influence in the procurement of the GPSA. The
statement concluded that Niko had never been convicted of a similar offence and
that it was not proven that “any influence was obtained as a result of providing
the benefits". In fact, the GPSA was concluded only in December 2006, one and
a half years after the Minister had resigned. The High Court Division in the BELA
proceedings concluded “that the JVA was not obtained by flawed process by
resorting to fraudulent means” and that there was no evidence that the GPSA
had been procured by corruption.

38 As noted above, the issue of corruption was first raised in the proceedings on
Jurisdiction. The Respondents relied on several incidents of alleged corruption.
The Claimant disclosed the Canadian investigation concerning the incident with
the Land Cruiser and investigations by the United States Department of Justice
which were discontinued “in light of Niko's guilty plea in Canada”. The
Respondents also relied on investigations by the Bangladesh Anticorruption
Commission (ACC). The Tribunals noted that the Government, which at the time
was still party to the Arbitration proceedings, was best placed to provide evidence
of the ACC investigations. They noted that, judging from the evidence before
them, the investigations had not led to any trial, let alone conviction for acts of
corruption that may be attributed to the Claimant and its group; and they
referred to the conclusions of the High Court in the BELA proceedings. The
Tribunals concluded that, apart from the acts subject of the Canadian conviction,
no other acts of corruption were committed by the Claimant or its group. The
Tribunals had no reason to believe that corruption had any influence in the
conclusion or the content of the JVA or the GPSA.

39 Corruption was again raised as a defence in the proceedings on the Payment
Claim: Petrobangla asserted that the GPSA was procured by corruption and was
therefore void. The Claimant objected to the assertion, relying on the Tribunals'
finding in the Decision on Jurisdiction. No new argument or evidence had been
produced since then. Petrobangla did not pursue the matter further and omitted
the corruption claim in the final version of the relief sought on the Payment
Claim.

⁴ Claimant's Exhibit C-15. A second charge concerned the “non-business related portion of the travel
and expense" in Canada, quantified at CDN 5'000.

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40 As noted above, in March 2016, a new version of the Corruption Claim was
introduced by the Respondents; this new version had a much broader scope. The
requests for relief were modified to some extent over time, with the Respondents
requesting first a declaration that the JVA and GPSA were voidable and had been
voided; later the requested relief included a declaration that the two Agreements
were void ab initio; subsequent requests included findings that “Niko used
corruption in the establishment and maintenance of the investment”; they also
included requested findings that Niko was not entitled to any payment or credit
for past performance.

41 The Tribunals heard the Parties about the admissibility of the new version of the
Corruption Claim and the procedure to be followed. In Procedural Order No 13, they
suspended all proceedings on all other claims.

42 The Corruption Claim, as it was presented at this stage of the proceedings,
was characterised by several features which distinguished it from other cases,
which also involved allegations of corruption. In particular, the corruption on
which the Respondents based their case in the new version did not consist of
a single act or group of acts by which an investor bribes a civil servant in
order to gain some advantage. In the new version of the claim, the
Respondents argued that, during the period when the two Agreements were
negotiated and concluded, the country was under the rule of a government
which had established an endemic system of corruption which required bribes
from anyone wishing to do business in the country. These payments,
according to the Respondents, were not made directly by Niko to the targeted
civil servants, but through a multitude of payments made to different players
in different countries and passing through different accounts of different
individuals and destined for a number of final beneficiaries. This explains why
the inquiry, which the Tribunals had to conduct in addressing the
Respondents' case, was exceptionally complex and time-consuming.

43 As the Respondents explained during the proceedings on their Corruption
Claim, a vast investigation had been carried out in cooperation between the
Bangladesh Anti-Corruption Commission (the “ACC"), the Royal Canadian
Mounted Police (the “RCMP”) and the U.S. Federal Bureau of Investigations
(the "FBI"). The investigation by these organisations also concerned other
companies and generated a vast amount of material, on which the
Respondents relied and which they disclosed gradually. Many of the payments
identified in the course of the investigation were represented graphically on a
synthetic table which found itself at the centre of argument and
demonstrations at the Hearing and often referred to as “Spider Web”

44 The Tribunals organised their examination in a broad manner, responding to
the broad scope of the alleged corruption. They fixed the period from 2001 to

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the first quarter of 2004 as the “Targeted Period”; ordered or authorised the
production of documents, including complete records of all payments by the
Niko group to Bangladesh and a statement of the Niko auditor; heard
witnesses from Niko, including Mr Amit Goyal, the Financial Controller of the
Niko parent company, witnesses from Bangladesh, including Mr Ferdous
Ahmed Khan, Special Assistant to Prime Minister Sheikh Hasina on
corruption matters, providing strategic services to the ACC, and Ms Debra
LaPrevotte Griffith, Certified Anti-Money Laundering Specialist, assigned as
F.B.I. Agent to the majority of the international money laundering and asset
recovery cases of the F.B.I.; when, after a change of government, the caretaker
government of Bangladesh requested assistance from the United States to
investigate corruption in Bangladesh, the investigative aspects of the request
were assigned to her at the F.B.I.

45 In the course of the procedure, the Tribunals addressed issues concerning
requests to the courts in Canada, including the question whether an ICSID
Tribunal had powers to make such requests to a national court; evidence by
persons with no personal knowledge of the facts they addressed, the relevance
of criminal investigations relating to the alleged corrupt regime in Bangladesh,
issues concerning confidential information and derivative materials
incorporating confidential information and a confidentiality regime in the
Arbitration and at the hearing, legal privilege under Canadian law and issues
of the Exclusivity of the Tribunals' decisions, as had arisen in the context of
the Payment Claim.

46 The Tribunals considered the legal grounds for the avoidance of the two
Agreements, including grounds under Article 102 of the Bangladesh
Constitution, the relevance of a judgment by the High Court Division in the
Alam case, and the grounds under the Bangladesh Contract Act.

47 The Tribunals also considered the various sources of evidence, noting that the
Respondents had insisted through repeated procedural initiatives that would
have involved the Tribunals in a prosecutorial search for evidence which must
have been available in Bangladesh. The Tribunals were however disinclined
to draw inferences from these inconclusive and disruptive initiatives and
decided the Corruption on the basis of the evidence that was brought before
them. On this basis, the Tribunals examined the different Governmental acts
allegedly procured by corruption, examining the facets of the alleged
corruption and specific suspect payments. The Tribunals reached the
conclusion that the allegations and the related evidence to a large extent were
extrapolations from other cases of corruption in Bangladesh and from the
investigations related to these other investigations.

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48 In conclusion of their examination, the Tribunals noted that, apart from the Canadian conviction that had been considered already in the Decision on Jurisdiction, no other acts of corruption had been found in Canada, in the United States or in Bangladesh; the Respondents themselves did not claim invalidity of the Agreements when corruption first was considered in the Arbitration and relied on it as grounds for avoidance only after the Tribunals had decided that Petrobangla had to pay for the gas delivered by Niko. The Tribunals also noted that Niko's project, recovering gas from marginal/abandoned fields, had been assessed by the Respondents and the Government as advantageous to Bangladesh and was implemented at Niko's sole expense and risk; no administrative irregularity had been identified, and the evidence did not establish that the Agreements or Government acts in their preparation were procured by corruption. In their 572-page Decision on the Corruption Claim of 25 February 2019, the Tribunals therefore denied the declarations requested by the Respondents, rejected the objections to the Tribunals' jurisdiction, found that the JVA and the GPSA were not procured by corruption and remained valid and binding; and they found that there was no basis for revising the Tribunals' decisions on the Payment Claim. The decisions on the liability for the blowouts and the resulting damages were reserved.

49 When the Corruption Claim had been decided the Tribunals resumed the proceedings on Niko's liability for the blowouts. Further to the Tribunals' invitation, the Parties identified the standards relevant for this liability. The Tribunals considered specifically the standard of conduct set out in the JVA, in Petroleum Industry Standards and in the Laws of Bangladesh as well as the role of the experts in the identification and understanding of the Petroleum Industry Standards.

50 The Tribunals concluded that no directly applicable contractual or other legal obligation had been identified which required, at the time of the blowouts, a specific act or omission, the breach of which by Niko was causal for the blowouts. The experts insisted on the need to consider the specific nature of drilling operations and the control of the well, emphasising the diversity of situations, the choice by the operator of the most suitable way of proceeding, while ensuring both safety and efficiency. This standard was defined in the JVA and referred to as the “prudent operator standard”. No standard under the law of Bangladesh relevant to Niko's liability for the two blowouts had been identified that was more stringent for the conduct of Niko as the Operator than those of the JVA.

51 These conclusions required a detailed examination of the specific circumstances in which the wells were drilled and the manner in which the design of the well and the drilling operation took these circumstances into

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account. The Parties and their experts provided extensive evidence about the geology of the Chattak field and appropriate well design, in particular the hazards of "shallow gas”, casing depth, the diverter system and blowout preventers; reference to the Chattak 1 well drilled in 1959 and the blowout that had occurred not far from the Chattak field in 1997 in the Moulavi Bazar field operated by Occidental Petroleum Corporation; the drilling operation and limited evidence about the events of the blowouts. Much time was also consecrated to examining the possible causes of the first blowout and the conduct of the drilling crew, in particular the performance of the wiper trip and the reaction when a kick occurred, which developed into the blowout.

52 Considering the evidence and the contradictory explanations of the experts, the Tribunals identified a list of possible failures that may have caused the blowout. They submitted this list as part of the note accompanying PO No 12, prior to the November 2015 hearing. These possible failures were discussed at length at the hearing and in the post-hearing submissions.

53 The Tribunals eventually identified two principal categories of issues: (i) the design of the drilling operations, specifically with respect to casing depth and kick tolerance and (ii) the qualifications and performance of the drilling crew. In the Decision on Liability of 20 February 2020, the Tribunals concluded that the Claimant had not established that the Chattak 2 design had a "reasonable kick tolerance”; this meant that the design relied on a high standard of the capability of the drilling crew; any error of that crew causing the kick tolerance to be exceeded would be fatal. Irrespective of the qualifications of the crew, a design that relied on the crew's capability to master the necessary well control operations, in the circumstances of the Chattak 2 well and despite the availability of safe alternatives, was excessively risky, failed to take adequate account of safety concerns, and thus was not in compliance with the prudent operator standard. The Tribunals also concluded that the drilling crew was not properly prepared for dealing with the risks that Niko had created by its well design. The resulting failure of the drilling crew to control the well caused the first blowout. Niko's failure to ensure the safety of the drilling operation could not be reconciled with the prudent operator standard. The Tribunals concluded that, with respect to the Chattak 2 blowout, Niko breached its obligations under the JVA.

54 With respect to the second blowout, that of Chattak 2A, similar issues were raised and considered. The design and drilling operations of this well were conducted by a specialist engaged by Niko. The Tribunals concluded that the experts' observations about the relief well strategy and its implementation did not justify a conclusion that the relief operation was conducted in breach of the prudent operator standard and the Petroleum Industry Standard. In any event, drilling relief wells was not an operation in Niko's scope of work and

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responsibilities under the JVA. The obligation was to select and engage the relief well specialist and Niko performed this obligation in line with the standard of a prudent operator.

55 The Claimant also argued that its liability was shared with BAPEX under the JVA and in any event was limited. The Tribunals found that in the circumstances there was no basis for making BAPEX share the liability for the breach of Niko's obligations as Operator in relation to the first blowout.

56 Extensive argument was presented by the Parties with respect to the limitation of liability under Section 73 of the Bangladesh Contract Act and Article 27.2 of the JVA. The Tribunals considered these provisions in light of their interpretation by authorities from Bangladesh and other common law jurisdictions. They concluded that the breach of Niko's obligations as Operator under the JVA was the immediate cause of the first blowout. This blowout was driven by gas escaping from the Reservoir. The gas that escaped during the first blowout was lost. They found that the loss of this gas and the corresponding loss of production were direct losses caused by Nokia's breaches for which the Tribunals found the Claimant liable. The exclusions of Article 27.2 of the JVA and those of Section 73 of the Contract Act do not apply to these losses. The Tribunals reserved other losses to be determined, expecting the Parties to address the issue of exclusion in their submissions in the damages phase.

57 When the Tribunals considered with the Parties the continuation of the proceedings on damages, it appeared given the Covid 19 pandemic that a full evidentiary hearing on damages could not be held before mid-2021. It was therefore decided to hear and decide, in advance of the evidentiary hearing and to the extent this would be possible prior to that hearing, legal issues concerning the heads of loss for which Niko is liable under the law of Bangladesh and the JVA. The Parties filed further written submissions and were heard at a hearing on 19 and 20 November 2020. The Tribunals rendered their Decision on Heads of Recoverable Loss (the Heads of Recoverable Loss Decision) on 18 May 2021. The Tribunals clarified that it was the objective of the decision, by identifying claimed losses that were recoverable in principle, to avoid costly and time-consuming expert and factual investigations and submissions on quantum with respect to claims which would fail on legal grounds.

58 The Parties discussed further the legal principles applicable to the scope of liability and its limitation, in particular the relationship between the objective of putting the injured party as much as possible in the situation in which it would have been but for the breach, to which the Parties referred as restitutio in integrum, and the provisions on the limitation of liability. The Tribunals

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concluded from the authorities presented by the Parties that the loss that must be compensated should not be remote or indirect, by reference to Section 73 of the Contract Act and Article 27.2 of the JVA; restitutio in integrum applied to the compensable loss so defined and did not impact on the definition of the recoverable loss. The Tribunals also concluded that, in order to be compensable, the loss must have been reasonably foreseeable at the time of the JVA. They saw no clear distinction between “remote and indirect” in Section 73 and “consequential” in Article 27.2. They concluded that the compensable damage is that “which naturally arose in the usual course of things” from the breach and in the absence of intervening events.

59 The Tribunals applied these principles to the three principal heads of loss: the first head of loss concerned the gas that escaped due to the blowout of the Chattak 2 well (the Blowout Gas). Different periods had to be considered: there was no dispute between the Parties that, for the gas that escaped during the first period (from 7 January to 24 June 2005), Niko was liable; with respect to liability for gas lost during the second period (from the second blowout on 24 June to the completion of the Chattak 2B relief well on 9 October 2005) the Parties disagreed on the precise causes of this second blowout, a matter that required that any relevant evidence and the experts be heard in the next phase of the Arbitration; concerning the loss during the third phase (following the completion of the Chattak 2B relief operation) the Tribunals determined that two distinct issues had to be considered: the question whether the relief operation was indeed successful and sealed the Chattak 2 wellbore and, if the sealing was not complete, the responsibility for the continuing seepages, which both had to be determined in the next phase of the Arbitration.

60 The second head of loss concerned loss of production due to damage to the Overburden and drilling hazards caused by the Chattak 2 blowout. The loss claimed under this head was not the gas that had escaped but instead the gas that had remained in the Reservoir but could no longer be produced. BAPEX explained that the gas that had escaped and was trapped in the Overburden created serious hazards for drilling and production activities; drilling a production well therefore was no longer possible. The Tribunals noted that the Parties disagreed about the factual allegation that the gas in the Reservoir could no longer be produced. Assuming that the BAPEX's allegations in the Arbitration were factually correct, the Tribunals noted, however, that, after the blowouts had occurred, Niko proposed the drilling of production wells, BAPEX and the Government did not object that the drilling of such wells had become too hazardous or that the gas in the Reservoir had been lost; the development of the Reservoir, in the view of the Parties, remained technically feasible and was not precluded. In the opinion of the Tribunals this excluded that the Parties, when they concluded the JVA, knew

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or even contemplated these hazards and a resulting loss of the gas from the Reservoir as a likely result of a breach of Niko's obligations as the Operator. Even if that alleged loss were proven, it would be remote and therefore excluded.

61 The third head of loss concerned environmental losses. The Tribunals examined the reports about the blowouts and the losses to the population of Tengratila, the village in the immediate neighbourhood of the blowouts, and the claimed losses. The Tribunals noted the incomplete presentation of the environmental claims in the Arbitration and adopted a cautious approach in their determination of the recoverability of these claims in principle. They pointed out some of issues that the Respondents had to address when presenting the supporting evidence and argument. In the Heads of Recoverable Loss Decision, the Tribunals considered specifically two causes of loss to which the Respondents had attributed particular attention:

(i) BAPEX's experts had observed arsenic in the groundwater and drinking water which was “a known hazard in the region”; they asserted that the blowout caused an increase in the arsenic content. The Tribunals noted that arsenic was not a component of the gas emissions from the blowout; if it occurred in connection with the blowout, it would have had its origin in the minerals of the soil ejected during the first hours of the blowouts. Arsenic in the soil does not occur naturally in soluble form; arsenic containing minerals must react under specific conditions to form water soluble compounds.

(ii) The Parties' experts described different processes by which such reactions might occur. These processes were complex and rested on different assumption. Neither the Respondents nor the experts were certain about the mechanism by which the material ejected during the blowout could have caused the contamination of the water. The Tribunals were unable to consider any of the different processes described by the experts as a natural result of the Niko's fault as Operator that caused the blowout. If it would be established that, as a consequence of the first blowout, the arsenic content in the drinking water increased, this would be a remote loss unforeseen at the time of the JVA and excluded by Section 73 of the Contract Act and by Article 27.2 of the JVA. The Tribunals excluded Niko's liability for any arsenic contamination.

(iii) Mr Wilson, one of BAPEX's experts, had proposed projects of abatement and mitigation of risks resulting from continuing seepages of gas. One risk factor resulted from the use of gas as

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an “informal cooking gas supply system” causing “a significant risk of explosions to the residents in the building”. Irrespective of the disputed liability for continuing gas seepages, the Tribunal found that the risk from this use of the gas seepages was attributable to the decision of the villagers to use the gas in their homes and was therefore indirect. Niko was not liable for it. Other aspects of the proposed project were reserved in the Heads of Recoverable Loss Decision and are decided in the present Award.

62 Concerning Niko's liability in relation to losses of the Government of Bangladesh and Petrobangla, the Tribunals held in the Decision on Jurisdiction that they had jurisdiction to determine whether Niko has any liability for the two blowouts under the JVA and to make the requested declaration if they deemed it to be well founded. Based on the assignment recorded in the JVA, the Tribunals concluded that their jurisdiction concerning Niko's liability extended to the liability towards the Government and Petrobangla. They decided in the Decision on Liability that Niko's liability as Operator for the 2005 blowouts in the Chattak field must be determined exclusively under the JVA between Niko and BAPEX by the Tribunal constituted in ICSID Case No ARB/10/11; that Tribunal's decision on Niko's liability for the two 2005 blowouts in the Chattak field is binding on the Government and Petrobangla as assignors to BAPEX. On the same grounds, the limitation of liability agreed in the JVA also applies to claims by the Government and Petrobangla as assignors.

63 Concerning the loss of the Government due to the lost gas, the Tribunals clarified in the Heads of Recoverable Loss Decision that the issue was not a question of assignment of claims to BAPEX. Rather the issue had to be considered as a function of the JVA, which regulated the development and production of gas from the Chattak field. This included the manner in which loss and damage caused by this activity was dealt with. Consequently, BAPEX's claim for the Government's losses is a claim under the JVA. It is a claim to damages in contract; it is not necessary to examine whether the claim also meets the requirement of a separate tort claim. The Tribunals also clarified that the quantum of the Government's claim may not exceed the difference between the price that Petrobangla would have paid to the BAPEX/Niko Joint Venture and the market price, determined by reference to the price the Government or Petrobangla paid to comparable gas producers in Bangladesh.

64 Concerning the loss and damage of the population and to the environment, the Respondents first had insisted that they were claimed in the Money Suit and were outside the jurisdiction of the ICSID Tribunals. Further to the Tribunals' decision on liability, BAPEX claimed for these losses under the

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JVA. The Claimant objected that the claims made were not for losses actually incurred and in any event were for losses of third parties, without showing subrogation or representation. The Tribunals distinguished this matter as follows:

(i) with respect to loss concerning the State as such, specifically the claim for atmospheric pollution: the Tribunals decided that the Government may claim for this loss, just as it may claim for the lost gas;

(ii) with respect to the claims for remedial action to be conducted in the future, the Tribunals pointed out that they were aware of the Government's limited resources. They noted that they would have to consider in each case what conclusions must be drawn from the fact that the remedial or mitigation action for which the Government claims have not (yet) been taken;

(iii) With respect to claims for individuals having suffered losses, the Tribunals concluded that the Government was entitled to act for them, provided it acted along the lines that were adopted in determining compensation to the local population, further to the assessment of the Local Losses Committee.

65 Concerning BAPEX's warranties in the JVA relating to the assignment by the Government and Petrobangla, the Tribunals found in the Decision on Liability that no decision in the Money Suit had been made; a decision about the breach of these warranties would therefore have been premature. The Tribunals reserved the decision about a possible breach of warranties until further notice. No such notice was provided and in the final version of the relief sought, the Claimant did not repeat the request for a decision on the warranties.

66 With its Counter-Memorial on Damages the Claimant had introduced a request referred to as its Set-off Claim. The Claimant argued that BAPEX's failure in 2005 and thereafter to approve further drilling in the Chattak field was a breach of its obligations under the JVA and had caused loss of at least USD 114 million. It requested set-off against the claims by BAPEX. The Respondents argued that the claim was inadmissible in the procedure and in any event time barred. In the Decision on Heads of Recoverable Loss the Tribunals found that the claim was admissible in the procedure but time barred. They denied the Set-off Claim.

67 After the Heads of Recoverable Loss Decision, the Tribunals split the proceedings in the two cases. They completed the proceedings on the Payment Claim and issued the award in ICSID Case No ARB/10/18. The proceedings continued before the Tribunal in ICSID Case No ARB/10/11. This Tribunal

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now completes the proceedings on the Compensation Declaration claim by deciding the remaining issues, in particular the quantum of the losses to be awarded for the lost gas and for the environmental losses. At this point it summarises its decisions and the reasons that are developed in the body of this Award.

68 The quantification of the lost gas was a complex task, as the gas escaping from the Reservoir had not been measured. The experts presented by the Parties employed two methods to quantify this loss, one by estimating the flow from the Reservoir (Flow Rate method), the other by comparing the quantities of gas in the Reservoir before and after the blowout (Material Balance method). The Gas Loss Committees in Bangladesh in 2005 employed the Flow Rate method and pointed out the possibility of applying the Material Balance, if a future well would provide the necessary data. In the Arbitration, the experts of both Parties provided estimates using the Material Balance method; the Claimant's experts relied primarily on the Flow Rate method and presented Material Balance as a “cross check”; BAPEX's experts insisted that, in the circumstances of the present case, Material Balance was the only reliable method. BAPEX nevertheless presented a Flow Rate estimate but did so only after the last evidentiary hearing in its first Post-Hearing Brief.

69 Concerning the Flow Rate estimates, the Gas Loss Committees had distinguished three stages: Q1 the initial flare of unrestricted flow of gas that ignited into a high flame, Q2 gas seepages and flames at the surface after the blowout well bridged and Q3 gas that escaped from the Reservoir into the subsurface above the Regional Shale (the Overburden). The First Gas Loss Committee calculated the Q1 loss by a formula using factors such as the pressure in the Reservoir and the dimensions of the wellbore to calculate the flow rate. Both Parties accepted the estimate of the volume of gas during the initial 40 hours so calculated; the Tribunal saw no reason to differ.

70 The Q2 rate was estimated on the basis of observations of gas escaping at the surface. The Tribunal considered the evidence for this flow and concluded that it was too unreliable to provide the basis for an estimate which it could adopt with any confidence.

71 With respect to the Q3 rate, the First Committee used a formula similar to that for the Q1 rate and calculated a flow rate in two scenarios. For the first scenario its calculation reached a rate which was higher that the Q1 flow through the open borehole. The Committee recognised that this was an impossible result and replaced the calculated rate by the rate it had adopted for the Q1 rate. The Second Committee considered that, in view of the evidence from the Chattak 2A well, drilled subsequently to Chattak 2, this rate seemed "unlikely". The second scenario of the First Committee reached a rate far lower

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than the first scenario. This rate was in the range of that adopted in other estimates. In the absence of substantial criticism of the rate of the Committee's second scenario, the Tribunal accepted it for to estimate the flow of gas after the bridging of the first blowout well.

72 The quantification of the gas loss due to the Chattak 2A blowout required the decision on one of the remaining issues of liability and causation: whether this loss was part of the Chattak 2 blowout or the result of a separate chain of causation for which Niko is not liable. BAPEX's experts assumed that gas had accumulated in the Overburden, caused the second blowout and burnt until the Chattak 2A well bridged; the gas during the Q1 flare of the second blowout, in the opinion of BAPEX and its experts, thus was gas that had escaped from the Reservoir already and was therefore attributable to the first blowout for which Niko is responsible. The Claimant's experts stated that a quantity of gas that burnt in a high flame for some 12 days could not have accumulated near the well; they assumed that the blowout created a connection with the Chattak 2 wellbore, opening a new flow from the Reservoir. Considering the evidence and the experts' explanations, the Tribunal concludes that the gas of the Q1 flare flowed from the Reservoir through a new connection to the Chattak 2 wellbore and this is due to the Chattak 2A blowout; to the extent to which it exceeds the rate of flow from the Chattak 2 blowout, Niko is not liable for it.

73 The completion of the Chattak 2B relief well on 9 October 2005 led to a substantial reduction in the emissions on the surface. Bob Grace, who had conducted the relief well operation, believed that the operation was successful but accepted that “only time will tell for sure”. Seepages of gas at the surface continued for many years with varying strength and frequency. Some of the villagers collected the seeping gas for cooking purposes and one enterprising villager set up a network distributing gas to several households until the local police intervened for safety reasons. The Tribunal concludes that the relief operation did not succeed in sealing completely the opening in the Upper Maring Shale and concludes that Niko is liable for the continuing flow at a reduced rate.

74 Niko had repeatedly requested agreement for it to drill further production wells and had asserted that such wells would reduce and eventually extinguish the seepages after 9 October 2005. BAPEX delayed its authorisation of such wells and eventually made it subject to conditions which Niko considered unacceptable. The Claimant argued that, by its failure to approve further drilling of production wells, BAPEX itself was responsible for the gas losses that could have been avoided by such wells. The Tribunal examined the circumstances of BAPEX's delay and the reasons given by BAPEX for the conditional approval; it concludes that both the delay and the

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conditions were not justified and limits Niko's liability to the quantity of gas that would have escaped until the additional wells would have caused the seepages to cease.

75 The difficulties in the application of the Material Balance method concerned almost exclusively the estimation of the Original Gas in Place (OGIP or GIIP) and the Estimated Ultimate Recovery (EUR). As there was no direct evidence available, the Parties' estimation depended on indications by inference or relied on evidence from other sources. Widely differing estimates were presented. BAPEX argued that the Parties had agreed in the JVA on an OGIP value which was binding for the loss calculation. The Claimant contested that there was such an agreement. It argued that subsequent information, in particular a 3D seismic study, had provided information that required a different assessment. BAPEX also relied on other estimates, which Niko had produced after the 3D seismic information had become available. The Claimant also contested the relevance of these estimates. The Tribunal examined these estimates and concludes from the context in which they were presented that they were not reliable. It considered for its estimates those quantifications that showed that they were based on verifiable data and used these data in a verifiable manner. When using available data the Parties and their experts differed widely in their interpretation.

76 Prior to the Arbitration, it was assumed that the Reservoir consisted of two separate gas deposits, Sand 1 and Sand 2. In the Arbitration, BAPEX's experts contested this assumption of compartmentalisation and opined that the two Sands were pressure connected and had a single Gas-Water Contact (GWC); the Claimant's experts contested this opinion.

77 The differences between the experts concerned the relevant factors for determining the OGIP, the sources for the relevant data and the interpretation of the data, in particular Reservoir pressure, GWC, reservoir mapping (productive area) and pay height (reservoir thickness) water saturation, resistivity factor and conductivity, and porosity.

78 Concerning the Reservoir pressure, the First Committee and the Claimant's experts relied on the mud weight for the drilling of the Chattak 2 well, assuming that the pressure in the Reservoir could not have been higher than the resistance from the drilling mud. BAPEX's experts agreed that this was an accepted method for determining the pressure of a reservoir. They argued, however, that the mud weight used during the drilling of the Chattak 2 well should not be used because that well blew out. Instead, these experts used the reservoir pressure of Sands 3 – 6 recorded in a Reservoir study of 1978 concerning the Chattak 1 well drilled in 1959. As the Claimant's experts pointed out, the Chattak 2 blowout occurred only after the Chattak 2 well had

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been drilled successfully through both Sands 1 and 2, had reached a level below the Reservoir at a depth of 807m and the drill assembly was pulled out again in a wiper trip. The kick occurred during this wiper trip when the drill assembly had reached 466m. In other words, the drilling mud of Chattak 2 was heavy enough to prevent the gas of the Reservoir from entering the borehole. BAPEX's experts did not respond to this objection. They introduced the argument that the static weight of the mud, as it is measured at the top of the well, was not decisive. They stated that other factors increased the effective mud weight but did not present a calculation based on the Chattak 2 mud weight, adjusted for these other factors. The Tribunal was not persuaded by the reliance on pressure measurement of Sands different from those of the Reservoir and accepted the pressure determined on the basis of the Chattak 2 mud weight. It considered the adjusting factors to which BAPEX's expert referred and determined the mud weight relevant for determining the upper limit of the reservoir pressure.

79 Concerning the water saturation and conductivity, BAPEX's experts had taken the values for the water resistivity in their estimation not from the Reservoir but from a gas deposit below it. The Claimant's experts had taken the data from the Reservoir itself, and the Tribunal sees no justification for choosing the data from a different deposit.

80 Considering the petrophysical analysis of Chattak 1 and the information about the water saturation between the sands of the Reservoir and its conclusions about BAPEX's experts position with respect to reservoir pressure and water saturation, the Tribunal concludes that BAPEX's assumption of a single GWC and pressure connection between the sands of the Reservoir is not supported by a correct choice of relevant data and their interpretation: the Tribunal assumes that Sand 1 and Sand 2 are separated.

81 The Tribunal considered the relevant estimates and noted that the estimates of the Claimant's experts, one of the estimates of BAPEX's experts and an estimate by Fekete Associates, consultants engaged by Niko in 2006, all were based on the assumption of compartmentalisation and a separation of Sands 1 and 2. The Tribunal noted that these estimates were within the same range and adopts one of them for the OGIP value in its Material Balance estimate.

82 While the estimate of OGIP was subject to uncertain factors and subject to controversy and widely differing estimates, the data available from the Chattak 2C well are materially uncontroversial and gave rise to only minor differences.⁵ This well provided information of the Reservoir pressure at a date

⁵ BAPEX's experts had misunderstood some information provided by the Claimant and in their first report based their estimate on erroneous assumptions. These were corrected in the second report; Ryder Scott III, paragraph 14. ↩

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after the blowout. BAPEX's experts had calculated their gas loss estimate by establishing the difference in Reservoir pressure before the first blowout and the pressure from the Chattak 2C well on 4 September 2005; they applied the percentage of that difference to their OGIP value to determine the quantity of the lost gas. The Claimant's experts, while pointing out that the loss calculation was more complex, accepted that the loss of reservoir pressure indicated the order of magnitude of the loss of gas. The Tribunal decided to apply this simplified approach for the gas loss estimate according to the Material Balance method.

83 The result reached by the Tribunal's application of the Material Balance method was substantially lower than that produced by the Flow Rate method. The Tribunal decides to use the average of the two methods to determine the gas loss for which Niko is liable.

84 The environmental damage, which includes loss and damage to the population of Tengratila and damage to the atmosphere by Greenhouse Gases (GHG), had been assessed in 2005 by the Local Losses Committee and the three Environmental Losses Committees. Shortly after the first blowout, Niko engaged a team of environmental consultants from Canada and Bangladesh to “implement and oversee a comprehensive environmental monitoring programme”. The team produced a first Environmental Site Inspection Report and, during the following three years, a total of 46 monitoring reports; these reports were followed by monthly and thereafter quarterly reports by Niko itself. The Government also inspected and monitored the environmental effects of the blowout: the DoE created a Sub-Committee for Observation and Monitoring of the Environmental Status after the blowout; that committee prepared an Observation and Monitoring Report and gave directions for the monitoring by the team engaged by Niko.

85 After the critical observations and initial directions by the DoE, which were implemented by the environmental consultants, no complaints or criticism of the team of environmental consultants and their report have been reported in the Arbitration until August 2015. At that time BAPEX filed its Request for Provisional Measures, withdrawn shortly thereafter, and presented the first report of Dr Borthwick, dated 31 August 2015, which severely criticised the monitoring reports, asserting that the monitoring failed to meet applicable standards. This was followed in BAPEX's Memorial on Damages of 25 March 2016 by a request that the Tribunal order Niko to pay some USD 8.5 million for future “expenses of monitoring, surveying and abatement and to hold [the Arbitration] proceeding open until such time as a complete survey and monitoring of the Tengratila area can be conducted and BAPEX can provide the fullest possible accounting of environmental and health related losses”.

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The principal request in this memorial was the Corruption Claim which the Tribunal addressed by priority.

86 When the Corruption Claim had been decided and proceedings on the Compensation Declaration claim resumed, no progress was reported by BAPEX on the monitoring and survey for which it had requested the suspension of the proceedings. In written submissions and at the November 2020 Hearing, BAPEX continued to request advance payment by Niko, as compensation for direct loss caused by the blowout, and renewed its requests for the suspension of the proceedings concerning the environmental claims. The duration of the requested suspension remained uncertain due to the Covid 19 pandemic. The Tribunal addressed the requests for advance payment and suspension in the Heads of Recoverable Loss Decision of 18 May 2021.

87 Concerning BAPEX's claim seeking that Niko pay for further monitoring and assessment costs before its liability for these costs had been determined, the Tribunals considered that, under certain circumstances, the party liable for another party's losses may have to participate in establishing and assessing the losses which it must repair, including by advancing some or all costs for establishing the losses. The explanations provided by the Respondents, in the opinion of the Tribunals, did however not justify an order for such advance payments.

88 Concerning the suspension request, the Tribunals pointed out that the mandate of the Third Environmental Losses Committee included to “estimate the long term potential losses”, that the assessment of this committee formed the basis of the Money Suit and had not been put into question by the Respondents who had announced in 2016 that the assessment of the Committees had to be “supplemented due to continuing harm occurring over the past decade”. The Tribunals accepted that the Respondents supplement, develop or modify these assessments; they did not accept further delay by an open-ended programme for the completion of the assessment.

89 Following the Case Management Conference of 8 June 2021, the Respondents confirmed that the environmental claims to be decided by the Tribunal in ICSID Case No ARB/10/11 were those in the table showing 11 items forming the "Total amount of environmental losses” in the Third Environmental Losses Report, with any necessary updates. These 11 items were recorded in paragraph 460 of the Heads of Recoverable Loss Decision; it was agreed that, in a further round of submissions, the Parties would specify for each of these claims their position concerning the justification, the amount claimed and the relevant evidence on record. This table and the submissions further to

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Procedural Order No 27 form the basis of the Tribunal's decision in this Award.

90 After some claims had been decided on a legal basis in the Heads of Recoverable Loss Decision, the remaining claims were further argued by BAPEX in its Submission on Environmental Claims, dated 20 August 2021, and Niko's Reply on Environmental Claims of 1 October 2021. The Parties agreed that no oral argument was necessary in relation to the environmental claims, and that these could be decided on the basis of the written submissions. They are now decided in this Award.

91 The Tribunal examined the evidence about the work of the local authorities and the report of the Local Losses Committee, registering and assessing the damage suffered by the local population, businesses and institutions, notably schools and the mosque, and the environment. It concludes that these records reflect a conscientious effort through direct contact with the affected households, one by one, to understand and evaluate the losses. The Tribunal noted that this otherwise complete assessment expressly excluded long-term effects.

92 It is uncontested that Niko supported the effort of the Local Losses Committee and fully paid the losses recorded by it. Niko also made an initial payment for distribution by local authorities to 616 families in January 2005, unrelated to specifically identified damage and direct payments to up to 100 families residing near the blowout sites and temporarily evacuated from their homes. Niko also made other payments to the population and performed work relevant to the blowout and the reparation of the damage.

93 Considering the 11 items forming the “Total amount of environmental losses” in the Third Environmental Losses Report that formed the basis for the environmental claims remaining to be decided, the Tribunal notes that they included and indeed focused on long-term effects. Two of these items of loss, those concerning the agricultural sector and fisheries, referred to losses that had been assessed by the Local Losses Committee and thus were part of the losses paid by Niko. BAPEX so recognised and did not pursue these claims in the Arbitration. The Tribunal concludes that the losses in the agricultural sector and fisheries have been fully compensated, and no further claims are before it concerning these losses.

94 The claims that remained to be decided and that are addressed in this Award concern (i) the Losses due to Atmospheric Pollution, (ii) the remaining items in the Commission's list and (iii) the reserved part of Mr Wilson's proposal for removal of gas from the soil.

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95 The first claim, which is the claim for the highest amount, is described as concerning “Air Pollution” or “Atmospheric Pollution”. It concerned in substance the emission of GHG as part of the blowouts. The Committee reports referred to the United Nations Framework Convention on Climate Change (UNFCCC) and Bangladesh's obligations under that Convention. BAPEX and its experts also relied on reports of the Intergovernmental Panel on Climate Change (IPCC). Concerning the quantity of GHG for which it claims, BAPEX points out that the blowout released methane of which some ignited and produced CO2. The quantity of methane emissions was converted into to CO2 equivalent. BAPEX applied to the total quantity of CO2 and CO2 equivalent emissions a “shadow price”, understood to be related to a value for carbon credits.

96 The Claimant objected that the alleged environmental damages were consequential and indirect. Moreover, Bangladesh had no obligation to reduce carbon emissions; the emissions from the blowout therefore did not constitute a loss for Bangladesh. BAPEX also pointed out that Bangladesh had no regulatory regime requiring the purchase of GHG offset credits; by the claim, BAPEX in reality sought a windfall, not compensation for an actual loss.

97 The Tribunal considered the evidence about GHG effects, in particular by reference to the IPCC reports, and concluded that CO2 and methane (CH4) by themselves are not harmful to the atmosphere; it is the increase in their emissions beyond a certain level that disturbed the natural carbon cycle and causes global warming. The Tribunal concludes from this evidence that, by 2005, GHG emissions had reached a level that the emissions from the Chattak 2 blowout, together with other emissions worldwide, contributed to further warming of the Earth's surface and atmosphere, affecting weather and climate extremes. Additional GHG emissions therefore increase these effects and thus are damaging. Insofar, the GHG emissions by the Chattak 2 blowout are a damage caused by the event for which Niko is liable.

98 While it appears likely that Bangladesh suffers from the effects of global warming, the process of climate change is of such complexity that the Tribunal sees no possibility of tracing the Chattak 2 emissions to any adverse climate effects in Bangladesh.

99 The Tribunal notes that, in the context of climate change litigation, attempts to establish the causal link between GHG emissions and specific damage have been attempted rarely and only in special circumstances, which in the Tribunal's view do not operate in the present case. In any event, BAPEX has not attempted to demonstrate or argue such a causal link between the Chattak 2 blowout and any loss caused by adverse weather effects. Moreover, the link, if it could be established, would be indirect to a high degree. The

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Respondents have failed to show any concrete damage suffered by BAPEX, the Government or Bangladesh in general, caused by the GHG emissions from the Chattak 2 blowout.

100 Nevertheless, the Tribunal had to consider that a damage had occurred caused by Niko and BAPEX claimed reparation for it on behalf of the Government. The Tribunal considers that the Respondents have relied on the commitments of Bangladesh under the UNFCCC system. While it has not assumed specific GHG reduction commitments, Bangladesh is committed, since its adhesion in 1994 to the UNFCCC, to supporting actions for mitigating GHG emissions. Restoring the damage caused by the GHG emissions from the Chattak 2 blowout is therefore an action in line with Bangladesh's international commitments. In the opinion of the Tribunal, this entitles BAPEX, on behalf of the Government of Bangladesh, to include the related costs in the claim against Niko. The Tribunal accepts that restoration of the environmental baseline is an obligation of Niko which BAPEX may claim under the JVA. As the Claimant had requested that the Tribunal “order such other and further relief as the Tribunal may deem appropriate in the circumstances” and the Respondents had made similar requests, the Tribunal decided on restoration as the remedy for the damage caused by the GHG emissions of the Chattak 2 blowout. The Tribunal nevertheless invited the Parties to comment on the specific restoration project it had identified.

101 The Third Environmental Losses Committee also referred to carbon sequestration and, referring to the claimed amount, stated that “plantation work can be taken to offset emitted CO2, using this money to be collected as compensation”. The Tribunal therefore has sought to identify the costs of plantation work sequestrating the quantity of CO2 and equivalent for which Niko is responsible. A 2022 World Bank report identified the costs for such sequestration by Afforestation/Reforestation. The Tribunal referred the Parties to this report and invited comments. Having considered these comments the Tribunal calculated the costs of sequestering the Chattak 2 emissions for which Niko is liable and awards these costs in this Award.

102 Concerning the other remaining claims for environmental losses, the Tribunal concludes that the claimed losses, to the extent that they were proven, were to a large extent compensated, as assessed by the Local Losses Committee or by other action of Niko, in particular by the substantial improvements to the access of the local population to clean drinking water and improvements to the environment. As an exception to this conclusion the Tribunal finds that, in the context of the claim for loss to education and social life, additional compensation must be paid to the students affected by the makeshift schooling in a substitute location and related inconvenience and prejudice.

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103 The Tribunal also considers that the repair and restoration of some of the environmental damage, as observed in the context of some of the environmental loss claims, did not compensate for the disruption and suffering of the affected population for such effects. The Tribunal considers in particular the stress and disruption from the blowouts and the related noise and disruption and serious inconvenience to the local population from the spread of debris ejected by the first blowout until this debris was removed or washed out. For this disruption and suffering, the Tribunal awards compensation in relation to several claims taken collectively. The Tribunal noted the recommendation of the Third Environmental Losses Committee that the amounts awarded “can be distributed among the villagers through District Administration” and supports this recommendation.

104 Given the controversial nature of many of the issues it had to decide, the Tribunal made an effort to set out in detail the circumstances and the reasoning related to the legal and the many factual and technical issues that arose in this dispute. It did so in its prior Decisions and does so in this Award with respect to the remaining issues concerning primarily the quantum of the losses for which Niko is liable. As pointed out above, these issues were complex and subject to a large degree of uncertainty; the views expressed by the Parties and their experts varied widely and took much time to resolve in a manner that adequately and fairly addresses the loss and damage caused by Niko's negligence in the design and drilling of the Chattak 2 well.

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2 THE PROTAGONISTS

2.1 The Claimant

105 The Claimant in this case is Niko Resources (Bangladesh) Ltd. It is a company incorporated under the laws of Barbados. The Claimant and its nationality were discussed in Section 5 of the Decision on Jurisdiction of 19 August 2011.

106 Since August 2013, the Claimant is represented in this Arbitration by:

Mr Gordon Tarnowsky KC, Ms Rachel Howie, and
Mr Anthony Cole
Dentons Canada LLP
850 – 2nd Street SW
15th Floor, Bankers Court
Calgary, Alberta T2P 0R8
Canada

and

Mr Barton Legum
Ms Clara Motin
Honlet Legum Arbitration
28 rue Cambacérès
75008 Paris
France
(Mr Legum was part of the Dentons team until January
2022, and continues to represent the Claimant)

and

Mr Rokanuddin Mahmud and Mr Mustafizur Rahman Khan
Delta Dahlia (level 8)
36, Kamal Ataturk Avenue
Banani, Dhaka 1213
People's Republic of Bangladesh

107 During the initial phase of the proceedings up to the Decision on Jurisdiction, the Claimant was represented by:

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Mr Kenneth J. Warren KC Mr James T. Eamon KC, Mr John R. Cusano
and Ms Erin Runnalls
Gowlings
1400,700 - 2nd Street S.W.
Calgary, Alberta
Canada T2P 4V5

and

Mr Ajmalul Hossain KC
A. Hossain & Associates
3B Outer Circular Road
Maghbazar, Dhaka 1217
People's Republic of Bangladesh

2.2 The Respondent

108 The Respondent in this Arbitration is Bangladesh Petroleum Exploration & Production Company Limited or BAPEX.

109 BAPEX is a wholly owned subsidiary of Petrobangla incorporated under the Bangladesh Companies Act 1994.⁶ By Notification issued on 8 June 2003 the Ministry of Power, Energy and Mineral Resources granted to BAPEX “complete administrative and financial freedom by the Government”.⁷

110 The legal status of this corporation and its relationship with the Government of Bangladesh was discussed in Sections 6 and 7 of the Decision on Jurisdiction.

111 The Respondent is represented in the Arbitration by:

Engr. Md. Fazlul Haque
Managing Director, BAPEX
Level-6, BAPEX Bhabon
4 Kawran Bazar C/A
Dhaka 1215
People's Republic of Bangladesh

and

⁶ Hearing on Jurisdiction, HT 2011.10.13 (Day 1), page 42. ↩
⁷ Exhibit 2, Appendix B to R-CMJ.1. ↩

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Mr Derek C. Smith and Mr Sudhanshu Roy
Foley Hoag LLP
1717 K Street NW
Washington, DC 20036
United States of America

and

Ms Christina Hioureas
Foley Hoag LLP
1301 Avenue of the Americas
New York, NY 10019
United States of America

and

Mr Moin Ghani
Barrister-at-law
Alliance Laws
Suite 6A (Level 5), Paradise Lake View Nibash
Ba-73/1 Gulshan-Hatirjheel Lake Drive Road
Dhaka 1212, People's Republic of Bangladesh

112 Between June 2015 and September 2024 the Respondent's external counsel was:

Mr Imtiaz U Ahmad Asif
Aequitas Chambers
Suite 5B House 1 Road 27
Banani Block K
Dhaka 1212, People's Republic of Bangladesh

113 Between June and July 2015, the Respondent's external counsel were:

Mr Kay Kian Tan
Watson Farley & Williams (Thailand) Limited
Unit 902, 9th Floor
GPF Witthayu Tower B
93/1 Wireless Road
Patumwan,
10330 Bangkok
Thailand

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114 Between 2011 and June 2015, the Respondent was represented in these proceedings by

Mr Luis Gonzalez Garcia and
Ms Alison Macdonald
Matrix Chambers, Griffin Building, Gray's Inn
London WC1R 5LN
United Kingdom

115 Between 2011 and December 2014, the Respondent was also represented in these proceedings by

Mr Tawfique Nawaz, Senior Advocate and Mr Mohammad Imtiaz Farooq
Juris Counsel
59/C, Road #4
Banani, Dhaka 12 13
People's Republic of Bangladesh

2.3 The Arbitral Tribunal

116 The Arbitral Tribunal, constituted on 20 December 2010, is composed of Professor Jan Paulsson, appointed by the Claimant, Professor Campbell McLachlan KC, appointed by the Respondent, and Mr Michael E. Schneider, President of the Tribunal, appointed per the agreement of the Parties.

Professor Jan Paulsson
Gudabiya Palace
Bani Otbah Avenue
Building 101, Road 351, Block 325
Manama
Kingdom of Bahrain
National of Sweden, France and Bahrain,
appointed by the Claimant

Professor Campbell McLachlan KC
University of Cambridge
Faculty of Law
Trinity Hall
Cambridge, CB2 1TJ
United Kingdom
National of New Zealand,
appointed by the Respondent

Mr Michael E. Schneider
LALIVE

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35 rue de la Mairie P.O. Box 6569
1211 Geneva Switzerland
National of Germany,
appointed as President of the Arbitral Tribunal upon agreement by the
Parties

2.4 The Secretariat

117 The Tribunal was assisted by Ms Frauke Nitschke, ICSID Senior Counsel/Team Leader.

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3 SUMMARY OF THE RELEVANT FACTS

118 The history of Niko's relations with the Government of Bangladesh, Petrobangla and BAPEX, of the projects concerning the Niko and the Feni and Chattak gas fields, the blowouts in the Chattak field and the related dispute have been described in several of the Tribunal's decisions. The Tribunal refers to these descriptions. In the present section, the Tribunal limits itself to a summary of the facts. Further details relating to the gas loss and the environmental damage following the blowouts in 2005 are presented below in Sections 7 and 9.

119 The dispute concerning the Compensation Declaration proceedings relates to Niko's work in the Chattak field. The field is sometimes also referred to by the name of the neighbouring village of Tengratila, in the Sylhet area in the far north-east of Bangladesh. Gas was discovered in 1959 by Pakistan Petroleum Ltd., the predecessor of Petrobangla. The first well, the Chattak 1 Well, was drilled in 1960, operated for some 25 years, producing some 26 Bcf of gas. Increased water production forced Petrobangla to shut down the well in 1985. This Chattak 1 well is situated in the Western part of the field. For the location of the Chattak field in Bangladesh, see the map produced from BAPEX Memorial on Damages:⁸

⁸ BMD, Figure 11 at page 168. ↩

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[Map of Bangladesh]

Labels on Map:

• BHUTAN
• INDIA
• Tengratila
• SYLHET
• BANGLADESH
• DHAKA
• INDIA
• Bay of Bengal
• MYANMAR

Map Title: TENGRATILA WITHIN BANGLADESH

120 In 1997, a blowout occurred in the Moulavi Bazar well, sometimes also referred to as Maguchora, an exploration well drilled by Occidental Petroleum also in the Sylhet area. The Parties disagree as to whether information concerning this well and this blowout was available to Niko before it drilled in the Chattak field, as has been discussed in Section 8.2.1 of the Decision on Liability.

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121 Niko and its parent company Niko Resources Ltd (Niko Canada) were in contact with the Government of Bangladesh and the Respondents since 1997. In August 1999 Niko and BAPEX concluded a Framework of Understanding pursuant to which they produced in February 2000 a joint study on three marginal/abandoned fields, including the Chattak field. This study, entitled "Marginal Field Evaluation Chattak, Feni and Kamta”, presented the information that had been gathered on the three fields.⁹ It was decided that the Chattak and the Feni fields were promising enough to justify further work, in the Chattak field with priority to Chattak West. In June 2001, the Government adopted the Marginal Field Procedure, regulating contracts of the type to be concluded with Niko.¹⁰

122 After protracted negotiations in which the Government and Petrobangla were actively involved, BAPEX and Niko concluded the Joint Venture Agreement (JVA) on 16 October 2003 relating to the Feni and the Chattak fields.¹¹ Niko was assigned the role of the Operator. The details of these negotiations are described in particular in Section 4.1 of the Decision on the Corruption Claim.

123 Following the conclusion of the JVA, the Joint Venture started its work in the Feni field where it drilled several wells. Production by the Feni 3 Well started on 2 November 2004.¹² The BAPEX/Niko Joint Venture produced gas from the Feni field and delivered it to Petrobangla, starting before a contract for these deliveries had been concluded. After protracted negotiations Petrobangla and the BAPEX/Niko Joint Venture concluded the Gas Purchase and Sale Contract (GPSA), dated 27 December 2006.

124 Apart from two initial payments, Petrobangla did not pay for the gas delivered. Niko initiated ICSID Arbitration proceedings, registered as ICSID Case No ARB/10/18. The proceedings in this case, conducted in parallel with the present Arbitration by a tribunal of identical composition, were completed by an Award of 24 September 2021.

125 With respect to the Chattak field, Niko conducted a 3D Seismic Study, starting in May 2004. After production in the Feni field had started, Niko moved the drilling rig to the Chattak field. On 31 December 2004, Niko started drilling the Chattak 2 well.

⁹ Both the Framework of Understanding and the Marginal Field Evaluation are attached to the JVA as Annex A and B and produced in this arbitration as Exhibit C-1. For further details see Decision on the Corruption Claim, Sections 9.1 and 9.2. ↩
¹⁰ Attached as Annex C to the JVA; see also Decision on the Corruption Claim, Section 9.4. ↩
¹¹ Exhibit C-2. ↩
¹² For details about the production from the Feni field see in particular Decision on the Corruption Claim, pages 146 et seq. ↩

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126 In Chattak West eight gas bearing sands had been identified. The Chattak 1 well produced gas from Sands 3 and 4 and from Sands 5 and 6; Sands 7 and 8 were tested from 1632m – 1657m. The Chattak 2 Well Proposal targeted primarily Sands 1 and 2 that were logged but untested in Chattak 1; but it was designed for a depth of 1750m, exploring also Sands 7 and 8.¹³

127 Sands 1 and 2 are situated below an impermeable Upper Marine Shale, also referred to as the Regional Shale, at a depth between 570m and 650m. In the present Award these two sands are referred to as the Reservoir.¹⁴

128 Drilling of the Chattak 2 well had reached the depth of 807m when the drilling crew performed a wiper trip. During that wiper trip on 7 January 2005, the first blowout occurred at 19:50h. Gas mixed with debris erupted from the Chattak 2 well and blew up to 100m or more in the air. The rig collapsed and fell into the crater that had formed. The gas ignited and burned for several days.

129 Niko's personnel escaped safely, and no casualties occurred. The few cases of physical injury are discussed below in Section 9.5.5.4. Damage was caused to the surrounding habitats and environment. The events are described in further detail below in Section 9.

130 The Parties in the Arbitration agree that on 9 January 2005, the Chattak 2 well "bridged over” or “bridged off”.¹⁵ They disagree, however, at which level the well bridged over, an issue that was discussed in particular in the context of the flow rate after the bridging¹⁶ and in the context of the Chattak 2A blowout.¹⁷ In the Hughes Supplemental Report “bridging over” is described as follows:

formation sand and shale packed off around the drill string and casing and prevented any further flow of gas to the surface.¹⁸

131 That report also states that, when the “well bridged over downhole, flow diminished, and the fire was extinguished”.¹⁹ The report indicates that the bridging occurred at the level of 466m.²⁰ This is also where the Respondents

¹³ Chattak 2 Well Proposal, attached to Niko's letter to BAPEX of 14 December 2004, Exhibit C-15. ↩
¹⁴ For the geology of Chattak West see in particular below Sections 7.5.3 and 7.5.4. ↩
¹⁵ The Respondent at Amendment, paragraph 30; the Claimant, at HT 2020 Day 1, page 129 contests the explanations of Mr Hughes, but does not seem to contest that on 9 January 2005 the Chattak 2 well bridged off. ↩
¹⁶ Below, Section 7.6.3.4. ↩
¹⁷ Below, Section 7.5.5. ↩
¹⁸ Supplemental Expert Report of Jeffrey Hughes, 19 August 2020 (Hughes II), paragraph 15. ↩
¹⁹ Hughes II, paragraph 6. ↩
²⁰ Hughes II, Figure 1 at page 10. ↩

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assume the bridging to have occurred; they rely for this assumption on Robert Grace's report of 4 July 2005 which contains the following observation: “it was generally considered that, assuming the bit to be at 466m (1529 ft), the bridge in the blowout well would be at or near the bit".²¹

132 The Claimant objected, arguing Mr Grace did not know where the bit was and referring to Gaffney Cline's reports which considered different locations of the bridge.²²

133 Despite the bridging of the well, gas continued to escape from the Reservoir and to the surface.²³ The importance of this seepage and the charging of gas into the Upper Sands is a controversial issue in the Arbitration.

134 Niko engaged Safety Boss Inc., a Canadian well control and safety consultant, whose representatives arrived on site on 9 January 2005. They concluded that surface intervention was not possible and that sub-surface intervention, i.e. a relief well, remained the only option.²⁴

135 Niko then engaged GSM Consulting Petroleum Engineers (GSM) the company of Robert Grace for the relief well design and drilling.²⁵ GSM prepared a Relief Well Program which Niko submitted to BAPEX on 13 February 2005.²⁶ After consultation with Mr Grace, the programme for Relief Well Chattak 2A was approved by the JV Joint Management Committee (JMC) on 27 March 2005.²⁷

136 Drilling the relief well, referred to as Chattak 2A well,²⁸ started on 30 May 2005 some 100m away from the blowout at the Chattak 2 well. The Chattak 2A Well also suffered a blowout on 24 June 2005, ejection material from the well and igniting into a high flame, similar to the events at the first blowout. This high flame continued until 7 July 2005 before this well, too, bridged and gas continued seeping as at the Chattak 2 blowout.

137 Niko and BAPEX then decided that a Data Acquisition Well (referred to as the Chattak 2C well) should be drilled, providing information for a further relief well, referred to as the Chattak 2B well. The drilling programmes for

²¹ Niko: Robert Grace Report, Events at Niko Resources - Chattak 2a Relief Well, 4 July 2005, Exhibit C-45, page 4; the Respondents rely on this passage at HT (Day 2), page 352. ↩
²² C-PHB 1, paragraph 34 and FN 54. ↩
²³ See below Section 7.6.3.4. ↩
²⁴ Safety Boss, Summary Report Covering the Period from 9 to 12 January 2005, 24 January 2005 (Safety Boss Summary Report), Exhibit C-23. ↩
²⁵ Consulting Agreement between Niko and GSM Consulting Petroleum Engineers, 7 January 2005, Exhibit C-18. ↩
²⁶ Niko's Letter to BAPEX, attaching Relief Well Programme, 13 February 2005 (Relief Well Program), Exhibit C-28. ↩
²⁷ Revised Minutes of JMC Meeting held on 22 February 2005, Exhibit C-31. ↩
²⁸ Chattak 2A Relief Well Plan and Drilling Procedure, Exhibit C-86. ↩

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both wells were submitted on 23 July 2005²⁹ and were approved by the Joint Venture JMC at its 5^th meeting.³⁰

138 The Chattak 2B relief well was eventually completed on 9 October 2005. The Claimant asserts that the relief operations were successful and sealed the opening in the Regional Shale through which the gas escaped from the Reservoir as a result of the first blowout. BAPEX contested this assertion and relied on the continued seepages at the surface in a wide range around the wells. The Claimant attributes the seepages to gas in the Overburden that was migrating slowly to the surface. The issue is discussed below in Section 7.6.6.1.

139 Shortly after the first blowout, Niko engaged a team of environmental specialists, formed of TERA Environmental Consultants, Canada, and Crown Agents Services, an international development company with offices in Dhaka, to inspect and monitor environmental damage. The Department of Environment reviewed the first report of this team and gave directions for further work. During its work it produced 46 monitoring reports, the last of which on 31 December 2008. The Department of Environment also produced an Observation and Monitoring Report on 19 February 2005. The reports are discussed below in Section 9.2.2.2.

140 Starting on 3 May 2005, Niko proposed to resume drilling development wells in the Chattak field to produce gas from the Reservoir and lower Sands, specifically Chattak 3 and Chattak 4, in addition to re-entering Chattak 2C. When the dispute arose about the success of the Chattak 2B relief operation, Niko also explained that producing gas from the Reservoir would save gas and would also reduce seepages if it were correct that the relief operation had not been successful. BAPEX had approved the drilling of the Chattak 3 well, subject to the successful completion of the Chattak 2B relief operation and the prior adoption of the budget. After the completion of the Chattak 2B relief operation, BAPEX did not approve the drilling of Chattak 3.

141 Eventually BAPEX announced at the 6^th JMC on 7 March 2006 that the Government had approved the work programme, but made it subject to a number of conditions which Niko did not accept.³¹ Despite continuing seepages and repeated observations that producing from the Reservoir would resolve the problem, no further wells were drilled. The issue of additional wells is discussed below in Sections 7.5.6.

²⁹ Niko's Letter to BAPEX, attaching Drilling Programmes, 23 July 2005, Exhibit R-59. ↩
³⁰ BAPEX's letter of 22 November 2005, Exhibit C-4, paragraph IV. ↩
³¹ Exhibit C-66 and below Section 7.5.6.4. ↩

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142 The Government set up several committees to examine the issues relating to the blowouts. In some of them Niko was represented, in others it was not.

143 Concerning the causes of the blowout and the responsibility for it, the Government established two Enquiry Reports which presented their reports on 7 February and 13 August 2005. Both reports concluded that Niko was responsible for the blowouts.

144 Two Committees examined the gas losses caused by the blowouts. The First Gas Loss Committee produced its report on 4 June 2005. It estimated the gas loss caused by the first blowout, dividing the loss in three components. The first component (Q1) concerned the initial flare of gas and fire, which was estimated at a flow of 271.70 MMcfd and a total of 0.453 Bcf. The second component (Q2) estimated the seepage of gas at the surface at 2 MMcf per day. For the third component (Q3) concerning gas charging into the Overburden (subsurface loss), the Committee calculated, in a first scenario, a loss of 558 MMcfd. It found that this rate was not possible and adopted the rate of 271.70 MMcfd, producing a total of 50.808 Bcf for the period until 15 July 2005; the Committee adopted a second Scenario calculating a rate of 31.47 MMcfd and a total of 5.885 Bcf. Niko's representative on the Committee disagreed with the first Scenario, did not sign the report and wrote to express his objection.

145 The Second Gas Loss Committee presented its report on 27 August 2005. It noted that the Chattak 2A well did not reach the Regional Shale and had not drilled a new hole in it so that the estimation “will remain unchanged”. It considered, however, that the first scenario seemed unlikely. It estimated that the flow at the initial flare was on average at 148.2 MMcfd and the surface loss after the bridging was at 4 MMcfd. Niko signed the report of the Second Gas Loss Committee.

146 The losses to the local population and the environment were examined and quantified by a committee formed by the local authorities. The committee produced a detailed report, dated 8 June 2005 (the Local Losses Report), recording damage and loss of each affected family and each business and quantifying its monetary value of these losses.³²

147 The Local Losses Report expressly noted that long term losses were not considered in the investigation on which the loss assessment was based. These long-term effects were estimated by three Environmental Losses Committees and their reports. After a First Environmental Losses Report,

³² See below Section 9.2.1.4. ↩

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dated 17 January 2005,³³ the Second and Third Environmental Losses Reports, dated 13 April and 15 September 2005,³⁴ provided more detailed assessments and estimated the losses they had considered. The Second Committee estimated the loss at BDT 354'450'078.60 and the Third Committee at BDT 845'583'973.³⁵

148 Niko paid all the losses assessed by the Local Losses Committee and provided other restoration work and some direct payments to the local population. It contests the estimates by the Environmental Loss Committees and has made no payment with respect to the losses assessed by them.

149 Following the 6^th JMC, Niko made several attempts to obtain approval for developing the Chattak field. It produced an assessment of the gas losses caused by the blowouts, prepared by the Canadian consultant Fekete Associates Inc. (the Fekete Report),³⁶ dated 8 December 2006. It relied on this report in an assessment of the commercial viability of the remaining reserves in Chattak West (the Commerciality Report)³⁷ which it submitted to BAPEX on 1 July 2007.

150 The Government of Bangladesh and Petrobangla, following a legal notice of 27 May 2008, initiated on 15 June 2008 legal action in the Court of District Judge, Dhaka against Niko and others. The proceedings, referred to as the Money Suit, and other court proceedings in Bangladesh related to Niko, have been discussed in previous Decisions of the Tribunal, in particular in Sections 2.5 and 2.6 of the Decision on the Corruption Claim, in the Decision pertaining to the Exclusivity of the Tribunal's Jurisdiction and in the Decision on Liability. In the Money Suit, the Government and Petrobangla claim compensation for “losses sustained due to burning of gas and destruction of mineral resources and natural resources which are mainly losses of movable property".³⁸ These losses relate to the two blowouts in the Chattak field and

³³ Report of the Committee for Estimation of Environmental and Forestry Losses Caused by the Fire Created in Tengratila Gas Field, 17 January 2005 (First Environmental Losses Report), Exhibit Annex R-1; also produced as annex to the Second Environmental Losses Report (Exhibit Annex R-2(bis)) in a different translation. ↩
³⁴ Report of the Committee Formed to Estimate the Amount of Environmental Losses due to Blow-out Explosion in Tengratila Gas Field, 13 April 2005 (Second Environmental Losses Report), Exhibit Annex R-2 and Report of the Committee Formed to Estimate the Amount of Environmental Losses due to 2nd Blowout in Chattak Gas Field, 15 September 2005 (Third Environmental Losses Report), Exhibit Annex R-5. ↩
³⁵ See below Sections 9.2.1.1. to 9.2.1.3. ↩
³⁶ Fekete Report, Exhibit C-70. ↩
³⁷ Letter from Niko to BAPEX, attaching Chattak West Commerciality Report, 1 July 2007, Exhibit C-72. ↩
³⁸ Complaint, People's Republic of Bangladesh v. NIKO Resources (Bangladesh) Ltd., Money Suit No. 224/2008 (2d Court of Joint District Judge) (Bangl.) (Money Suit Complaint), Exhibit C-6, paragraph 65. ↩

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are for a total of Taka 746.50 crore, corresponding according to Niko to approximately USD 106 million.³⁹ The claimed amounts are presented in the following schedules:

Schedule A, Gas burnt at Chattak field: Taka 36.85 crore (USD 5'250'040)

Schedule B, Subsurface loss at Chattak field: Taka 72.35 crore (USD 10'307'740)

Schedule C, Additional subsurface loss at Chattak field: Taka 552.75 crore (USD 78'750'530)

Schedule D, Environmental Losses at Chattak Gas Field: Taka 8455,83,973 (USD 12’047٬070).⁴⁰

151 The Claimant's request for the Compensation Declaration relates to these claims. In paragraph 217 of the Decision on Liability the Tribunal noted that the latest information it had received about the proceedings in the Money Suit was that it is “now pending”. No further information about the Money Suit has been received by the Tribunal since then.

³⁹ Based on OANDA for 27 May 2008, see C-CD.2, paragraph 192. ↩
⁴⁰ Money Suit Complaint, Exhibit C-6, pages 76 and 77; the US Dollars equivalents were calculated by the Claimant using the exchange rate in the Money Suit of Tk 70.19 per USD (C-CD.2, paragraph 195 and FN 255). ↩

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4 THE PROCEDURE

152 In the course of the proceedings in this Arbitration, the Tribunals in the two connected cases have rendered decisions on issues concerning both cases together and others specific to one or the other case. Five of these decisions concern the claim for the Compensation Declaration; the operative part of these decisions is reproduced below in Section 5. Each of these decisions contains a detailed description of the phase of the procedure that led to it. The present Section summarises these earlier phases and then describes in more detail the phase following the Decision on Heads of Recoverable Loss leading to the present Award.

4.1 The initial phase of the Arbitration leading to the Decision on Jurisdiction

153 The present proceedings were started by two successive Requests for Arbitration against the two Respondents and the Government, filed with the International Centre for Settlement of Investment Disputes (ICSID or the Centre), one on 1 April 2010 (the First Request or RfA I) and registered as ARB/10/11; the other on 16 June 2010 (the Second Request or RfA II) and registered as ARB/10/18. In these requests Niko sought an award for payment of outstanding invoices for gas delivered (the Payment Claim) and a declaration that it was not liable for damages and owed no compensation in relation to the blowouts and alternatively fixing the amount of any compensation (the Compensation Declaration).

154 Because of some common features of the cases in these two requests, the Parties agreed to appoint identically composed tribunals in the two Arbitrations. The Tribunals in both Arbitrations were constituted on 20 December 2010 in accordance with Article 37(2)(b) of the ICSID Convention.

155 The proceedings were conducted together, as agreed during the Joint First Session on 14 February 2011 in Geneva. At this session the Parties also agreed that the applicable arbitration rules would be the ICSID Arbitration Rules in force as of 10 April 2006, that the place of proceedings would be London, United Kingdom, and that the language of the Arbitration would be English. The Parties confirmed that the Tribunal was properly constituted in the two cases and that they had no objection to the appointment of any Member of the Tribunals.

156 Concerning the conduct of the procedure, the Parties agreed:

... that the two cases proceed in a concurrent manner as reflected in these minutes and in the procedural order concerning the procedural calendar. The Tribunals may therefore issue a single instrument (procedural order,

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decision or award) in relation to both cases, and may discuss the two cases jointly except where circumstances distinct to one case necessitate separate treatment.⁴¹

157 During the course of the joint conduct of the proceedings in these two Arbitrations, the Parties and the Tribunals often used the term “arbitration" and “tribunal” in the singular, as this is done also in the present decision in the context of Niko's liability to BAPEX. This may not be taken as an indication that during the joint conduct of the two proceedings the Tribunals disregarded the distinction between the two cases. In principle, given that the two cases were conducted concurrently, the Tribunal will apply the term “Tribunals” and “Respondents” (in the plural) up to the time when the award in the Payment Claim proceedings was dispatched. This clear distinction has not always been strictly observed.⁴²

158 At the Joint First Session, the Tribunals and the Parties also considered the procedural timetable. It was decided inter alia that the Respondents' objections to jurisdiction against the Payment Claim would be dealt with as a preliminary matter, reserving for the Respondents the possibility of relying on claims for losses caused by the blowouts. As the Respondents did not avail themselves of this possibility, the Parties' subsequent written submissions addressed the Respondents' objections to jurisdiction on both claims. A hearing on jurisdiction was held on 13 and 14 October 2011 in London.

159 The proceedings started by addressing jurisdictional objections raised by the Respondents and the Government. They argued that the People's Republic of Bangladesh had not agreed to arbitration and that Petrobangla and BAPEX had not been “designated to the Centre” by Bangladesh, to qualify as a designated agency for the purposes of Article 25(1) of the ICSID Convention. The objections also concerned the Claimant's identity and nationality. In its submissions, the Claimant also sought a declaration that BAPEX was obligated under the JVA to cooperate with Niko for commencing arbitration against Petrobangla (Cooperation Claim).

160 During the jurisdictional phase, the Respondents (i.e. BAPEX and Petrobangla) and the Government also asserted that the Claimant had committed illegal acts, had violated good faith, and had unclean hands. In particular, they argued that the Claimant had “violated principles of good faith and international public policy” by acts of corruption and that, therefore, the Tribunal should dismiss the claim in order “to protect the integrity of the

⁴¹ Summary Minutes of the Joint First Session of the Two Arbitral Tribunals, 4 April 2011, Section 20. ↩
⁴² As a general matter, the Tribunal also notes that quotations set out in the Award omit footnote references that appear within the quoted text. ↩

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ICSID dispute settlement mechanism”. The Respondents clarified, however, that they did “not intend to argue that the contract is void or voidable by reason of corruption or otherwise” but reserved their position in case of further disclosures. At that stage the Respondents invoked the corruption as grounds for denying jurisdiction.

161 On 19 August 2013, the Tribunals issued their Decision on Jurisdiction,⁴³ accepting jurisdiction over Petrobangla with respect to the GPSA and BAPEX in relation to the JVA. On the side of the State of Bangladesh, the Government had chosen to implement the project by the means of agreements which it did not conclude directly. Instead, it delegated the necessary powers to Petrobangla and BAPEX. The Tribunals concluded that they did not have jurisdiction over the State of Bangladesh and released the State from the Arbitrations.

162 In the Decision on Jurisdiction, the Tribunals addressed the arguments concerning designation to the Centre, the Claimant's identity and nationality and the Cooperation Claim. With respect to the substance of the dispute, the Tribunals held that they had jurisdiction with respect to both the Payment Claim and the Compensation Declaration and that their jurisdiction ratione materiae included not only issues of compliance with specific contractual obligations but should be understood in a wider sense including

...sources of liability other than the agreement itself. The question what these sources are and which obligations, contractual or other, fall to be considered concerns the substance of the dispute and is not determined at this stage of the arbitration.⁴⁴

163 With respect to the corruption allegation, as raised during the jurisdictional phase, the Tribunal noted that that allegation was based on a Canadian conviction of Niko Canada on account of bribes to the Bangladeshi Minister of Energy in 2005. The Agreed Statement of Facts,⁴⁵ which completed the Canadian proceedings, made mention of the conviction while also observing that “the Crown was unable to prove that any influence was obtained as a result of providing the benefit to the Minister”. Indeed, the Minister resigned shortly after the benefits had been provided, some eighteen months before the GPSA was signed. Investigations in the United States were discontinued on the grounds that “prosecution is not necessary at this time in light of Niko's guilty plea in Canada”. The Tribunals had no reason to believe that the acts of corruption to which the Canadian conviction related had any influence in

⁴³ For the operative part of that decision and some further comments, see below Section 5.1. ↩
⁴⁴ Decision on Jurisdiction, 19 August 2013, paragraph 505. ↩
⁴⁵ Agreed Statement of Facts, 23 June 2019, Exhibit R-215. ↩

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the conclusion or the content of the JVA or the GPSA. Having examined also other allegations made by the Respondents, the Tribunal concluded that it had no reason to believe that there were any other acts of corruption by the Claimant or the Niko Group.

4.2 The proceedings leading to the Decision on Liability

4.2.1 The initial proceedings in the absence of a substantive defence by BAPEX

164 Following its Decision on Jurisdiction, the Tribunals organised the proceedings on the merits of the two Arbitrations. With respect to the Compensation Declaration, it was agreed that the Claimant first specify the scope of the liability concerning the two blowouts which it wished the Tribunal's Compensation Declaration to cover, and to state whether and by whom any such liability had been invoked. BAPEX was to respond by stating the scope of liability invoked against Niko and the quantum of the loss for which compensation was sought.

165 The Claimant presented its position in its Memorial Concerning the Compensation Declaration of 27 September 2013 (C-CD.1). The Claimant stated that it was seeking, in particular, an award that it was “not liable to BAPEX, its predecessors, assignors, successors or assigns”, and, in the alternative, that the Tribunal fix the amount of such liability. The Claimant also specified that it was seeking a declaration that Niko is entitled to compensation for the damages caused by the Money Suit.

166 The procedural order organising this initial phase of the proceedings on the merits required from BAPEX a full memorial on liability and quantum, including the evidence on which it relied. The Tribunal had given the following directions:

BAPEX shall file a First Memorial addressing the scope of liability to which the Declaration may extend and the particulars of the claims concerning Niko's alleged liability for the two blow-outs and damage allegedly caused by Niko, including its quantum. If BAPEX intends to rely on expert reports these reports must be included in the First Memorial. If BAPEX relies on the testimony of witnesses, it must include short written statements setting out the essential points of this testimony. Any

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documentary evidence on which BAPEX intends to rely and which has not yet been produced, must accompany this memorial.⁴⁶

167 In the Counter-Memorial that it filed on 30 January 2014 (B-CD.1), BAPEX discussed the Tribunal's Decision on Jurisdiction, the factual background of the two blowouts, and its understanding of its obligations under the JVA. BAPEX produced documents, legal authorities and an annex entitled “Investigations into the blowouts and their consequences” together with appendices 1-5. It did however not discuss the Claimant's liability, nor did it file any fact witness statements or expert opinions. It requested that the Tribunals issue a declaration “that there is no legal dispute between BAPEX and Niko under the JVA” and, in the alternative, that “BAPEX is not obligated to indemnify Niko for any damage resulting from the pursuit of the Money Suit by the Government of Bangladesh and Petrobangla in the Bangladesh courts".⁴⁷

168 The Claimant filed its Reply on 29 May 2014 (C-CD.2), in which it discussed at length the factual, technical and legal issues relating to the two blowouts and responded to BAPEX's Counter-Memorial. The Reply was supported by documents and legal authorities (CLA-3 to CLA-8), as well as the witness statements of Brian Adolph, Randal Glaholt and William Hornaday, and expert reports of William Cline, Robert Kemp and John Wright. The Claimant repeated its request for relief as stated in its Memorial.

169 On 25 September 2014 BAPEX filed its Rejoinder (B-CD.2). The Rejoinder was accompanied by further documents and legal authorities. BAPEX stated inter alia that it “ha[d] never invoked Niko's liability for the two blowouts” and that "this case involves no dispute between Niko and BAPEX concerning the blowouts". BAPEX further declared that it had no involvement in the findings of the Committee Reports which dealt with the blowouts and added that “it has little or nothing to add in response to Niko's description of the facts”. As in the Counter-Memorial, BAPEX did not discuss the factual and legal issues related to the question whether Niko breached any obligation or law and whether Niko has any liability with respect to the blowouts. No witness testimony or expert opinions were attached to BAPEX's submission.

⁴⁶ Procedural Order No 3 of 15 November 2013, issued following the Tribunals' proposal of 19 September 2013, the Parties' comments and further correspondence about the organisation of the procedure. ↩
⁴⁷ For the complete text of this request see below Section 6.2.2. ↩

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4.2.2 Addressing BAPEX failure to deal with the merits and the appointment of the Tribunal Experts

170 Given BAPEX's approach as stated in these submissions, the Tribunals noted that the Claimant's argument and evidence had not been contested by BAPEX in any substantive manner, while at the same time BAPEX continued to request the Tribunals to dismiss the Claimant's request for a declaration of non-liability. Neither Party had identified in its written pleadings with specificity the applicable law and standards based on which the Claimant's non-liability under the JVA or otherwise was to be determined by the Tribunal.

171 The Tribunal addressed this situation in Procedural Order No 7 of 17 October 2014, reminding the Parties of the issues that had to be addressed:

The question whether Niko complied with these obligations under the JVA clearly must be determined according to the procedure prescribed by the JVA itself, i.e. ICSID arbitration. The Tribunals considered this matter in their Decision on Jurisdiction under the heading “Jurisdiction ratione materiae” (section 10.2) which may also be referred to as subject matter jurisdiction. The Tribunals found that they have jurisdiction to decide whether Niko is liable under the JVA for the two blowouts (paragraph 497). In addition the Tribunals also found that “it may well be possible that [they] can make findings concerning liability on grounds other than the JVA” (paragraph 506), but left the question open for further consideration.

172 The Tribunals concluded that they must continue with the examination of Niko's request for the Compensation Declaration and the issues which were raised by that request. In particular, the Tribunals had to examine and decide whether Niko was liable for the two blow-outs and the damage caused by them. The Tribunals concluded:

Given the technical nature and the complexity of many of the issues arising in this context, the Tribunals do not wish to proceed in the absence of a critical review of the technical issues arising from the Claimant's case. In the circumstances the Tribunals require the opinion of an independent expert or, given the diversity of the relevant substance matters, several experts.

173 In consultation with the Parties the Tribunals organised the appointment of Tribunal experts and their preparation of technical reports. In Procedural Order No 7 the Tribunals identified three subject matter areas in which they intended to seek assistance given the absence of a critical review of the Claimant's evidence and technical opinions by BAPEX:

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(a) the well design and drilling of the Chattak-2 well and the design and execution of the relief well operation for Chattak- 2A;

(b) the quantum of gas lost as a result of the Chattak-2 and Chattak-2A and

(c) the air quality and greenhouse gas emissions due to these incidents and resulting monetary loss or damage

174 The Tribunal invited the Parties jointly to propose the names of experts in these three subject matter areas.

175 While they had to take steps to appoint their own experts, the Tribunals nevertheless granted the Respondents a final opportunity for substantive submissions. The Tribunals specified that in the event the Respondents availed themselves of this opportunity, the Tribunals would reconsider the rulings in Procedural Order No. 7. The Respondents however did not seize this opportunity.

176 The Parties were unable to jointly propose names of independent experts for the subject matter areas identified by the Tribunals. The Tribunals held a Procedural Consultation on 12 November 2014 to discuss with the Parties inter alia: (i) the expert appointment procedure, (ii) the expert(s)' mandate(s), (iii) the documents to be reviewed by the expert(s), (iv) communications between the expert(s), the Parties and the Claimant's experts, (v) the expert(s)'s reporting obligations, and (vi) the conduct of the expert(s)'s examination during the oral procedure.

177 As discussed with the Parties at this occasion, the Tribunals addressed itself to the International Centre for Expertise of the International Chamber of Commerce (ICC) which proposed the names of nine experts. At the invitation of the Tribunal ranked their preferences and the Tribunal appointed the following experts:

(a) Gas Well and Relief Well Design and Execution: Mr Leo William Abel;

(b) Quantification of Gas Lost: Mr Keith Brian Masters; and

(c) Air Emissions: Mr Ian Wallis.

178 In consultation with the Parties, the Tribunals prepared the terms of reference for each expert, identifying the substance matter of the requested expert opinion. It was agreed that each expert prepare a written report on which the Parties would be given an opportunity to comment and, subsequently to comment on the other party's observations. The experts would then be available for examination during the evidentiary hearing. The

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Tribunals also provided the Parties with an estimate of each expert's budget for the anticipated work.

179 Once the terms of reference had been executed, the experts were provided with the Parties' pleadings, the Committee Reports and the expert reports and witness statements that had been filed by the Claimant. The Tribunal experts presented their reports, which were provided to the Parties on 10 June 2015 with the invitation to present their observations by 15 July 2015.

180 During the time following Procedural Order No 7, the Respondents informed the Tribunal of several changes of their representatives.⁴⁸ On 9 July 2015, they announced the appointment of new counsel, Messrs Paul S. Reichler and Derek C. Smith of Foley Hoag LLP.

4.2.3 BAPEX's change of position: adaptation of the scope of the Arbitration and of the procedure

181 The Respondents’ new counsel requested modifications of the previously agreed procedure, announced their intention to produce new expert reports and requested an extension of the time for the observations on the reports of the Tribunal experts. After exchange of correspondence on the requested modifications to the procedure and the scope of the newly announced expert evidence, the Tribunals issued on 19 August 2015, Procedural Order No. 11. The Tribunals recalled the procedural history which preceded the Respondents’ 9 July 2015 request, specifically referencing the multiple counsel changes, the many opportunities afforded to the Respondents to file expert evidence and the purpose of the appointment of Tribunal experts. The Tribunals concluded:

... by 25 September 2014, the time of the BAPEX Rejoinder, the written phase of the proceedings on the Compensation Declaration had been completed. By that time, all documentary evidence had to have been presented, all witnesses had to be announced by short written statements and all expert reports had to have been presented. The additional phase which the Tribunals opened at that stage had a very limited purpose: in the absence of substantive comments from the Respondents, it was to provide the Tribunals with a “critical review of the technical issues arising from the Claimant's case”. This was the purpose for which the Tribunal Experts were appointed and this must be the limit to the comments which the Parties may make to the Reports.⁴⁹

⁴⁸ For details see below Section 2.2. ↩
⁴⁹ PO No 11, paragraph B14. ↩

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182 The Tribunals saw no justification for revising the previously agreed procedure and its scope as requested by the Respondents; but it extended the time for the Parties' observations on the reports of the Tribunal experts and accepted that these observations may be accompanied by observations of the Parties' own experts within the limits of the issues defined in the terms of reference.

183 On 31 August 2015, both Parties filed their Comments on the Reports of the Tribunal Experts (C-CD.3 and B-CD.3). The Respondents' submission was accompanied by observations from Dr Neal Adams, Mr Ian Borthwick and Mr Parthasarathi Bandyopadhyay. Each party filed Responsive Comments on 30 September 2015 (C-CD.4 and B-CD.5).

184 On 13 August 2015, BAPEX had filed a request for provisional measures (BCD/PM), concerning alleged gas seepages in the area of the Chattak 2 Well, attributed to an incomplete sealing of opening caused by the first blowout. BAPEX requested that the Tribunals order:

(i) that Niko provide for the immediate relocation as needed of the people affected by a continued flow of gas from the Chattak reservoir, and

(ii) that Niko take all necessary steps, in a safe and prudent manner under the supervision of an internationally recognized shallow gas well control specialist approved by BAPEX, to stop the flow of leaking gas caused by the 2005 blow-outs.

185 Following observations and objections by the Claimant, BAPEX withdrew the request on 4 September 2015. BAPEX informed the Tribunals that it had filed a Notice of Dispute with Niko and its parent company as required by the JVA “in order to pursue its claims arising from gas seepage caused by Niko's blowouts at the Chattak field after 9 October 2005”; a copy of the that Notice was attached to BAPEX's letter.

186 BAPEX then sought to withdraw the evidence that it had produced with the request for provisional measures, in particular Exhibits R-14, R-14A and R-14B, and sent versions of the expert reports in which passages related to the damage caused by the seepages were redacted. The Tribunal decided that all submissions of the Respondents, including expert reports and documentary evidence would remain on the record in unredacted form.

187 In the original procedural timetable, the evidentiary hearing had been scheduled for 10 – 14 November 2014. When the appointment of Tribunal experts was decided, these dates were cancelled; subsequently new hearing dates were fixed for the period from 2 to 7 November 2015. In Procedural Order No 11, Tribunals confirmed the hearing dates and proposed pre-hearing

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conference during the week of 19 October 2015 to prepare the hearing. Eventually these consultations were held by telephone conference on 1 October 2015.

188 In its comments on the reports of the Tribunal Experts of 31 August 2015, BAPEX stated that Niko had failed to indicate important sources for its liability and had failed to address the full scope of the damage caused by Niko's breaches; and the Tribunal Experts also did not address these sources of liability and scope of damage.

189 BAPEX expanded these comments in a submission of 25 September 2015 (B- CD.4), asserting that the scope of Niko's breaches was more far reaching and the damage caused by the blowouts more substantial than presented by Niko. It argued that “the case record is substantially incomplete in terms of facts, legal argument, expert testimony and other evidence, which, taken together, seriously compromise the integrity of these proceedings and the Tribunal's ability to deliver a just and fair award”. For these reasons, BAPEX requested on 25 September “the opportunity for BAPEX to file an additional pleading and to present counterclaims in these proceedings”.

190 In support of this request BAPEX's newly appointed counsel asserted that BAPEX's “prior counsel made grave errors in judgment and material omissions that resulted in the deprivation of BAPEX's right to be heard and an inequality of arms”. According to BAPEX, previous counsel “failed to understand the nature of these proceedings and the consequences of his actions on the rights of his clients”. Relying on Article 45 of the ICSID Convention, BAPEX argued that it thus found itself in the position of a party that has failed “to appear or to present his case at any stage of the proceedings". BAPEX stated that the “circumstances have now changed" and, quoting Schreuer, the “hitherto uncooperative party is about to cooperate”. BAPEX requested the Tribunal to “restore party equality of arms and BAPEX's right to be heard,” and to provide BAPEX with an opportunity to file an additional pleading and present counter-claims.

191 The Tribunals were informed that, on 17 September 20215, BAPEX also had served on the Claimant a Notice of Dispute, seeking inter alia compensation for environmental damage and for gas lost as a result of the two blow outs and had announced that, if attempts to settle the dispute concerning these claims fail, it intended to request arbitration under Articles 18.2 and 18.5 of the JVA.

192 In view of these developments, the question of the scope of the Arbitration about the Compensation Declaration arose: the Claimant had sought a declaration that it had not breached any obligation or law and was not liable for the blowouts. BAPEX had been invited in Procedural Order No 3 to address

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in its first memorial “the scope of liability to which the Declaration may extend and the particulars of the claims concerning Niko's alleged liability for the two blow-outs and damage allegedly caused by Niko, including its quantum”. BAPEX denied that it had any dispute with Niko and had not taken position on Niko's liability. The Tribunals had concluded that the scope of the Arbitration was confined to the non-liability declaration sought by the Claimant. BAPEX's latest submissions and the expert reports attached to them introduced aspects of possible liability of the Claimant which seemed to exceed substantially the scope of the Arbitration resulting from the request initially defined.

193 The Tribunals found it critical for the further conduct of the Arbitration proceedings that the scope of the Arbitration be clearly defined and, if required, be distinguished from actual or possible other proceedings concerning the same or related substance matters. The Tribunals invited Niko on 28 September 2015

... to clarify with precision the declaration it seeks in these proceedings and to specify whether any of the issues arising from the submissions and requests by BAPEX and its experts do not in its view fall within the scope of the present arbitrations.

194 In its reply of 30 September 2015, the Claimant repeated the relief it had previously requested describing it as

... the core declarations on liability and damages that Niko requests in the Compensation Declaration:

Claimant Niko respectfully submits that the Tribunals should issue an award in its favour and against BAPEX:

a. Declaring that Niko breached no obligation or law as concerns the two blowouts in 2005 at Chattak field and is not liable to BAPEX, its predecessors, assignors, successors or assigns;

b. In the alternative, and in the event that the Tribunals find liability on the part of Niko, fixing the amount of any compensation due for any damages to BAPEX, its predecessors, assignors, successors or assigns ...

195 The Claimant added that

these declarations are framed in broad terms. They encompass any liability on Niko's part as concerns the two blowouts, and any aspect of the amount of compensation due for any damages to BAPEX and its predecessors, assignors, successors and assigns.

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196 In another letter of the same date, Niko commented on BAPEX submission of 31 August 2015, arguing:

Instead of serving the purpose of offering comments on the analysis and conclusion of the Tribunal Experts, BAPEX's Comments and the associated expert reports have been tendered as an entirely new case, advanced at the eleventh hour, and far outside of the long-established procedural timetable.⁵⁰

197 The Tribunal concluded that the scope of the Arbitration remained a live issue and addressed it at the Pre-Hearing Conference on 1 October 2015 (PHC). It discussed with the Parties the choice between, on the one hand, what was called the “Base approach”, considering the case as it had been made by the Claimant and, on the other hand, an “Full Scope of Liability approach” which would expand the Arbitration to include the case as requested by BAPEX on 25 September 2015 the obligations and laws which the Respondents and their experts had raised recently. In this approach the Compensation Declaration Arbitration would cover all possible obligations which Niko had under the JV Agreement or under the law and which, according to BAPEX, were breached by Niko, causing or contributing to one or both of the two blow-outs in 2005 (“the alleged Niko Breaches”).

198 During the PHC, the Tribunals also discussed with the Parties the organisation of the Hearing, its scope and preparation. BAPEX explained that it required five months for submitting the additional pleading, as requested in its letter of 25 September 2015; this would require to postpone the hearing scheduled for November 2015. BAPEX explained the additional time was required essentially for the evaluation and documentation of the damage for which BAPEX held the Claimant liable. Niko's Breaches, however, had been set out essentially in the submissions and expert reports produced in response to the reports to the Tribunals' experts. If the proceedings in a first phase would be limited to the question of possible breaches of the obligations and the law in relation to the blow-outs, the November 2015 hearing could be preserved, the Claimant could be given an opportunity to respond to the newly alleged breaches, including new evidence and expert explanations, with possible responses by BAPEX at the opening of the hearing. Steps were considered for completing, prior to the hearing the list of obligations and laws would be completed and preliminary comments were prepared. The damage possibly flowing from any breaches determined by the Tribunals and the counter-claim would then be considered in a further phase

50 Niko's letter of 30 September 2015.

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of the Arbitration. At the pre-hearing conference (PHC), BAPEX declared that it was not in a position to substantiate its counter-claim.

199 The Summary Minutes of the PHC, prepared by the Tribunal and Secretariat and dated 5 October 2015, record the following position of the Respondents:

Recognising that the need for these modifications to the procedure was the result of their failure to make their submissions in due time, the Respondents undertook to make every reasonable effort in this alternative approach, to limit the disruptive effects of these modifications. They stated that this alternative approach as discussed at the Pre- Hearing Conference satisfied the request, as it had been made in BAPEX's letter of 25 September 2015. The Claimant accepted that such a modification was feasible in theory but reserved its position as to whether such a change should be admitted at this late stage of the proceedings.

200 On 5 October 2015, the Claimant informed the Tribunal that it chose the Full Scope of Liability Approach. In a letter of 7 September 2015, the Tribunals noted the acceptance of the adjustment of the procedure and added:

... the Tribunals have decided to modify the procedure so as to afford the Respondents yet another opportunity to present the argument and evidence which they had previously failed to present in accordance with the procedural schedule.

201 The Tribunals confirmed the revision of the procedure:

The approach that emerged from the Pre-Hearing Conference of 1 October 2015 would allow the Respondents a full opportunity to present their defence as requested, without causing excessive disruption to the proceedings, by dividing the Respondents' presentation of two issues: (i) the Claimant's liability and in particular the alleged breaches by Niko, and (ii) the damage said to have been caused by these alleged breaches and its quantification. The Respondents said they were ready to argue the first of these issues at the November hearing but requested additional time to analyse questions concerning the second issue. The Tribunals were prepared to accommodate this concern by reserving the second issue for a later phase in the arbitrations.

4.2.4 The November 2015 Hearing

202 At the PHC of 1 October 2015 and in PO No 12 of 21 October 2015, the Tribunals organised, in consultation with the Parties, the preparation of the

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Hearing that had been fixed for 2 to 6 November with a possible extension on 7 November 2015.

203 During this preparatory period, BAPEX filed on 19 October 2015, a submission on legal issues (B-CD.9), in particular in response to the Claimant's letter of 5 October 2015, details on the Money Suit, the cost allocation, and certain issues concerning the hearing organisation. The Claimant objected to this submission, which it described as an “unauthorised submission” and a “second rejoinder”.

204 The Claimant filed a pre-hearing submission on 23 October 2015, entitled “Niko's Submission on Newly Alleged Breaches” (C-CD.7), accompanied by a second witness statement of Mr William Hornaday and a supplemental expert report by Mr John Wright (Wright II); and BAPEX announced on 23 October 2015, its intention to have Mr Md. Abdul Baqi testify at the November 2015 Hearing. The Claimant objected but the Tribunals accepted the testimony and invited the BAPEX to provide information about the substance of the testimony in the form of a witness statement or otherwise which was done on 27 October 2015.

205 In the course of the preparatory exchanges, BAPEX conveyed a request from the Minister of Power, Energy and Mineral Resources and the Minister of Law, Justice and Parliamentary Affairs that the Tribunals hold the procedural consultation in London, in the presence of representatives of the Government. Despite several exchanges between the Parties and the Tribunals, a convenient date for that meeting could not be found. BAPEX subsequently withdrew the request.

206 Following a request from the Parties at the PHC, the Tribunals provided a “Note on the Scope of Examination and Questions for Consideration” as Annex to PO No 12. The Tribunals identified, in a provisional manner and subject to correction by the Parties and their experts, what the Tribunals had understood as the overall principles governing Niko's obligations concerning the conduct of the operations under the JVA and other obligations relating to such operations and the actions possibly relevant for the blowouts. The Tribunals further provided the Parties with a “Preliminary Note on the Organisation of the November 2015 Hearing” on 27 October 2015. The Note confirmed that the principal objectives of the November 2015 Hearing were to determine

(i) the nature and content of the laws and standards which apply to Niko's conduct of the drilling and the relief operations (the “Applicable Laws and Standards”);

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(ii) whether any breaches of these Applicable Laws and Standards occurred which caused or contributed to the blow-outs and the damage caused by them (the “Breaches”).

207 The hearing took place from 2 to 7 November 2015 in London. In addition to the three Members of the Tribunal and the Tribunal Secretary, the Hearing was attended by the Parties and their counsel, witnesses and experts. Minister Nasrul Hamid, Government of Bangladesh, presented as shareholder of BAPEX, also attended. No objections were raised against the presence of a representative of the Government of Bangladesh which, as a result of the Tribunals' decision on jurisdiction, was no longer a party to the Arbitration proceedings.⁵¹

208 The Parties' counsel delivered opening statements, addressing inter alia the issues which the Tribunals had outlined prior to the hearing. In the course of the Opening Statements and subsequently during the hearing, it was clarified that the Claimant was seeking a declaration of non-liability only in respect of those breaches of Applicable Laws and Standards which were causal for the two blowout incidents, and not an assessment of the Claimant's operation in general terms.

209 The Tribunals explained that, before examining the specific factual aspects of the two blowouts, the arbitrators wished to obtain from the experts a better understanding of the technical issues as they arise in the context of drilling and relief operations and the relevant laws, standards and practices. After the Parties' opening statements, the Tribunals therefore invited Mr Abel, the expert appointed by the Tribunals, to deliver a presentation on these matters and to answer specific questions from the arbitrators. Mr John Wright, the expert appointed by the Claimant and Dr Neil Adams, the expert appointed by the Respondents, commented on Mr Abel's explanations and provided their own views in an open discussion among the three experts.

210 Subsequently, Mr Wright delivered a presentation on drilling operations and answered questions from the Tribunals, with Mr Abel and Dr Adams also being requested by the Tribunals to provide their views on various issues in the form of an interactive discussion. This was followed by a presentation by Dr Adams, with questions from the Tribunals and a discussion in the same format. Subsequently, Mr Wright was cross-examined by counsel for the Respondents, followed by cross-examination of Dr Adams by counsel for the Claimant, who then also posed questions to Messrs Abel and Wright. This was

51 A detailed lists of attendees is presented in the Decision on Liability, paragraph 111.

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followed by further examination by counsel for the Respondents, the Claimant and the Tribunals.

211 After this initial clarification of the technical issues concerning drilling and relief operations and the relevant laws, standards and practices, the Tribunals turned to the factual questions of what actually happened when the blowouts occurred. The Tribunals started by examining Mr Adolph, who was also examined by counsel for the Claimant and cross-examined by counsel for the Respondents. Thereafter Mr Hornaday and Mr Baqi were examined by the Tribunals and counsel of the Parties.

212 Having completed the fact witness testimony, the Tribunals turned to issues specific to relief operations and sought clarification from the three experts. The three experts addressed specific issues related to the relief well operations identified by the Tribunals and were examined by the arbitrators and the Parties' counsel, following the same procedure of an interactive discussion under the direction of the Tribunals.

213 The three experts had disclosed in their written reports that they knew each other well. This was apparent at the November 2015 Hearing. They also stated that they knew Mr Grace well, who had been engaged by Niko for the relief operations. It was understood that all four were included in the small number of industry specialists who had experience in drilling relief wells. They had worked with each other in one form or another on other projects; some of them also were engaged in the context of the Moulavi Bazar blowout in Bangladesh. No objection was raised against any of the experts and their qualifications to provide expert opinions in these Arbitrations.

214 It was agreed during that hearing that legal argument regarding breaches and bases for liability would be addressed in written submissions, followed by a two-day hearing. At the conclusion of that hearing the Parties agreed on the procedural calendar for the remainder of the proceedings on the Compensation Declaration, providing for simultaneous Post-Hearing Briefs on Liability, addressing in particular the Applicable Laws and Standards, identifying breaches and bases for liability, followed by a hearing in Paris on liability. Thereafter, the Respondents were scheduled to present their Memorial on Damages, followed by the Claimant's Counter-Memorial and a subsequent hearing on damages to take place in Paris.

215 At the end of the November 2015 Hearing, the Tribunals enquired whether the Parties were satisfied with the conduct of the oral procedure and if there were any complaints they wished to raise. No such complaints were raised by the Claimant and the Respondents.

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216 Transcripts of that hearing were prepared by Ms Georgina Ford and Mr Ian Roberts of Briault Reporting Services. A copy of the transcripts was sent to the Parties and the Members of the Tribunal on each hearing day. They were subsequently corrected by the Parties. Sound recordings were made of the hearing and uploaded to the electronic file sharing account created for this proceeding for access by the Parties and the Tribunals.

217 The Tribunals prepared Summary Minutes of that hearing which were sent to the Parties on 12 January 2016, together with Hearing Exhibits (Exhibits RH- 6 and TEH-3 and TEH-4).

4.2.5 Post-Hearing Events on Liability

218 Following the November 2015 Hearing, the Tribunal prepared a note on Possible Issues for the Parties to address in their Post-Hearing Briefs. The Parties filed post-hearing briefs on 22 January 2016, in accordance with the procedural calendar agreed at the November 2015 Hearing.

219 A pre-hearing conference was held on 28 January 2016 addressing procedural issues that had arisen since the November 2015 Hearing, the preparation of the forthcoming Hearing and certain issues concerning documents that had arisen at and after the November 2015 Hearing and the related correspondence; specifically (i) Niko's Well Control Manual,⁵² the “2005 SWP Manual”.⁵³ Summary Minutes of that PHC were sent to the Parties on 3 February 2016.

220 At this pre-hearing conference the Tribunal also discussed with the Parties a document production request that the Respondents had filed on 8 January 2016. The latter request had been the subject of correspondence and at the procedural conference; as agreed at that occasion, the Respondents provided some further information concerning their request.

221 On 10 February 2016, the Claimant informed the Tribunal that on 5 and 6 February 2016, a site visit had taken place at the Chattak field. The Claimant stated that “beginning on 5 February 2016 Niko hosted a site visit by the Respondents at Chattak” at which “Niko permitted inspection of all documents concerning Petroleum Operations that Respondents wished to review". The Claimant wrote:

Over 70 persons visited the Chattak site, including the Minister of Energy, a score of personnel from BAPEX and its sister company Sylhet Gas Fields Limited, four representatives of Foley Hoag, numerous technical

52 See Decision on Liability, paragraphs 128 et seq. 53 See Decision on Liability, paragraphs 129 et seq.

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and/or environmental experts retained by BAPEX, an intelligence officer, two ambulance attendants, five fire service employees and 33 police officers. Niko made available to BAPEX's team all documents on site arising from Petroleum Operations as defined under the JVA. BAPEX’s legal team scanned hundreds of pages of these documents.

222 The Claimant asserted the Respondents' letter of 4 February 2016 contained “a range of erroneous or misleading statements” and that “BAPEX assertions concerning the necessity of a Tribunal order have been overtaken by events”. It also stated that, following the search of its records requested by the President during the 28 January 2016 pre-hearing conference, it had identified letters transmitting to both BAPEX and the Department of Energy all but one of the Environmental Reports requested by BAPEX.

223 By letter of 14 February 2016, the Tribunals requested the Respondents to respond to the information provided by the Claimant regarding the 5 February 2016 site visit, specifying whether or not the Respondents maintained their 8 January 2016 document production request.

224 Responding to directions from the Tribunals, the, the Respondents provided on 14 February 2016 a status update regarding the site visit and the documents. They confirmed that a site visit had taken place on 5 and 6 February 2016 and explained that “BAPEX exercised its rights under the Joint Venture Agreement to inspect documents on the site through its legal representative, Foley Hoag LLP”. The latter, they explained, had been granted access to inspect and copy some documents but not others. The Respondents pointed out that the “documents were by no means presented in an organised fashion”; many of the documents were irrelevant and their condition “was less than ideal having been exposed to the elements, dust, and pests for the past ten years”. The Respondents concluded that

... the documents obtained at the site visit do not obviate the Respondents' request for documents. Accordingly, BAPEX maintain its request for the documents listed in its letter of 23 December 2015.

225 In subsequent correspondence the Tribunals attempted to clarify the status of the requested documents and the identification of the documents that remained outstanding with no success. On 20 February 2016, the Respondents added further items to the list of requested documents.

226 At the February 2016 Hearing, the Tribunal discussed with the Parties these requests and settled the requests as follows:

The Claimant confirmed its willingness to cooperate with BAPEX in the context of the JVA and invited representatives of BAPEX to its Dhaka

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office in order to examine whether any of the requested documents existed and would be required by BAPEX. This procedure applied to all document requests of the Respondents, except for the following:

• The 2004 3D seismic survey referenced in the Respondents’23 December 2015 letter which the Respondents confirmed to be in their possession.
• With regard to the 11 Monthly Environmental Reports requested by the Respondents in their 23 December 2015 letter, the Claimant stated that it had been able to retrieve 10 of them, including the transmittal sheets evidencing that these 10 Monthly Environmental Reports had been delivered to the Department of Energy. The Claimant nevertheless accepted to deliver an additional copy of each of these reports to the Respondents. As to the 11th report the Claimant undertook to conduct further research, including in Niko's offices in Dhaka and at the Chattak field. If and when this report will be retrieved, the Claimant will deliver it to the Respondents.
• With regard to the photo documentation prepared by Mr Glaholt (para. 12 of the 23 December 2015 letter), the Claimant undertook to follow up with Mr Glaholt and produce the documentation that can be retrieved.
• The Respondents confirmed that they were in the possession of the Geosyntec study referenced in paragraph 16 of the Respondents' 23 December letter.
• Documents related to payments to local inhabitants and medical records were considered irrelevant for the Tribunals' decision on the quantification of damage; the Respondents did not insist on their production.

227 The Tribunals requested the Parties to address certain technical aspects related to casing and drilling operations at the forthcoming February 2016 Hearing. It also requested information about other cases concerning well blowouts and to provide copies of such decisions. The Claimant “identified in excess of 20 authorities meeting the stated criteria”. It excluded “authorities addressing blowouts allegedly resulting from defective equipment and authorities lacking substantial discussion of the drilling operations conducted before the blowout" and transmitted five authorities from US courts. The Respondents also “found a number of cases of varying relevance to the present case that met the stated criteria”. In addition to the cases presented by the Claimant, the Respondents presented on 20 February 2016 a court decision in the Deepwater Horizon case and filed it as Exhibit RLA-115.

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228 The two-day hearing on liability that was held, as scheduled, on 21 and 22 February 2016 in Paris, at the offices of the World Bank. The Hearing was again attended by the full Tribunal, the Tribunal Secretary, the Parties and their counsel and by Minister Nasrul Hamid, State Minister of Power, Energy and Mineral Resources, Ms Khadiza Nazneen, Ministry of Power, Energy and Mineral Resources.⁵⁴ The Claimant did not object to the presence of the representatives of non-parties to the Arbitration, specifically the government, who was no longer a party to the Arbitration since the Tribunals' Decision on Jurisdiction.

229 The Parties presented full legal argument on liability and answered questions from the Tribunals on 21 February 2016. Rebuttal presentations were delivered on the following day, followed by a further rebuttal. followed on 22 February 2016, with each side providing final observations, i.e. a further rebuttal after that. Copies of the slides of these presentations were distributed and entered on the record.

230 In response to an observation from the Respondents, the Tribunals reminded the Parties that the scope of the hearing and of the Tribunals' forthcoming decision had been described in Procedural Order No 12 and its accompanying annex. Accordingly, the scope included the question of the effect of Niko's operations on the long-term viability of the Chattak field, as it had been identified in item 4(vi) of the annex to that Procedural Order.

231 The Claimant objected to the reliance by the Respondents on independent opinions expressed by Mr Abel, the expert appointed by the Tribunals, in his report and during the November 2015 Hearing. The Claimant further recalled its written submissions made in this regard in its 31 August 2015 comments on the reports issued by the three Tribunal appointed experts. The Tribunal pointed out that it had heard three qualified experts, i.e. Mr Wright, Dr Adams and Mr Abel, and that it did not consider it justified to generally give less weight to the views of Mr Abel than to those of the other two experts. The Claimant's counsel agreed with this position, confirming that the best evidence for the Tribunals to turn to when determining the liability questions is the evidence of these three experts. The Claimant's counsel emphasised the differences in the standards and certain calculations applied by Mr Abel in his report. The Tribunals reiterated that it did not consider itself bound by any particular opinion or calculation of any of the experts and that the Tribunal members would apply their own minds to the issues they have to decide.

54 The list of attendees can be found at paragraph 149 of the Decision on Liability.

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232 The February 2016 Hearing was recorded and the audio recording was uploaded subsequently to the file sharing account established for these proceedings. A verbatim transcript was also prepared by Ms Georgina Ford and Mr Ian Roberts of Briault Reporting Services Limited, which was distributed to the Parties and the Tribunals on each hearing day. As the hearing completed the proceedings on liability and no further submissions were foreseen, a simplified process for correcting the transcript, limited to checking references, was agreed at the end of the hearing. Summary Minutes, prepared by the Tribunal, were distributed to the Parties on 31 March 2016.

233 Following the February 2016 Hearing, the Respondents filed on 5 March 2016 a new submission on shallow gas. The Respondents stated that, on the last day of the February 2016 Hearing, the Claimant had presented new arguments relating to “the definition of shallow gas and the extent to which Niko knew or should have known that it faced shallow gas risks prior to drilling the Chattak 2 Well”. The Respondents alleged that the Claimant had distorted the facts and requested leave to respond to the new arguments.

234 The Respondents' submission was accompanied by a document from Niko entitled “Chattak Field Development Plan, December 2004”⁵⁵ which, as the Respondents asserted, “BAPEX encountered [...] two days ago when it was given access to documents in Niko's office in Dhaka”. They requested that the document be admitted into the record, stating that “this document is also relevant for the Damages phase of the proceedings”, adding that they would enter it on the record with the forthcoming submission on Damages.

235 The Respondents concluded by requesting “that the Tribunal recognize [BAPEX's] right to respond by accepting the present submission in response to new arguments related to shallow gas raised by Niko at the second Hearing on Liability".

236 The Tribunals invited the Claimant to comment, limited to admissibility of the submission, reserving comments on the substance of the document in case it were admitted.

237 The Claimant objected to the Respondents' submission and described it as an "unsolicited post-hearing brief [and] an abuse of procedure that should be rejected”. It asserted that the “new” points to which the Respondents referred had been argued previously and discussed in detail at earlier occasions where the issue of shallow gas had been addressed. The Claimant stated that the arguments in the 5 March 2016 submission could have been made at the

55 Produced as Exhibit R-47.

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February 2016 Hearing. “There is no justification for BAPEX's decision to wait until after the hearing to respond to points raised in Niko's Post Hearing Brief and further articulated at the February Hearing.”

238 The Claimant also objected to the production of the new document which, in its opinion did not add anything to the record and for which there had not been any opportunity to analyses and addressed by witnesses or experts. The Claimant concluded by requesting that the Tribunal “deny BAPEX's request and rule it inadmissible".

239 By letter of 21 March 2016, BAPEX provided the Tribunals with a status update on the documents the production of which the Parties had agreed during the hearing at the February 2016 Hearing, specifying those documents that remained outstanding, and requesting the Tribunals to order the Claimant to produce the documents identified in that letter.

240 The request was overtaken by another request made by the Respondents, in another letter of 21 March 2016, by which they announced “new, recently obtained evidence of Niko's use of bribes and corrupt means to procure the JVA and GPSA”. They concluded that “the Tribunal should not issue any further decision or award in the two proceedings without considering that evidence and our statements on it” and requested the “Tribunal defer its decision until after the 25th [March] and after its review of our pleading on this issue".

241 On 25 March 2016, BAPEX presented its Memorial on Damages, which argued that the Tribunals' jurisdiction was “confined to determining the damages owed to BAPEX”. Concerning the loss of gas, BAPEX claimed that Niko was responsible for the lack of development of the Chattak field in the aftermath of the blowouts and quantified this loss as USD 118 million for BAPEX and USD 896 million for the Government;⁵⁶ with respect to environmental losses, BAPEX claimed “between US$ 8'461'463 and $8’642'493 to cover the expenses of monitoring, surveying and abatement and hold the proceedings open until such time as a complete survey and monitoring of the Tengratila area can be conducted and BAPEX can provide the fullest possible accounting of environmental and health losses”.

242 Considering the corruption claim that had been filed on 25 March 2016 and after consultation of the Parties, the Tribunals decided in Procedural Order No 13 to examine the Corruption Claim with priority. The Tribunals suspended the proceedings on all other issues, except for the Third

56 BMD, paragraphs 240 and 400(h). This figure was subsequently updated to USD 857 million: see Amendment, paragraph 99; Brattle II, Table 2 at page 5.

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Decision on the Payment Claim which was issued on 26 May 2016. The proceedings in relation to the Corruption Claim are addressed below in Section 4.3.

4.2.6 The Decision on Liability

243 The Decision on the Corruption Claim was issued on 25 February 2019. When communicating that decision to the Parties the Tribunals informed them that:

The Tribunals will now resume their work on the decision concerning liability for the blowouts which had been put on hold by the Respondents' Corruption Claim. The Tribunals will then consult the Parties concerning further directions for the completion of the Arbitrations.

244 Neither Party renewed the procedural requests that had been reserved in Procedural Order No 13. The Tribunals nevertheless considered the requests concerning the Respondents' submission of 5 March 2016 with Exhibit R-47 and the Claimant's objections of 16 March 2016. Concerning the documents which the Respondents had identified as still outstanding in their letter of 21 March 2016 and the explanations that had been provided by the Respondents on their relevance and materiality, the Tribunals concluded that they were not of critical importance for its Decision on Liability. It was comforted in this conclusion by the absence of a renewed request from the Respondents.

245 The Tribunals concluded that there are no procedural requests outstanding and that the Parties had full opportunities to provide argument and evidence in support of their positions concerning the liability for the blowouts. It resumed their deliberations and issued their Decision on Liability on 20 February 2020.

246 The Tribunals confirmed their jurisdiction with respect to Niko's liability to BAPEX under the JVA, noting that the initial position of BAPEX had changed and BAPEX sought a declaration that Niko must compensate BAPEX for the harms from Niko's breaches of the JVA ..."

247 With respect to Niko's liability to the Government and Petrobangla, the Tribunals found that Niko's liability for the two blowouts in the Chattak field must be determined under the JVA and its dispute resolution provision. As a result of their assignment to BAPEX and their approval of the JVA, the Government and Petrobangla may not seek different remedies in different fora concerning Niko's obligations with respect to its conduct in Petroleum Operations and the liability for the breach of these obligations.

248 The Tribunals noted that, at the February 2016 Hearing, the Respondents continued to assert that “it continues to be BAPEX's position that the record

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is not what it would be had BAPEX had competent counsel that would have filed evidence”. The Tribunals addressed this position as follows:

... whatever may have been their first counsel's failure to address the issues raised by the case brought by the Claimant, the Respondents were given repeated opportunities to present their case on Niko's liability; and after the latest change of counsel, the Respondents availed themselves of this opportunity.

The Tribunal concludes that the Parties had a full opportunity to argue all possible grounds of Niko's liability for all kinds of possible damage resulting from the two blowouts; and they had an equally full opportunity to address Niko's alleged breaches of its obligations under the JVA and the applicable law.⁵⁷

249 The Tribunals were therefore satisfied that, in addition to the issues on jurisdiction just referred to, the following issues were ready for determination in the Decision on Liability, reserving the quantification of any loss and damage for which Niko was found to be liable:

• The obligations and laws applicable to Niko's operations relevant for the two blowouts;
• Any conduct by Niko in breach of such obligations and laws which is causal for the blowouts;
• Determination of Niko's liability.

250 Concerning the first of these issues, the Tribunals considered the requirements of the JVA, specifically Article 26.2.4, which required Niko as the Operator to

conduct all Petroleum Operations in a diligent, conscientious and workmanlike manner, in accordance with the applicable law, the JVA and generally accepted standards of the international Petroleum industry designed to achieve efficient and safe development and production of Petroleum and to maximize the ultimate economic recovery of Petroleum from the JVA Area.

251 The Tribunals used the term “prudent operator standard” to express the standard required by this provision. They noted that there was no contention that Niko violated its obligations of efficiency or, if it were treated as a separate objective, of maximising economic recovery. The question was whether Niko's

57 Decision on Liability, paragraphs 319 and 320.

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actions and omissions in relation to the blowouts violated relevant safety standards. The Tribunals focused their examination on the question whether a failure of Niko to observe safety measures, specifically prescribed by any of the relevant standards or as they had to be observed by a reasonable and prudent operator in the given circumstances, caused or contributed to the blowouts.

252 The Tribunals examined specifically American Petroleum Industry (API) publications. While they recognised that the API recommended practices have no legislative force, not in the United States and not in Bangladesh, the Tribunals noted that the Parties had accepted these recommended practices as a valuable source for determining “generally accepted standards of the international Petroleum industry”, as they are applicable according to Article 26.2.4 of the JVA. The Tribunals considered specifically the API Recommended Practices (RP) for Well Control Operations (API RP 29) and Diverter Systems Equipment and Operations (API RP 64).⁵⁸ The Tribunals concluded that these publications

.... are relevant texts that can provide useful information when determining Petroleum Industry Standards applicable according to Article 26.2.4 of the JVA. These publications are recommendations based on broad industry experience; but they do not prescribe specific actions concerning well design or blowout control. In their application the specific circumstances of each well must be considered, using sound engineering judgment.⁵⁹

253 The Tribunals also considered other sources for Petroleum Industry standards to which the Parties had referred, such as the Well Control Training Manual of the Well Control School at the Institute of Drilling and Technology, Oil and Natural Gas Corporation Limited, Dehradun, India,⁶⁰ sometimes referred to as the ONGC Manual. Reference was made to Niko's “Drilling and Control Manual”; the Claimant produced “a February 2005 edition of Niko's drilling work over SWP [Safe Work Procedures] manual” but the Claimant considered this and some other documents as “completely irrelevant to the issues before the Tribunals”, given their date of issuance.

254 The Tribunals also considered the laws of Bangladesh. The Respondents in general terms referred to environmental law and general tort liability. The Tribunals concluded that it "had not been demonstrated that the relevant standard under Bangladesh tort law is more exacting than that prescribed by

58 Exhibits R-43 and R-42. 59 Decision on Liability, paragraph 396. 60 Exhibit R-33.

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the JVA”. With respect to specific petroleum legislation, the Claimant pointed out that there was no regulatory regime in Bangladesh prescribing mandatory standards, an assertion that was supported by the recommendation of the First Enquiry Report by the Committee set up by the Government to determine the causes of the blowout:

Guidelines associated with such drilling should be adopted and enforced in Bangladesh for in future the country will produce many of its shallow gas. The necessity for an upstream regulator, therefore, may receive urgent attention.⁶¹

255 In their Post-Hearing Brief of 22 January 2016, the Respondents referred to the Bangladesh Petroleum Act of 1974. The Tribunals noted that the Respondents had not invoked any breaches of the Petroleum Act at any time before the Post-Hearing Brief and no action had been taken in Bangladesh under that Act in relation to the blowouts. In any event, the Tribunals noted that the terms of Section 6.1 of the Act on which the Respondents relied “resemble in some respects the wording of Article 26.2.4 of the JVA”. The Respondents did identify any aspect of these terms which differ from the obligations under that Article or impose more stringent requirements and the Tribunals have not been able to identify such amplifying requirements. The Tribunals concluded that

... Article 26.2.4 of the JVA encapsulates Niko's obligations as the Operator that must be considered in the present case. As the Respondents stated at the November 2015 Hearing in terms quoted above: “No specific question of the violation of applicable law” needs be considered by the Tribunal when determining Niko's liability for the blowouts".⁶²

256 The Tribunals also considered the opinions expressed by the three experts presented by the Parties and the expert appointed by the Tribunals.

• The Claimant had appointed Mr John Wright and on 29 May 2014 submitted his opinion with respect to the well design and drilling of the two wells that suffered the blowouts. Mr Wright's opinion describes his training as a professional engineer registered in Texas and his experience in the oil and gas industry since 1978. He explained that he had extensive experience in relief well projects,

61 Enquiry Report, Exhibit R-3, paragraph 6.22. 62 Decision on Liability, paragraph 427.

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• including the relief operation on the blowout at Occidental Petroleum's well in Mulavi Bazar, which he designed and managed.
• In the situation described above, the Tribunals appointed, Mr Leo William Abel as Gas Well and Relief Well Design and Execution Expert. Mr Abel described himself as a Specialist Consultant Drilling and Well Control; holding a BScE and an MBA, registered as Professional Engineer in the Texas. He practiced in his field since 1977, specialising in pressure control projects including relief wells, capping operations, snubbing operations, well kill, firefighting and well control operations.
• After they had announced new counsel in July 2015, the Respondents presented a report by Dr Neal Adams, a Registered Professional (Petroleum) Engineer of 43 years' experience who described his experience in drilling (land, offshore and deepwater), as production and completion engineer specializing in, among other areas well and blowout control, drilling planning and operations, site supervision, rig and site safety, drilling rigs, drilling optimization and drilling problems, production impairment/restoration and fracturing.

257 In the Decision on Liability the Tribunals emphasized the important contribution of these experts:

... the advice of the three experts was particularly important and useful for the Tribunal, both with respect to the identification of the standards relevant for specific aspects of the case and in applying such standards to the specific conduct at issue. All three experts were highly qualified and had extensive experience in relevant petroleum operations. When examining the events [concerning the two blowouts], the Tribunal found their explanations very useful and at many occasions found their advice persuasive. Where it had to choose between conflicting views, the Tribunal considered the arguments in support of these views to determine the most persuasive one in the circumstances and giving regard to the contractual terms.

258 Considering the evidence and argument on Niko's obligations, the Tribunals concluded that

... no directly applicable contractual or other legal obligation has been identified which required, at the time of the blowouts, a specific act or omission the breach of which by Niko was causal for the blowouts.

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259 When considering the sources relevant for this standard, the Tribunals noted that they generally recognise the diversity of situations that arise in the performance of operations such as the Chattak wells. Mr Wright, for instance, insisted on the specific nature of drilling and well control, and highlighted the extent to which these operations depend on the circumstances of each well:

The drilling of oil and gas wells, unless there are specific laws in the country of operations that must be followed, is left to the operator to determine the best course of action for their situation. That is, there are 50 shades of grey in attempting to determine a reasonable course of action.

260 The Tribunals note the expression of Mr Abel:

... the people who taught me to drill said the hole speaks to you, listen to what it is saying ...

261 With respect to the application of the Prudent Operator Standard, the Tribunals concluded from these explanations:

While in many respects the operator has the choice of the most suitable way of proceeding, it must exercise this choice in a responsible manner, ensuring both safety and efficiency. The standard to be followed thus is one of professional competence and responsibility.⁶³

262 When applying these considerations to the specific events of the two blowouts, the Tribunals examined the specific circumstances at the location of the wells, in particular the characterisation of “shallow gas”; with respect to the design a particularly relevant consideration related to the depth of the casing of the wellbore. The Tribunals analysed the evidence about the events of the blowout. The noted that the drilling had started on 31 December 2004, traversed the Upper Marine Shale and Sands 1 and 2 until it reached on 7 January 2005 (day 8 since the spud the depth of 807m. The drilling crew then performed a wiper trip. When the drilling bid had been raised to 466m, gas entered the well and quickly developed into the blowout. The details of this event described in Section 8.2 of the Decision on Liability; further information is contained below in Section 9.1.2.

263 The Tribunals considered the causes for the blowout and concluded that it was most likely due to “swabbing” during the wiper trip. They concluded that the shallow casing created a risk that the drilling crew failed to master.

63 Decision on Liability, paragraph 479.

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264 With respect to the design the Tribunals considered the “risk trade-off made in the casing design setting depth”. They considered:

Two assumptions are essential in this “trade-off”: the kick tolerance must be reasonable, and the drilling crew must be able to “execute the necessary well control operations”. As just explained, the Claimant has not established that the Chattak 2 design had a “reasonable kick tolerance”. The reliance on the capability of the drilling crew meant that any error of that crew causing the kick tolerance to be exceeded would be fatal.

265 On this basis the Tribunals concluded that Niko's design of the Chattak 2 well did not meet the reasonable operator standard:

The Tribunal concludes that, irrespective of the qualification of the crew, a design that relied on the crew's capability to master the necessary well control operations, in the circumstances of the Chattak 2 Well and despite the availability of safe alternatives, was excessively risky, failed to adequately take into account safety concerns, and thus was not in compliance with the reasonable operator standard. Niko's design breached its obligations under Article 26.2.4 of the JVA.⁶⁴

266 With respect to the qualification of the drilling crew, the Tribunals concluded that it "met the requirements of the certification and experience ordinarily expected of a drilling crew”; but Niko did not take adequate precautions to prepare the drilling crew to face the risks caused by the chosen design and to ensure that it was able to control the well especially when tripping through the targeted shallow reservoir.⁶⁵

267 The Tribunals held that Niko also breached its prudent operator obligation by failing to ensure the safety of the drilling operation. They concluded that

... the drilling crew was not properly prepared for dealing with the risk that Niko had created by its well design. The resulting failure of the drilling crew to control the well caused the blowout. Niko's failure to ensure the safety of the drilling operation cannot be reconciled with the prudent operator standard. Niko breached its obligation under the JVA.⁶⁶

268 The Tribunals then considered the second blowout when Mr Robert Grace and his company GSM Consulting Petroleum Engineers drilled the Chattak 2A relief well. The Tribunals considered the events of this blowout which was

64 Decision on Liability, paragraph 851. 65 Decision on Liability, paragraphs 863 and 875. 66 Decision on Liability, paragraph 914.

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attributed to a premature and inadvertent communication of the relief well with the blowout well.⁶⁷

269 Concerning Niko's scope of responsibility with respect to the Chattak 2A blowout, the Tribunals noted agreement between the Parties that, in case of a blowout, Niko as the Operator had to engage a competent specialist to deal with the blowout. Based on its examination of Niko's obligations under the JVA, the Tribunals concluded that

drilling relief wells is not an operation in Niko's scope of work and responsibilities under the JVA. A contract concluded by Niko for provision of this service, therefore, is not a subcontract for the performance of which Niko is responsible as if it was its own performance under the JVA.

270 The obligations of Niko with respect to the control and extinction of the Chattak 2 well blowout consisted in selecting and engaging the relief well specialist:

If this obligation was performed in line with the standard of a prudent operator, Niko has met its obligation. It is not responsible for the performance of the work of this specialist and not liable for any defects in its performance of the relief well operations.⁶⁸

271 The Tribunals examined the manner in which Niko selected and engaged Mr Grace as relief well contractor. They found that Mr Grace was “one of the few internationally recognised experts for relief operations”. They had no reason to doubt the solidity of his reputation. The Tribunals also examined the process by which Mr Grace was selected and the Respondents' criticism in this respect. They concluded:

... Mr Grace was suitably qualified for performing the Chattak 2A relief operation and that Niko could rely on his determination that he was so qualified. When engaging Mr Grace, Niko met the standard of conduct of a prudent operator under Article 26.2.4 of the JVA.⁶⁹

272 The experts discussed the relief well strategy adopted by Mr Grace and his implementation of the relief operation. The Tribunals concluded that

... the experts' observations about the relief well strategy of Mr Grace and its implementation do not justify the conclusion that the relief operation itself was performed in breach of the prudent operator and the Petroleum

67 Decision on Liability, paragraph 934. 68 Decision on Liability, paragraphs 949 and 950. 69 Decision on Liability, paragraphs 954 and 977.

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Industry Standard. The performance of the relief operation leading to the blowout of Chattak 2A did not constitute a breach of the requirements of Article 26.2.4 JVA, assuming it was applicable to this performance.⁷⁰

273 The Claimant had sought to rely on limitation of its liability. It argued that, in the hypothesis of a breach by Niko, BAPEX, as the joint venture partner, must be held to have shared this liability and that, in any event, Niko's liability was limited under the JVA: The Respondents denied any shared liability and did not agree that Niko's liability was limited under the JVA.

274 In support of its argument about a shared liability, the Claimant had asserted that BAPEX approved the well design and that it withheld information relevant information.

275 The Tribunals observed that Niko had prepared the well design and chose the relief well contractor. The Tribunals did “not accept that BAPEX's failure to object to the design or its approval of the design reduces Niko's liability". With respect to the allegedly withheld information, the Tribunals concluded:

The Claimant has not shown that the information allegedly withheld by BAPEX was of a nature that it could have required a different risk assessment, leading to a different design solution. Even if the Claimant's allegation were correct, this would not affect Niko's liability, as found by the Tribunal.⁷¹

276 The Claimant relied on the limitation of liability under Section 73 of the Bangladesh Contract Act which is worded as follows:

Compensation for loss or damage caused by breach of contract

73. When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

70 Decision on Liability, paragraph 982. 71 Decision on Liability, paragraphs 996 and 1001.

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277 The Claimant also relied on Article 27 of the JVA which, in the relevant parts, reads as follows:

27.1 While conducting Petroleum Operations, OPERATOR shall take necessary measures in accordance with generally accepted standards of the international petroleum industry, for conservation, safety of life, property, crops, fishing and fisheries, navigation, protection of environment, prevention of pollution and safety and health of personnel, including but not limited to

[...]

27.2 Bear responsibility in accordance with laws applicable in Bangladesh for any loss or damage to third Parties caused by the wrongful or negligent acts or omissions of the OPERATOR or the OPERATOR employees or sub-Contractor's or sub Contractor's employees and indemnify BAPEX and the Government against all claims and liabilities in respect thereof. Under no circumstances shall a Party be liable to the other Party for any consequential loss or damage including but not limited to lost profits or lost production or other consequential loss or damage resulting from pollution.

278 The Parties argued extensively about the exact meaning of these provisions under the Law of Bangladesh as applied by the courts of the country and in other common law jurisdictions.

279 With respect to Section 73 of the Contract Act, the Tribunal reached the following conclusion:

Section 73 of the Contract Act is clear on its face insofar as, in the first paragraph, it specifies the two types of losses or damage that must be compensated in case of a breach, those which naturally arise and those known by the parties to be likely. The former are recoverable whether or not the particular defendant was conscious of the consequences (because contract breakers are held to what the reasonably expected consequences of their acts), whereas the latter, often referred to as “special”, require proof of specific contextual understanding of the parties.

[...]

The second paragraph of Section 73 excludes “such compensation”, i.e. compensation provided by the preceding paragraph. It follows that even where the specific contextual understanding was that a particular type of damage might flow from non-performance, it will nevertheless not be

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recoverable if it is “remote and indirect”. The Tribunal considers that this does not “go beyond” the Hadley v. Baxendale rule; it might rather be suggested that the available compensation is more clearly restricted.

In any case, the Tribunal will apply Section 73 as it is written; even loss or damage which the parties knew would likely arise in a case of breach is excluded if remote and indirect.⁷²

280 Having examined the wording of Article 27 of the JVA, the argument of the Parties, decided cases and the use of terms “consequential loss and damage”, the Tribunal saw no basis for distinguishing the loss or damage that remains compensable under Article 27.2 from that which is compensable under Section 73, first paragraph. With respect to the exclusion of loss of profit, the Tribunals concluded:

Article 27.2 of the JVA, second sentence, does not exclude liability for any lost profit and lost production; it excludes liability for such losses only insofar as they are consequential and not direct.

[...]

... loss of profit may be direct and thus not excluded by Article 27.2 of the JVA.

[...]

... direct loss or damage from pollution is not excluded.⁷³

281 Noting the difference in the claims, the Tribunals concluded that the “question whether the losses claimed are direct or consequential, remote or indirect thus will have to be considered distinctly with respect to each of the claims.” They announced that this would have to be done in the next phase of the Arbitration. Considering an argument of the Claimant relying on the rare occurrence of blowouts and concluding that damage by such occurrences was remote, the Tribunals stated that

...the relevant question is not whether blowouts, as they occurred in the present case, are ordinary in the course of things in the oil and gas industry. Section 73 of the Contract Act does not refer to ordinary events in the context of the contract performance in general but to loss or damage caused in the usual course of things “from such breach”.⁷⁴

72 Decision on Liability, paragraphs 1016, 1018 and 1019. 73 Decision on Liability, paragraphs 1138, 1142 and 1144. 74 Decision on Liability, paragraphs 1148 and 1149.

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282 While the claims for different items of loss were reserved for the next phase of the proceedings, one item of claim was ready for an immediate decision: the gas lost as part of the first blowout. The Tribunals made the following determination:

The breach of Niko's obligations as Operator under the JVA, as determined in the present decision, was the immediate cause of the first blowout. This blowout was driven by gas escaping from the reservoir with the effect described. The gas that escaped during this blowout was lost. It is therefore clear without the need for further argument and evidence that the gas that escaped from the Chattak 2 Well as part of the first blowout and the corresponding loss of production are direct losses caused by Niko's breaches for which the Claimant is liable. The exclusion of Article 27.2 of the JVA does not apply to them.

283 Finally, the Tribunals considered an argument of the Respondents based on the wording of Article 27.2 of the JVA which applied liability of “a Party” to "the other Party”. The Respondents argued that the limitation of liability provision did not apply to the claims by the Government and Petrobangla which were not included in the contractual definition of “Party”. The Tribunals concluded that

... the words in the exclusion clause in the JVA which refer to liability “to the other Party” do not restrict the scope of that clause. Niko's liability must be determined under the JVA including the exclusion clause of that agreement. The Government and Petrobangla as assignors are bound by this determination within the limits resulting from the exclusion clause.⁷⁵

284 On the basis of these considerations and conclusions, the Tribunals decided Niko's liability on 28 February 2020 in terms recorded below in Section 5.4.

285 The Respondents subsequently requested a correction of the Decision on Liability as the Tribunals had inadvertently omitted to include Messrs Asif and Ghani in the list of the Respondents' counsel. On 6 March 2020, the Tribunals issued a correction, adding their names and addresses to paragraph 15 of the Decision on Liability.

75 Decision on Liability, paragraph 1158.

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4.3 The Corruption Claim

4.3.1 The Proceedings on the Corruption Claim

286 BAPEX's Memorial on Damages of 25 March 2016 (BMD) started with a section entitled “Niko procured the JVA and GPSA through corruption”. BAPEX requested that the Tribunals

1. Declare that Niko procured the Joint Venture Agreement between BAPEX and Niko Resources (Bangladesh) Ltd of 16 October 2003 through corruption;
2. Declare that Claimant is not entitled to use the international arbitration system to pursue claims related to the JVA;
3. Declare that the JVA is voidable, recognize BAPEX's invocation of its right to void the JVA, and treat the JVA as void.⁷⁶

287 BAPEX sought dismissal of the Claimant's claims and a declaration that it was "entitled to compensation for all of its losses arising from Niko's corrupt procurement of the JVA, including all losses resulting from the two blowouts that occurred at the Chattak Field”. In the alternative, should the Tribunals determine that the JVA was not voidable or voided, BAPEX sought compensation as specified above.

288 In a letter of the same date, Petrobangla relied on BAPEX's presentation of the facts and requested the Tribunals to find that “the GPSA was procured by corruption and is voidable”. Petrobangla requested that Niko's claims based on the GPSA be rejected and the Tribunal's decision on the Payment Claim be vacated.⁷⁷

289 Subsequently, the Respondents pursued their respective corruption claims jointly.

290 In the BMD, BAPEX stated that “BAPEX and Petrobangla now have evidence that both the JVA and GPSA were procured by corruption” and it asserted that “new evidence of corruption recently obtained by BAPEX fundamentally change the nature of these proceedings”. BAPEX explained:

According to the corruption case currently proceeding against former Prime Minister Khaleda Zia and 10 other defendants in the criminal courts of Bangladesh, Niko used bribe money and corrupt influence to

76 BMD, paragraph 400 and Decision on the Corruption Claim, paragraph 379. 77 Decision on the Corruption Claim, paragraph 380.

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obtain the Joint Venture Agreement with BAPEX. The accused include the former President of Niko Bangladesh and the former Law Minister on whose legal opinion the Prime Minister relied.

291 The Respondents explained during the proceedings on the Corruption Claim that a vast investigation had been carried out in cooperation among the Bangladesh Anti-Corruption Commission (ACC), the Royal Canadian Mounted Police (RCMP) and the U.S. Federal Bureau of Investigation (FBI). The investigation also concerned other companies and generated vast amounts of material on which the Respondents and which was disclosed gradually during the proceedings on the Corruption Claim.

292 The Tribunals started these proceedings by inviting on 18 April 2016, the Claimant to comment on the applications by the Respondents; and the Respondents to comment on the consequences of the avoidance of the GPSA and the JVA.

293 In its response of 29 April 2016, the Claimant argued that the Corruption Issue now raised by the Respondents had been known for a long time and had been considered by the Tribunals in their Decision on Jurisdiction. This decision was final and binding and could not be reopened. If, however, the Decision were reopened, BAPEX had not offered any justification for doing so. In any event, Petrobangla's request to rescind the GPSA, “an agreement that had expired by its own terms years ago”, was frivolous and should “summarily be rejected".

294 The Respondents confirmed their position that “Niko cannot seek any relief from this Tribunal” and modified the relief requested, no longer arguing that the agreements were voidable but seeking a declaration that the “JVA is void, or in the alternative, declare that the JVA is voidable”. They stated:

Respondents first ask that the Tribunal recognize that the JVA and GPSA are void under Bangladeshi law and without legal effect. In the alternative, Respondents maintain their request to void the agreements.

295 Concerning the consequences of the avoidance of the agreements, the Respondents stated that “no credit would be due to Niko for performance under the JVA”. They concluded:

For the foregoing reasons, Respondents submit that Niko is not entitled to any payment or credit for past performance. As a result of Niko's corruption, the Tribunal should reject all of Niko's claims and any attempt by Niko to have the Tribunal give it a benefit for its corrupt acts. In addition, in accordance with the above, Respondents would like to modify their requests to the Tribunal.

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296 On 10 May 2016 the Respondents filed several requests concerning the evidence for their Corruption Claim, concerning evidence from the investigation in Canada, information from the Claimant's previous counsel and documentation concerning “transfers and/or payments of funds between 2001 and 2006” which they had requested previously from the Claimant. The Respondents expressed confidence that no further evidence was required to justify the relief requested, adding that “we do not at this time seek an order compelling the production of documents by Niko”.

297 The Tribunals considered the Parties' initial explanations and in Procedural Order No 13 of 26 May 2016, gave first directions about the manner in which it intended to deal with the Corruption Claim. They noted that their jurisdiction to decide the Corruption Issue had not been contested and decided to consider the Respondents' claims in this respect.

298 The Tribunals recognised the seriousness of corruption and the responsibility they had for the protection of international public policy. In PO No 13, the Tribunals described their approach to dealing with the Corruption Claim in the following terms:

The Tribunals are conscious of the seriousness of corruption offenses. In their Decision on Jurisdiction, they have recognised that, as a principle of international public policy, the prohibition of bribery overrides the general principle of party autonomy otherwise widely upheld in international and comparative law. The Tribunals have noted that other ICSID tribunals have taken the initiative of examining alleged acts of corruption without being restricted by the specific allegations of the Respondents and their burden of proof with respect to them. Mindful of their responsibility for upholding international public policy, the Tribunals will therefore examine the corruption charges that have been raised by the Respondents.

299 The Tribunals decided that they would, “as a matter of priority examine whether the JVA and/or the GPSA were procured by corruption” and ordered:

The proceedings on all issues other than the Corruption Issue and the Claimant's Request for Interim Measures of 19 May 2016 are suspended.

300 In PO No 13, the Tribunals addressed the Respondents' evidentiary requests and gave directions for the proceedings on the Corruption Claim and invited both the Claimant and the Respondents to provide an account of the negotiations for the two Agreements, identifying inter alia the persons involved in the negotiations, both on the side of Niko and on the side of Petrobangla, BAPEX and the Government of Bangladesh. The Tribunals also gave other

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instructions concerning evidence and announced its intention to hold a procedural consultation, once the requested initial information had been received.

301 Following submissions from the Parties and further instructions by Procedural Order No 14 of 29 July 2016, a Procedural Consultation was held on 10 August 2016 by telephone to discuss the further organization of the Corruption Claim procedure, addressing a “List of Issues” which the Tribunals had sent in advance of the consultation. The Parties agreed on simultaneous document production, followed by a written memorial in which the Respondents were to set out their allegations concerning the procurement by corruption of the JVA and the GPSA, accompanied by the relevant evidence. The Claimant was then to respond in the form of a written memorial containing its case in defence, also accompanied by evidence. The Respondents further requested a second round of written submissions.

302 The Tribunals prepared Summary Minutes of this procedural consultation and sent them on 25 August 2016 to the Parties in draft form together with the draft of Procedural Order No 15. These drafts were discussed at another Procedural Conference by telephone on 1 September 2016.

303 Procedural Order No 15 of 7 October 2016 confirmed the steps in the procedure and the procedural timetable as previously discussed with the Parties and settled a number of issues concerning in particular the scope of the Tribunals’examination, including the Target Period, the collection of evidence, the requested interventions of the Tribunals with respect to the Canadian Investigation.

304 With respect to the scope of their examination of the alleged corruption, the Tribunals noted that the Respondents insisted that the Tribunals' Decision on Exclusivity entailed an augmented responsibility with respect to the Corruption Claim and the need for a broad enquiry. Although they asserted that Niko's alleged corruption was proven by the information and evidence that they had received, the Respondents requested from the start of the proceedings on the Corruption Claim repeatedly interventions by the Tribunals to gather evidence. The Claimant insisted on the adversarial nature of ICSID arbitration proceedings, which require that a party state clearly the case which the other party must meet and the decisions which requires the arbitral tribunal to make.

305 In response to the Parties' arguments and requests, as expressed in the various written submissions and during the Procedural Consultations, the Tribunals reminded the Parties that their function was the decision of claims

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before them, not punishing acts of corruption, as a criminal court would do. They added:

For the reasons previously explained, the Tribunals have exclusive jurisdiction to make these determinations. They are conscious of the responsibility that flows for them from their exclusive jurisdiction and from their general obligations as ICSID tribunals. This may lead them to take their own initiatives in the evidentiary process in accordance with the ICSID Arbitration Rules; but they must preserve and protect the adversarial nature of ICSID proceedings, which requires that each Party clearly state its case and identify the evidence on which it relies so that the other Party has the opportunity to address this case.

306 The Tribunals also clarified that, in the interest of a rational and efficient conduct of the proceedings and in view of their adversarial nature, requests by the Parties that the Tribunals take such initiatives must be justified specifically and “the scope of the evidentiary enquiry must be limited to the issue that has to be decided, namely whether the two agreements were procured by corruption”.

307 The Claimant raised issues of confidentiality and “collateral use” of documents from the Arbitrations in other proceedings, especially in the Alam proceedings. It requested that “protective measures relating to the use or disclosure of documents or information exchanged in connection with the Tribunals' examination” be imposed. The matter was discussed at the Tribunals' consultations with the Parties and directly between the Parties. During the procedural consultation on 1 September 2016, the Parties informed the Tribunals that they had reached an agreement in principle. As no information on that agreement was received, the Tribunals requested to be informed and, until further notice instructed the Respondents' counsel

... not to make any document produced by the Claimant available to any person other than the legal team of their law firm.⁷⁸

308 Discussions on confidentiality continued.⁷⁹ In November 2016 the Parties reached agreement specifically with respect to the financial documentation released by the Claimant to the Respondents' financial expert. In PO No 17, the Tribunals defined the terms “Confidential Information” and “Derivative Materials." It had turned out, however, that the information to which confidentiality obligations had to be applied were limited and the Tribunals

78 PO No 15, paragraph 69. 79 See in particular Decision on the Corruption Claim, Section 2.4.7.

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concluded that a general confidentiality regime did not appear necessary at that stage.

309 Following PO No 17, the Respondents objected to the restrictions imposed by the Tribunal, explaining that “forbidding us from sharing information filed in the arbitration with our client, prejudices our ability to present our clients and violates principles of procedural fairness”. The Respondents argued that there was a “growing consensus that transparency and public access to pleadings should be the rule” and concluded:

Counsel for Respondents strongly believe that an order allowing all relevant parties (the Parties to the arbitration, all counsel, and witnesses) to view and use documents submitted to the Tribunals for the purposes of this arbitration with the understanding that such documents should be kept confidential and must not be shared with others would be sufficient. There is no justification to leap to the extraordinary measure of ordering that one Party to the arbitration is prohibited from reviewing the pleadings, exhibits, and witness statements while the other Party has full access to all the materials.

310 In preparation of the April 2017 Hearing, an agreement was reached and confirmed in PO No 19, concerning the use of confidential documents at the hearing and the confidentiality of the transcripts. The Respondents maintained, however, their position “that Respondents, their officers, and Boards of Directors should be provided unfettered access to all materials presented in the course of these proceedings”.⁸⁰

311 The timetable ordered by the Tribunals provided for a Memorial on the Corruption Claim by the Respondents, preceded by simultaneous document production and indications on persons available for testimony at the Hearing and followed by the Claimant's Counter-Memorial. Prior to the second round of written submissions (Respondents' Reply and Claimant's Rejoinder), a Status Conference was scheduled. After the second exchange a Prehearing Conference was scheduled, followed by a Hearing on the Corruption Claim in Paris, from 24 to 28 April, with 29 April 2017 in reserve. Post-Hearing Submissions were reserved.

312 The Respondents produced their Memorial on Corruption on 23 November 2016. The Memorial was accompanied by Annex A (a chart depicting payments and influence), exhibits, legal authorities and witness statements

80 PO No 9, paragraph 15 and Decision on the Corruption Claim paragraphs 244 – 247; for the arrangements at the hearing itself, see paragraph 253.

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by Mr Ferdous Ahmed Kahn, Mr Muhammad Imaduddin, Mr Md. Nural Islam, Ms Debra LaPrevotte Griffith and Mr Md. Maqbul-E-Elahi.

313 The Claimant filed its Counter-Memorial on the Corruption Claim on 11 January 2017, accompanied exhibits, legal authorities and by witness statements by Mr Brian Adolph, Mr Amit Goyal and Mr William Hornaday and an expert report by Mr Christopher P. Moyes. An updated version of this Counter-Memorial was produced on 31 January 2017.

314 The Respondent's Reply on the Corruption Claim was filed on 22 February 2017, accompanied by exhibits and legal authorities and by a witness statement by Mr Khairuzzaman Chowdhury and second witness statements by Ms LaPrevotte Griffith and Mr Khan.

315 The Claimant filed its Rejoinder on the Corruption Claim on 5 April 2017, accompanied by exhibits and legal authorities and a further witness statement by Mr Adolph.

316 Further to the procedural timetable a Status Conference was held between the first and second exchange on 30 January 2017, at which the Tribunals considered pending issues. The Tribunals provided to the Parties summary minutes of the conference.

317 After the completion of the written exchanges a Pre-Hearing Conference was held on 10 April 2017 by telephone, where the Tribunals were represented by their President. The Tribunals provided summary minutes to the Parties.

318 The Hearing on the merits of the Corruption Claim was held at the ICC Hearing Centre in Paris from 24 to 29 April 2017. It was attended by the full Tribunals, the Tribunal Secretary, the Parties counsel and representatives and, as witnesses Mr Adolph, Mr Hornaday and Mr Goyal, named by the Claimant, and Ms LaPrevotte Griffith, Mr Khan, Mr Islam, Mr Elahi and Mr Chowdhury, named by the Respondents, and by Mr Moyes as expert named by the Claimant. Mr Imaduddin and Mr Islam, who had provided witness statements were not called to testify.

319 The Parties were given an opportunity to examine the experts and fact witnesses, developed their arguments orally, and responded to questions from the Tribunals. In the course of the April 2017 Hearing, the Parties introduced additional documents. Among these documents was a marked-up version of Exhibit R-320, produced as Hearing Exhibit CH-19, representing all payments by Niko or its agents/consultants which, in the Respondents' view, the Tribunals had to consider when examining the corruption allegations. The exhibit frequently was referred to as the “Spider Web”.

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320 Sound recordings and verbatim transcripts, labelled as confidential, were made of the April 2017 Hearing and deposited in the Centre's archives. Copies of the confidential transcripts were distributed to the counsel and the Tribunals in accordance with the agreed confidentiality provisions. Summary Minutes prepared by the Tribunals were provided to the Parties.

321 Following the April 2017 Hearing, the Tribunal sent to the Parties as Annex A to the Procedural Order No 20 of 17 May 2017 a list of questions.

322 The Parties submitted their First Post-Hearing Submissions on 12 July 2017; the Respondents' submission was replaced on 13 July 2017 by a corrected version. The Respondents were ordered to submit a corrected version, respecting the agreed limit; they did so on 20 July 2017. Further to the agreed confidentiality arrangements the Parties subsequently filed a redacted version of their First Post-Hearing Brief.

323 The Parties filed confidential, unredacted versions of their Second Post- Hearing Submissions on 2 August 2017 and redacted versions on 4 August and 8 August 2017.

324 During the period following PO Nos 13, 14 and 15 discussed above, the Tribunals issued in the proceedings on the Corruption Claim the following Procedural Orders:

• PO No 17 of 11 January 2017, concerning Confidentiality and Protective Measures;
• PO No 18 of 23 March 2017, concerning the Application for an Intervention by the Tribunals before the Court in Alberta, Mr Khan and Ms LaPrevotte Griffith as Witnesses and the Weight of Statements by Persons not Appearing as Witnesses, the Target Period, the Appointment of a Forensic Expert to Review Niko's Records, Documents from the Criminal Investigation, Niko's Correspondence, Treatment of Confidential Documents and the Pre- Hearing Organisational Meeting;
• PO No 19 of 15 April 2017, concerning Hearing Organisation;
• PO No 20 of 17 May 2017, concerning Post-Hearing Organisation, including instructions for further information and documents and closing of the evidentiary record; Annex A, Questions to the Parties concerning the Corruption Claim;
• PO No 21 of 4 June 2017, concerning Procedure on further document production, privilege and related matters; and

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• PO No 22 of 27 July 2017, concerning Privilege Asserted Against the Production of the Deloitte Document.

325 The Decision on the Corruption Claim was issued on 25 February 2019. It gave rise to an issue addressed in PO No 23 of 24 May 2019, concerning Redactions in the Decision on the Corruption Claim and publication of the redacted Decision on the ICSID Website.

326 Shortly after the Respondents had presented their expanded Corruption Claim in their BMD of 29 April 2016, Professor Samsul Alam filed on 9 May 2016, a Writ Petition before the High Court Division of the Bangladesh Supreme Court seeking a decision that the two Niko Agreements were void ab initio. Like the Respondents in the BMD, Professor Alam relied on Article 102 of the Bangladesh Constitution. On 24 August 2017, the Respondents informed the Tribunal that the High Court Division had rendered its decision and had, on 24 August 2017, announced it orally (the Alam Judgment): the Court declared the JVA and the GPSA “to be without lawful authority and of no legal effect and thus void ab initio”. The assets of Niko and Niko Canada, including their shareholding in interest in Tullow Bangladesh Limited concerning Block-9 were attached.

327 This judgment gave rise to renewed correspondence by the Parties and submissions on 21 December 2017. It was considered in Section 6.4 of the Decision on the Corruption Claim

328 During the procedure leading to the Decision on the Corruption Claim numerous incidents and applications occurred and had to be dealt with by the Tribunals. They are described in detail in the Decision on the Corruption Claim. In particular, the Tribunals described the evidence that was available to the authorities in Bangladesh, and the evidence the Respondents made available in the Arbitration and the steps they requested the Tribunals to undertake. The Tribunals limit themselves here to highlight some of the issues that arose during the procedure.

329 The Scope of the Tribunals'enquiry and the Target Period: the Respondents alleged that Niko systematically engaged in corruption over a long period; it was only thus that, according to the Respondents, Niko obtained not just the conclusion of the JVA and the GPSA but also the various steps that preceded these agreements, especially the JVA. The Respondents stated that BAPEX and Petrobangla were not corrupted but they were instructed by corrupted members of the Government to conclude the JVA and the GPSA.

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330 The Respondents insisted that the Tribunals' Decision on Exclusivity entailed an augmented responsibility with respect to the Corruption Claim and the need for a broad enquiry. Although they asserted that Niko's alleged corruption was proven by the information and evidence they had obtained, the Respondents, from the start of the proceedings on the Corruption Claim, repeatedly requested interventions by the Tribunals to gather evidence. The Claimant insisted on the adversarial nature of ICSID arbitration proceedings, requiring that a party state clearly the case which the other party must meet and the decisions which it requests the arbitral tribunal to make.

331 The Tribunals had sought to define the scope of their enquiry and its limits from the outstart, especially by PO No 15. The Tribunals clarified that they were not a criminal court but were tasked with resolving an inter partes dispute. Concerning the period that had to be considered in the enquiry (the Targeted Period):

The Tribunals note that the principal focus of the corruption enquiry pertains to the circumstances of the conclusion of the JVA and the allegation that it was procured by acts of corruption attributable to Niko. The Parties agree that the relevant period begins sometime in 2001 and continues until the conclusion of the JVA on 16 October 2003. The Tribunals moreover accept the Respondents' observation to the effect that this period should be extended to the time immediately following signature of the JVA, in the event that evidence emerges of payments triggered by it.

Thus the relevant period of time comprises the years 2001 to 2003 as well as the period immediately following the conclusion of the JVA until the end of the first quarter of 2004 (“Targeted Period").

332 During the proceedings that followed, the Tribunals had to respond to repeated requests from the Respondents to extend the enquiry. The Respondents had declared and continued to state that they had presented “more than ample evidence of Niko's corruption”; but they requested the Tribunals to take action to obtain further information. Some of these requests were raised in the context of the Status Conference on 30 January 2017, after the first round of submissions. On 26 January 2017, the Respondents wrote in preparation of the Status Conference:

Respondents maintain their position that the Corruption Issue merits the fullest possible inquiry by the Tribunals even though Respondents put on more than ample evidence of Niko's corruption in the Memorial, and these Tribunals have the information necessary to find that the JVA and GPSA were procured by corruption. Despite our best efforts and the significant

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amount of evidence gathered, there is additional specific evidence known to exist that has thus far not been available to Respondents or the Tribunals.⁸¹

333 In this letter and at the Status Conference, the Respondents also requested that the Target Period be extended. In PO No 18 the Tribunals addressed this request and made the following comments about the scope of their enquiry:

In their letter of 26 January 2017 the Respondents requested that the Target Period be extended beyond the time fixed in Procedural Order No 15. In support of this request the Respondents argued that, prior to the BNP government, Niko laid the grounds for corruption and for making payments with the objective of corruption. While confirming that the corrupt system within the Government was limited to the period under the BNP Government between 2001 and 2006, the Respondents stated that the Sheikh Hasina Government was not corrupted but individual actors may have been. The Respondents continue to hold that the FoU was tainted by corruption and request that the Target Period be extended to the time prior to the BNP Government. The Respondents state that after the end of the BNP Government in early 2007, no corrupt payments were received by the Government from Niko.66

The Tribunals repeat here what they have pointed out at previous occasions: they are not a criminal investigator or court charged with punishing acts of corruption. Their mandate at this stage of these arbitrations is to determine whether the JVA and the GPSA were obtained by corruption. Acts of corruption which were not causal for the conclusion of the two agreements do not appear to be decisive for this determination.

It is the Respondents' case that BAPEX and Petrobangla themselves were not corrupted but were instructed by corrupted members of the Government to execute the JVA and the GPSA. No such corrupted Government instructions are alleged for the period prior to the BNP government. The Tribunals, therefore, see no justification for extending their examination beyond the Target Period, as defined in Procedural Order No 15. They do not exclude, however, evidence outside the Target Period and will consider it.⁸²

334 The corruption on which the Respondents relied in their Corruption Claim of 2016, had been the subject of intensive prior investigations in Bangladesh,

81 Respondents' letter of 26 January 2017 in preparation of the Status Conference on 30 January 2017. 82 PO No 18, paragraphs 102 – 104.

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Canada and the USA and a Joint Investigation between the authorities of these countries: The Respondents explained that, as soon as the BNP Government left office, the corruption during that period became the object of criminal investigations. BAPEX stated in its Memorial on Damages that the caretaker government, installed in Bangladesh on 12 January 2007, “spearheaded a massive anti-graft campaign, resulting in the arrest of the former Prime Minister Khaleda Zia and others involved in the Niko corruption". The investigation in Bangladesh was conducted by the Anti- Corruption Commission of Bangladesh (ACC).

335 Mr Ferdous Ahmed Khan described the investigations in Bangladesh in his witness statements and explained that the “Bangladeshi investigative teams were multidisciplinary groups made up of higher-level officials from different departments [...] working in concert with the Governments of Canada and the United States”. He played a key role in this investigation. Since 2007 he and his company Octokhan had been

... formally engaged to provide key strategic services to the Anti- Corruption Commission of Bangladesh, initially through the National Coordination Committee against Grievous Offences (‘NCCAGO') and then directly to the Anti-Corruption Commission, the Office of the Attorney General for Bangladesh and other agencies. [He] was appointed Special Assistant to Prime Minister Sheikh Hasina on corruption matters in 2009 and [his] appointment was renewed in 2014.

336 With respect to Niko, the ACC contacted the Canadian authorities, specifically the Royal Canadian Mounted Police (RCMP), which had started an investigation of Niko following the payment of travel expenses in the USA and the incident of the Toyota Landcruiser that had been delivered in June 2005 to a State Minister who resigned shortly thereafter, when the delivery of the car became public.⁸³ In the Niko matter, the ACC was also in contact with the U.S. Federal Bureau of Investigation (FBI) which took interest in the case because Mr Sharif, Niko's consultant and for some time Head of Niko's Bangladesh subsidiary, was a U.S. citizen.

337 The three organisations cooperated closely and shared the resulting evidence in the “Joint Investigation”. Mr Khan explained in his witness statement:

The vast majority of that evidence was gathered in Bangladesh in joint efforts between Canadian and Bangladeshi officials. This evidence was then given to the RCMP through the mutual legal assistance process to be

83 The incident is described in detail at Section 10.1 of the Decision on the Corruption Claim, mentioned also below in Section 7.5.6.4.

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processed, indexed and scanned to create a common source for the use of both countries and U.S. law enforcement agencies. It was returned to Bangladesh through the mutual legal assistance process and the RCMP stamp simply indicates that it has been shared with the RCMP, not that it was originally provided by Canada.

338 The Canadian investigations were conducted by Corporal Kevin Paul Duggan, a member of the RCMP. The Respondents highlighted the importance of this investigation:

According to Corporal Duggan, the Niko investigation involved assistance of the United States Federal Bureau of Investigation, City of London Police, the World Bank, and the United States Department of Justice, eight completed Mutual Legal Requests, 16 Production Orders, and 20 people interviewed in six different countries.⁸⁴

339 The investigations in the USA were conducted by Ms Debra LaPrevotte Griffith, Supervisory Special Agent at the FBI, where she had “instituted the agency's Kleptocracy Program” and had “seized more than $1 billion in corrupt proceeds”. In her first witness statement she explained that the FBI “was informed of numerous corruption investigations opened in Bangladesh", adding that she addressed first the “cases with a strong to the U.S.”. She travelled four or five times to Bangladesh and worked closely with the Bangladesh investigators, in particular the ACC. She explained:

Niko was one such case, because Niko used a U.S. citizen as one of its so-called consultants in Bangladesh and eventually made him President of its subsidiary in Bangladesh.

340 At the April 2017 hearing, Mr Khan testified that in March 2012 he handed over to Mr Nawaz, the Respondents' then counsel in the Arbitration, the evidence collected from Canada. After Mr Khan had been contacted by Foley Hoag around June 2016, instructed by the Principal Secretary in the Prime Minister's Office and “after due process” he handed over this evidence to the Respondents'new counsel in September 2016.⁸⁵ In his second witness statement he described the evidence that had been given to Foley Hoag for submission to the Tribunals, consisting of, as quoted above, in its “vast majority" of the evidence gathered in Bangladesh “in joint efforts between

84 Quoted in the Decision on the Corruption Claim, paragraph 814. 85 HT 2017 Day 2 (Confidential), pages 118 – 120, quoted in the Decision on the Corruption Claim, paragraph 841.

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Canadian and Bangladeshi officials” that was “processed, indexed and scanned” in Canada and then returned to Bangladesh.⁸⁶

341 The Joint Investigation was completed in Canada by the Agreed Statement of Facts, dated 23 June 2011,⁸⁷ that was considered already in the context of the corruption allegation in the Jurisdiction phase and discussed above in Section 4.1, containing the conviction of Niko for having delivered a Toyota Landcruiser to the State Minister and the covered the non-business-related expenses of his trip to Canada in 2005. Details were described in the Decision on Jurisdiction⁸⁸ and were summarised in Section 10.1 of the Decision on the Corruption Claim. The Agreed Statement of Facts recorded that “the Crown is unable to prove that any influence was obtained as a result of providing the benefits to the Minister". The Tribunals note that no other alleged acts of corruption were held against Niko in Canada.

342 In the United States the proceedings were discontinued. Ms LaPrevotte Griffith expressed her conviction that “the F.B.I. had a strong case to seize and forfeit the corruptly obtained assets of the U.S. citizen employed by Niko”, i.e. Mr Sharif, the principal representative of Niko during the negotiations for the JVA. She also asserted that “there was never any question of a lack of evidence that Niko engaged in bribery”.

343 Nevertheless, the United States Department of Justice determined in August 2011, “that it will discontinue its inquiry into potential violations of the Foreign Corrupt Practices Act (FCPA) by Niko Resources Ltd. (Niko)”. The Department explained:

While we have determined that prosecution is not necessary at this time in light of Niko's guilty plea in Canada, this letter should not be taken as an indication that we do not have concerns about Niko's compliance with FCPA.⁸⁹

344 The Department strongly encouraged Niko to adopt and implement policies and attached a “Corporate Compliance Program” to its letter. It also pointed out that “the Department may decide to restart this inquiry at any time”. The Tribunals have not been informed of any other action taken in the United States against Mr Sharif or Niko in relation to the project in Bangladesh.

86 WS II of Mr Khan, paragraph 10. 87 Exhibit R-215. 88 Decision on Jurisdiction, Section 9.2. 89 Letter of the U.S. Department of Justice to Baker Botts of 11 August 2011, produced as Exhibit D to the Statement of Kristine Robidoux, Q.C. of 6 September 2011, Exhibit C-222; see also Decision on Jurisdiction, paragraph 390.

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345 The evidence from the Joint Investigation was introduced in the Arbitrations with delay and piecemeal:

346 When the Respondents first raised allegations about corruption in 2011, they referred to the Canadian conviction based on the gifts to the Minister. In the context of a document production request, the Respondents made reference to the ACC investigations.⁹⁰ At the hearing in October 2011, the Respondents' counsel stated that an “investigation was going by the ACC and they have seized some files from Petrobangla” and the Claimant produced a charge sheet of which the Respondents' counsel was unaware. The Tribunals noted that “no further evidence was provided about the investigation by the ADD”.⁹¹ The Respondents made no reference to the evidence from the Joint Investigation, neither at the Hearing in October 2011 nor after March 2016 when, according to Mr Khan, this evidence had been made available to them; and the did not indicate that they had made any requests to access that evidence.

347 When they renewed the corruption allegation in the BMD of 25 March 2016, the Respondents identified the ACC as one of the principal sources of evidence for corruption and explained:

The evidence of payments made to obtain the JVA was discovered in the ACC investigation, and no court or tribunal has yet determined the validity of the JVA based on the evidence that it was obtained by bribery.

348 The Respondents added that until recently they did not have access to the evidence collected by the ACC and that BAPEX had not until the week of the filing in March 2016 received information from the ACC “to be able to share some evidence with the Tribunal. No mention was made of the evidence gathered by the ACC in the context of the Joint Investigation that Mr Khan had delivered to BAPEX's counsel in 2012:

Under the Bangladesh Anti Corruption Commission Act, 2004, the ACC is an independent statutory body entrusted with the powers to enquire, investigate, and file corruption cases. The Government has no control over the activities of the ACC and, for obvious reasons, the ACC has no obligation to share information with the Government, much less a company like BAPEX or Petrobangla. Other than the court orders available, BAPEX/Petrobangla have had no information on the content of the ACC investigation or what evidence was being gathered. BAPEX and Petrobangla have requested documentation from the ACC on the Niko

90 Decision on Jurisdiction, paragraph 419. 91 Decision on Jurisdiction, paragraphs 400 and 401; see also Decision on the Corruption Claim, Section 8.2.

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corruption case, and now that the trial has restarted, the ACC provided them with some of the evidence that it recently submitted to the Bangladesh court. Only this week has BAPEX received the information from the ACC to be able to share it with the Tribunal. The full record, however, is still not public and is not yet available to BAPEX.⁹²

349 In the subsequent proceedings on the Corruption Claim, the Respondents pursued a different approach: they did not rely on incomplete information received from the ACC. Instead, they requested “that the Tribunals issue a declaration that could be presented to the court” in Bangladesh. The requested declaration was to support an application of the Writ Petitioner in the Alam proceedings concerning evidence from Mr Khan. The Respondents explained that

... an individual consultant to the ACC, Mr. Ferdous Khan, has “substantial evidence of corruption in procurement of the Impugned Agreements” in his possession. The evidence in Mr. Khan's possession includes shared evidence from the Bangladesh, United States, and Canadian law enforcement investigations. Because this evidence is part of the ACC investigation, without authorization from the ACC or a Bangladeshi court order, such evidence is not available to Respondents or these Tribunals. If the court orders it, then the information should be released and be available for these Tribunals.

350 The Respondents complained that Niko opposed the request by the Writ Petitioner and added that the Petitioner had withdrawn the application requesting to compel Mr Khan to produce evidence.

351 The Respondents' request was considered at the Procedural Consultation on 10 August 2016. The Claimant objected to the Respondents' application. When, according to Mr Khan in September 2016, the Respondents received the evidence from the Joint Investigation, they did not withdraw the application. The Tribunals decided it in Procedural Order No 15 on 7 October 2016:

The Tribunals understand the explanations provided by the Parties about Mr Khan's evidence in the sense that he does not have any direct knowledge of the JVA and the GPSA nor of the alleged corruption; but that he is said to have in his possession evidence on such alleged corruption. There is no information about the evidence which he is said to have, except that Professor Shamsul Alam, in his application to the

⁹² BMD, paragraphs 39 and 41. ↩

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Supreme Court of Bangladesh, asserted that Mr Khan had in his possession “substantial evidence of corruption in procurement of the Impugned Agreements”.

In these circumstances, the Tribunals see no reason to pursue this allegation any further but leave it to the Parties to produce any relevant evidence which Mr Khan may have.⁹³

352 The Respondents then obtained directly from Mr Khan the evidence for which they previously they had requested the Tribunals' intervention with the court in Bangladesh.

353 The full extent of the Joint Investigation and of the Respondents' access to the evidence gathered by it became clear in Mr Khan's second witness statement of 17 February 2017 and at the hearing in April 2017.

354 The Tribunals saw no indication that the Canadian investigators withheld any evidence and noted Mr Khan's understanding of the joint effort of gathering the evidence which was “processed, indexed and scanned to create a common source for the use of both countries and the U.S. law enforcement agencies”. The Tribunals noted that they had no reason to believe that the RCMP or the FBI withheld any evidence relevant for Niko's alleged corruption. The Tribunals concluded:

... it is now clear to the Tribunals that any intervention of the Tribunals in Canada and the United States are not likely to produce evidence beyond that which is available in Bangladesh and accessible to the Respondents.⁹⁴

355 In the examination which the Tribunals organised when they addressed the revised Corruption Claim, the examination of financial flows was a central element: the Respondents relied on the World Bank Module on Planning an Investigation of Corruption and described the acquisition and analysis of financial information to “follow the money” as a “key aspect of a corruption inquiry". They requested

... financial documents showing transfers or payments of funds to Bangladesh, including from or on behalf of Niko to Mr Qasim Sharif, Mr AKM Mosharraf Hossain, Mr Giasudding Al Mamun, and Mr Selim Bhuiyan, among others. The study of financial information to track payments that might have been used for corruption must be done by

⁹³ PO No 15, paragraph 56. ↩

⁹⁴ Decision on the Corruption Claim, paragraph 829, highlighted in the original. ↩

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specialized financial experts “including financial investigators and experts in financial analysis, [and] forensic accountants [...]. Thus, Respondents reserve their right to have a financial expert review all financial information presented by Niko.

356 The Respondents also requested that

... Niko be ordered to make its financial records available to an independent financial expert for review. Respondents are prepared to appoint an expert for this purpose and would, of course, agree to have Niko appoint an expert as well. Respondents also believe it would be useful for the Tribunals to appoint its [sic] own expert or experts.

357 The Tribunals considered the Claimant's explanations about the financial records. In PO No 15 they recorded that the Claimant was prepared to produce these records and gave the following directions:

During the September 2016 Procedural Consultation the Claimant stated that it was prepared to produce complete records of all payments to Bangladesh made by any of the companies of the Niko Group. The Tribunals accept this production as a possibly sufficient measure in the production of financial records; but they reserve the right to consider the adequacy of this approach, once the production has been made and the Respondents have had an opportunity of commenting thereon. In particular, the Tribunals reserve the right to order a statement of the auditor of the Niko Group, as it had been announced in the draft of the present Procedural Order prior to the September 2016 Procedural Consultation.

358 Considering that the Niko Group produced consolidated accounts for the fiscal years ending on 31 March, the Tribunals concluded that any payment from a company of the Niko Group to third parties in Bangladesh must be reflected in these consolidated accounts. The Tribunals advised the Claimant to make the necessary preparatory arrangements so that the auditor may produce on short notice

... a statement identifying any payments during the fiscal years ending 31 March 2001 to 31 March 2004 which the Niko Group made to beneficiaries in Bangladesh, including Stratum, identifying each beneficiary and the amounts received. In view of these directions, the Tribunals see no need, at this stage, to make further directions concerning the financial records of the Niko Group.

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359 The Claimant did produce financial records. The Respondents were of the view that the production was insufficient. They produced with their letter of 23 November 2016 an opinion of Duff & Phelps, “a global financial firm with expertise in complex valuation, disputes, compliance, and regulatory consulting, among other topics”. In this opinion, the firm stated:

The documents provided by Niko were unorganised, incomplete, and do not meet the level of documentation needed to conduct a proper corruption examination...

360 In the correspondence leading up to the Status Conference on 30 January 2017, the Respondents made an application concerning the appointment of a financial expert by the Tribunals. In their letter of 26 January 2017, they wrote:

Specifically, Respondents maintain that the Tribunals should reconsider, as envisaged in Procedural Order No. 15, [...] ordering Claimant to open its financial records for the entire relevant period (2001-2006) to review by an independent financial expert.

361 The Claimant responded that the Respondents had produced extensive financial records of third Parties but did not tender any report from a forensic expert. The Claimant added that it did not see any justification why it should commission such a forensic expert concerning its own records. Concerning the Respondents' complaint about the insufficiency of the records on Niko's payments which it had produced, the Claimant asserted that the Respondents did not argue that channels of payment other than those indicated by the Claimant were used; rather they questioned the Claimant's explanations concerning the use of the funds transferred to Bangladesh. The Respondents confirmed that, other than the note by Duff & Phelps, their experts had not produced any opinion on the documents disclosed by the Claimant.

362 The Respondents stated that the Claimant had not provided the necessary information that experts would need to conduct an analysis of possible corruption emanating from Niko's accounts. The Respondents then extended the requested information beyond what had been ordered in PO No 15, requesting on 14 March 2017, correspondence and records of reports, insisting that, according to Duff & Phelps, “complete records” included:

copies of checks, deposit slips, records of electronic transfers, invoices to support payments, receipts, and general legers to understand the payments between Niko, Stratum, Mr Sharif, Mr Bhuiyan, Mr Mamoon and others, including payments through intermediaries and foreign accounts.

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363 The Respondents also requested “all reports by Mr Sharif or Stratum ‘on the use of funds' received from Niko”; and “correspondence and other documents, pertaining to payment negotiations or received by Five Feathers for any services provided”.

364 By the time of that request, the Tribunals had learned from the witness statements of Mr Khan and Ms LaPrevotte Griffith that the Joint Investigation had conducted an extensive collection of evidence for the financial transactions of the Niko Group. In PO No 18, of 23 March 2017 the Tribunals concluded that the Respondents had access to the results of this investigation or, at least, failed to demonstrate that they made diligent efforts to gain such access. The Respondents indeed had shown by some of the evidence produced with their submissions on the Corruption Issue that at least some of the evidence now requested from the Claimant was in their possession. The Tribunals concluded:

In these circumstances, the Tribunals see no justification to order the Claimant to produce documents of a type that had been made available already by the Niko Group and others during the course of the joint investigation and of which at least the “vast majority” is in the possession of the Bangladesh authorities and available to the Respondents. The request is denied.

365 With respect to an allegedly incomplete production of documents in the Respondents' list the production of which had been ordered previously, the Tribunals organised in PO No 18 an exchange to determine with specificity the allegedly incomplete productions. The Tribunals announced that they may draw adverse inferences if it appears to them that the document production remained incomplete and without convincing explanations for missing documents.

366 The Respondents then listed on 31 March 2017 the documents they had received and commented in particular on the financial documents. They explained why they considered these documents as incomplete; quoting the Duff & Phelps opinion reproduced above.

367 In its letter of 7 April 2017, the Claimant referred to the document production orders of the Tribunal in PO Nos 13 and 15 and Niko's commitments to the Tribunals, asserting that there were no outstanding documents or documents responsive to the Tribunals' orders. It also referred to Niko's agreement to produced certain records and asserted that it had fully complied with this agreement and explained that it:

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... disclosed all documents it was able to identify as falling within the above description that are in its possession or control. This included, but was not limited to: complete bank records for the Targeted Period; the pertinent data from IDEAs accounting software respecting the Targeted Period, as well as underlying transactional support (such as invoices, vouchers and cheques where available) for any payments over US$5,000 dollars. With respect to the US$5,000 threshold, as Niko pointed out in its letter of 9 December 2016.⁹⁵

368 The Respondents declared at the Pre-Hearing Conference that they were not satisfied but declared that they saw “no need for further submissions on the topic". In PO No 19 the Tribunals noted that the new list of correspondence and other documents requested by the Respondents on 14 March 2017 had a “very broad scope”, some failed to identify documents with specificity but instead described subjects of enquiry, yet others were of doubtful relevance – or seemed to be available in Bangladesh. The Tribunals considered that the documents and information sought by the Respondents on 14 March 2017 must have been considered by the Joint Investigation and stated that they saw:

... no justification to initiate now, one year after the Corruption Issue had been raised by the Respondents, such measures which, at best, would be duplicative of the joint investigation performed by organisations of incomparably greater means of investigation.⁹⁶

369 Other requests by the Respondents focused on evidence allegedly available in Canada: In its Memorial on Damages of 25 March 2016, BAPEX relied on a document referred to as the Duggan Affidavit.⁹⁷ This is a heavily redacted document, recording the declaration of Corporal Duggan before the Provincial Court of Alberta. The investigation to which this affidavit relates does not concern Niko directly but an officer of the Canadian Government: this officer was accused of having used his office “to lobby on behalf of a private company”. The Respondents explain that that private company was Niko and quote from this document by completing redacted passages a statement that the Canadian investigations “uncovered information that [Niko] used bribes to influence [Bangladesh] public officials in order to secure the Joint Venture Agreement with state-owned [BAPEX]"⁹⁸

⁹⁵ Claimant's letter of 7 April 2017, quoted in the Decision on the Corruption Claim, paragraph 929. ↩

⁹⁶ Decision on the Corruption Claim, paragraph 931. ↩

⁹⁷ BMD, in particular paragraphs 28 and 55; Exhibit R-213. ↩

⁹⁸ BMD, paragraph 52, quoting from Exhibit R-213, paragraph 6. ↩

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370 This document was at the start of a series of applications by which the Respondents sought evidence from the Canadian investigation. In a first phase, the Respondents requested on 10 May 2016 “an order from the Tribunals to compel Niko's cooperation to seek [a less redacted] version from the Canadian authorities”. The Tribunals denied the request in PO No 14 for reasons of doubtful evidential value and lack of possibilities of questioning Corporal Duggan.

371 The Respondents applied on 9 August 2016 for reconsideration, inviting the Tribunals to make an application to a court under the Canada and Alberta Evidence Act “to order the examination of” Corporal Duggan and “command [his] attendance [...] for the purpose of being examined”. Corporal Duggan thus would be available for cross examination and Niko's due process concerns could be resolved. The Tribunals continued to have doubts about the evidentiary value of Corporal Duggan's testimony and noted that there was no assurance that he would appear at a hearing before the Tribunals.

372 In a letter of 26 January 2017, the Respondents again asked for reconsideration, “seeking evidence from the Canadian investigation". The request was discussed at the Status Conference on 30 January 2017 following which the Respondents provided further details in their letter of 3 February 2017: the Tribunals were invited to make and application to the Alberta Court of Queen's Bench requesting the assistance of the Court in obtaining evidence. The Respondents then proposed on 10 February 2017 a draft of that application on ICSID letterhead but signed by the President of the Tribunals, addressed to the Alberta Court and requesting from that court an order “to compel the testimony and production of documents from the RCMP and testimony from Corporal Kevin Duggan of the RCMP ...”. The draft specified the requested documents and video recordings and the manner in which Corporal Duggan would be interrogated by the Tribunals.

373 One of the requested documents concerned the redacted version of an affidavit of Corporal Kevin Duggan of the Royal Canadian Mounted Police (RCMP) with respect to which they sought assistance in obtaining an un-redacted or less redacted version. Another request concerned information “relating to the ACC and the Canadian investigation and possibly the US investigation” which the law firm of Gowlings Lafleur Henderson LLP, the Claimant's previous counsel, had mentioned during the jurisdictions phase

374 This was followed by a further exchange in which the Claimant on 15 February 2017 and the Respondents on 28 February 2017 discussed further aspects of the application, in particular the question whether in ICSID

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arbitration a tribunal has the power to enlist the assistance of a national court.

375 The Tribunals examined the Parties' arguments and decided the application in PO No 18 of 23 March 2017.

376 Concerning the powers of the Tribunals to make the request to the court in Alberta, the Respondents had quoted Gary Born on International Commercial Arbitration who referred to had referred to some national laws providing that the parties may seek the assistance of a national court in obtaining disclosure of materials for use in the arbitration and who stated:

If carefully applied, in order to assist and not undermine the arbitral process, judicial assistance in evidence-taking should be no different from court-ordered provisional relief in aid of arbitrations – including foreign arbitrations.⁹⁹

377 While such powers of arbitral tribunals in commercial arbitration were not contested, the Claimant argued that “the ICSID Convention is a self-contained system that does not contemplate parallel resort to national courts”. It referred to Article 26 of the ICSID Convention providing that, unless otherwise stated, consent to ICSID arbitration is “to the exclusion of any other remedy"; the Claimant concluded:

A consequence of the Convention's stand-alone dispute settlement regime is that, contrary to accepted practice in commercial arbitration, resort to national courts for provisional measure in aid of arbitration is not permissible unless the parties explicitly agree to it.

378 The Claimant also quoted from the commentary on the ICSID Convention of Professor Schreuer:

The Convention does not provide for the right of an ICSID tribunal to enlist the assistance of national authorities, notably domestic courts, to obtain evidence. Under Arbitration Rule 39(6), the parties may agree that provisional measures may be requested from domestic courts. But such requests may be made by the parties only. There is no explicit legal basis for a tribunal's request for judicial assistance.¹⁰⁰

⁹⁹ G. Born, International Commercial Arbitration, 2nd ed., 2014, pages 2320 and 2420. ↩

¹⁰⁰ C. Schreuer et al., The ICSID Convention – A Commentary, 2nd ed., 2009, Article 43, at pages 653 – 654, paragraph 52, referenced in the Claimant's letter of 15 February 2017, page 3. ↩

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379 The Tribunals noted that the Convention lays the primary responsibility on the parties to assist tribunals by bringing forward the evidence necessary to the fair disposition of the dispute; nevertheless, it held:

For the purpose of this decision, the Tribunals are content to assume, without finally deciding, that, despite the absence of such an express power, an ICSID tribunal may, in an appropriate case where it is satisfied that a request under Article 43(a) of the Convention would be unavailing, be entitled to issue a request for assistance in the collection of evidence to a national court or (in what would likely be the more suitable step) to permit a party to pursue such a request directly. Although no such power is expressly included in the Convention and Rules, neither is it expressly excluded. It might be said that such a request for assistance, when issued under the control of the tribunal, supports its exclusive jurisdiction and does not undermine it, since it submits no part of that jurisdiction to the national court.¹⁰¹

380 The Tribunals also pointed out that the request which the Respondents invited it to address to the Alberta court would be a very unusual step; indeed the Respondents had not found any precedent. Such a request would be an exception to the general principle, mentioned above, according to which the production of evidence is the responsibility of the parties to an arbitration. The Respondents accepted that such an intervention would be conditional on a number of requirements being met. They identified the requirements under the Canadian Evidence Acts. And they have referred to Article 3.9 of the IBA Evidence Rules, the latter corresponding to a large extent to those of the requirements in Canada.

381 The relevant provisions under the IBA Evidence Rules require that the requested documents are “relevant to the case and material to its outcome” and the requesting party must state that the requested documents are “not in the possession, custody or control” of the requesting party. The Tribunals therefore examined whether the evidence which the request to the Alberta court was available to the Respondents. They observed:

For almost a year the Respondents have sought through various initiatives to involve the Claimant and the Tribunals in gathering evidence of which “the vast majority” is in the possession of the authorities in Bangladesh.

¹⁰¹ PO No 18, paragraph 70. ↩

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382 The Tribunals summarised the varying statements that the Respondents had made about limitations in the availability of the ACC evidence and the Joint Investigation; they asserted that they made efforts to obtain this evidence but gave no explanations about the steps they had taken as part of these alleged efforts. And the Tribunals noted that in his second witness statement, Mr Khan explained that he understood “that providing this evidence to the Arbitral Tribunal is appropriate and the information was given to the Tribunals with the consent of the Government”. The Tribunals concluded:

In these circumstances, the Tribunals do not accept that the Respondents do not have access to the evidence from the joint Bangladeshi/Canadian investigation. The Respondents have not alleged that any of the items of evidence they seek to obtain through the Alberta Court were not included in the “vast majority” of the evidence gathered and exchanged in this investigation. The Tribunals see no justification to intervene with a court in Canada in order to obtain evidence which is available in Bangladesh and of which the Respondents have not shown that it is not accessible to them there.

383 The Tribunals also considered the “relevance and materiality" of the videos and transcripts that the Respondents had identified in the proposed application to the Alberta court. The Claimant had asserted that the material requested was “not properly evidence". While they did not believe that the material as such was excluded as evidence, the Tribunals were of the view that it had to be considered with great caution and considered it of limited probative value. For this reason, too, the Tribunals dismissed the Respondents' request for an application to the Alberta court.

384 After the April 2017 Hearing and after the evidentiary record for the Corruption Claim had been closed by PO No 20 of 17 May 2017, the Respondents wrote to the Tribunals on 23 August 2017, communicating a letter which the Deputy Commissioner, Federal Policing of the RCMP had addressed on 21 April 2017 to the Attorney General of Bangladesh (the RCMP letter), in response to a request from the latter dated 26 March 2017.

385 The RCMP Letter described the 26 March 2017 request:

In your letter, you ask that the RCMP meet with your designee, Mr. Ferdous Khan, to discuss your request that the RCMP grant permission for Corporal Kevin Paul Duggan to provide a written statement and be available to be cross-examined in Paris, France during the scheduled hearing (April 24-29, 2017), and to grant permission for Corporal Duggan to use relevant evidence in possession of the RCMP for his witness statement.

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386 The letter continued by describing the RCMP's understanding of PO Nos 14 and 15 as an indication that the Tribunals did “not wish to hear from the RCMP, either through documentary evidence or through witnesses”. The RCMP concluded that it was “unable to voluntarily participate in the matters before the Tribunal”. The letter continued, however, by referring to the possibility of a request from the Tribunal. It did not say that Corporal Duggan would then appear before the Tribunal but that the RCMP “would then consider [the request] before determining how to proceed”. The relevant passage of the RCMP Letter reads as follows:

The RCMP is impartial with regards to the matters before the ICSID. If further involvement is required by either the Claimant (Niko) or Respondents (Bapex and Petrobangla), the RCMP would need a request from the Tribunal, which it would then consider before determining how to proceed.

387 In their letter of 23 August 2017, the Respondents described the RCMP letter as an "invitation” and stated:

The RCMP's invitation opens the possibility for the Tribunals to obtain the RCMP's evidence directly, without having to go through the Canadian Court procedures previously described by the Respondents.

388 The Claimant responded on 25 August 2017 stating that the Respondents' request for “reconsideration, for the essentially the fourth time” of the Tribunals decision concerning requests to the Canadian authorities. They declared that the “Respondents' submission is inadmissible on its face and therefore requires no response".

389 The Tribunals noted that the RCMP letter did not contain an “invitation" to the Tribunals; in case “further involvement” of the RCMP was required by Niko or the Respondents, the RCMP would “consider” and would determine how to proceed. Nor did the Respondents' letter of 23 August 2017 request specific action from the Tribunals. Therefore, the Tribunals informed the Parties on 11 September 2017, that they would address the matter in due course when this may become necessary.

390 In the Decision on the Corruption Claim, the Tribunals pointed out that they had accepted to hear the testimony of Ms LaPrevotte and Mr Khan, two of the investigators. They did not refuse to hear Corporal Duggan, contrary to what the RCMP seemed to have been made to believe. The Respondents failed to bring the correspondence about Corporal Duggan's testimony to the attention of the Tribunals at the Hearing or at any time before the closing of the

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evidentiary record on the Corruption Claim; the Tribunals did not see a justification for re-opening of the evidence. The Tribunals added:

As to the documentary evidence held by the RCMP to which the Respondents made reference in their 23 August 2017 letter, the Tribunals have pointed above to the very close cooperation between three agencies investigating corruption the Niko case. The Respondents have not shown any evidence nor even argued that the RCMP refused a request from the Bangladeshi authorities to share evidence gathered in the Niko investigation. The RCMP letter of 14 April 2017 does not indicate the contrary.¹⁰²

391 At the April 2017 hearing, Mr Hornaday referred to an investigation (also referred to as “audit”) by Deloitte & Touche Forensic & Investigative Services Inc. Calgary (Deloitte). He mentioned specifically a PowerPoint presentation concerning the result of the investigation. The Respondents requested the production of this presentation and related documents. The Claimant explained that Deloitte was engaged by Gowlings Lafleur Henderson LLP Calgary (Gowling), in support of the legal advice they were providing to Niko Canada. The Claimant produced the Deloitte Engagement Letter ¹⁰³ and invoked privilege.

392 By PO No 20 of 17 May 2017, the Tribunals ordered the Claimant to produce a list of all relevant documents, identifying those for which privilege was claimed and to produce those for which no privilege had been claimed. The Claimant produced the lists and documents of which some were redacted. The Respondents objected and requested information and documents. The Tribunals gave further directions in PO No 21 of 4 June 2017.

393 In the Claimant's submission on privilege of 22 May 2017 and the Respondents' Response on Privilege of 9 June 2017, the Parties discussed the factual background and argued in particular the rules concerning -Solicitor-Client Privilege and Litigation Privilege in Canadian law. In PO No 22 of 27 July 2017, the Tribunals summarised the factual background:

On the basis of the evidence produced by the Claimant, the Tribunals conclude that around early 2009 Niko Canada became aware of an “investigation of allegations of improper payments made by Niko Resources Ltd. and/or its subsidiary in Bangladesh and other locations”,

¹⁰² Decision on the Corruption Claim, paragraphs 868 and 869. ↩

¹⁰³ Exhibit C-238. ↩

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that it retained Gowlings who in turn engaged Deloitte to conduct the enquiry.

394 The Tribunals determined that the issues had to be decided on the basis of Canadian law. The explained the difference between Solicitor-Client Privilege and Litigation Privilege in Canadian law. The Tribunals examined the argument and evidence produced and concluded with respect to Solicitor-Client Privilege:

The Tribunals conclude that some and possibly many of the documents for which the Claimant asserts privilege do indeed attract solicitor-client privilege or at least may require redactions. The decision about their production requires further information from the Claimant and an examination of the documents themselves possibly by an independent expert. Before initiating a procedure to this effect and engaging time and resources in it, however, the Tribunals have examined the other basis on which the Claimant asserts privilege.

395 With respect to Litigation Privilege, the Tribunals concluded:

... the internal investigation, as it was initiated by Niko's engagement of Gowlings and then continued by the engagement of Deloitte, had as the dominant if not sole purpose to prepare Niko's defence against court or other proceedings relating to the allegations of corruption in Bangladesh. To that extent, the investigations by Deloitte and the documents and information produced by them are covered by the litigation privilege as protected by Canadian law.

[...]

The Tribunals conclude that the Claimant's defence against the Respondents' Corruption Claim is so closely related to the Gowlings-Deloitte investigation that the “protected area” of the litigation privilege of the latter extends to the former. The Tribunals accept that the Claimant may assert litigation privilege against the Respondents' request for production of the Deloitte documents.

396 In view of this conclusion, the Tribunals saw no need to resolve the remaining uncertainty with respect to solicitor-client privilege. The Respondents also had alleged that, in his testimony at the hearing, Mr Hornaday had waived Niko's privilege. The Tribunals concluded that

... the answers provided by Mr Hornaday to the questions of the Respondents' counsel and the Tribunal did not present direct evidence about the content of the Deloitte documents nor about the conclusions

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reached by Deloitte. They are not to be treated as a partial revelation of information protected by privilege and do not justify treating the privilege over the Deloitte documents as waived.¹⁰⁴

397 The Tribunals held that the Claimant was entitled to invoke privilege against the production of the Deloitte documents; the Respondents' request for the production of these documents was denied.

398 In the Decision on the Corruption Claim, the Tribunals explained the different sources through which evidence was available specifically to the Respondents and the efforts the Tribunals had made to contribute to the gathering of the evidence. The Tribunals also asked whether gaps remained in the evidence and concluded:

... the Tribunals point out again that any gaps in the evidence that remained at the end of the proceedings are attributable primarily to the Respondents who insisted through repeated procedural initiatives on involving the Tribunals in the search for evidence which must be available in Bangladesh. The Tribunals have not drawn from these disruptive initiatives inferences adverse to the Respondents. They will decide the Corruption Claim on the basis of the evidence that was brought before them.¹⁰⁵

4.3.2 The Decision on the Corruption Claim

399 The Decision on the Corruption Claim was issued on 25 February 2019. The Respondents' case was very broad and was summarised in the assertion that "Niko's corruption tainted the entire decision process”.¹⁰⁶ The Tribunals therefore had to examine all governmental acts allegedly procured by corruption, starting with Niko's first proposals in 1997 and Niko's qualification for having its proposal considered in 1998, through the FOU, the MFA and the various steps in the negotiations for the JVA to the Government approval for that agreement in 2003; and the negotiations of the GPSA from 2004 until its conclusion in December 2006. The Tribunals also examined the various forms that Niko's corruption was said to have taken, in particular the use of consultants and “layering” and it examined specific payments that the Respondents had identified as “suspect". Examining the large amount of evidence presented to support allegations of a system of corruption with many acts of corruption over an agreed Targeted Period of four years from 2001 to

¹⁰⁴ PO No 22, paragraphs 63, 88, 98 and 139. ↩

¹⁰⁵ Decision on the Corruption Claim, paragraph 963. ↩

¹⁰⁶ Respondents' Reply on Corruption, paragraph 104 et passim. ↩

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2004 but with alleged acts of corruption starting in 1997, in a context described as a “state of Kleptocracy”¹⁰⁷, required much time and effort resulting in a decision of 571 pages.

400 In their examination of the large and complex corruption allegations the Tribunals noted that the explanations of the Respondents and some of their experts on numerous occasions were at odds with the evidence in the record and ultimately failed to support their allegations. In many respects these explanations required substantial corrections in the pattern of facts; when these corrections are made, the picture of Niko and its activities in Bangladesh was found to be significantly different from that painted by the Respondents.

401 The Respondents and their experts assimilated Niko and its project for the development of marginal and abandoned gas fields to other targets of the Joint Investigation, which paid bribes to obtain lucrative contracts under which Bangladesh paid important sums to foreign companies. Ms LaPrevotte Griffith asserted that in “many ways the Niko tender or bid was very similar” to that of a large international corporation that was awarded a contract under which Bangladesh paid USD 40 million; and that thanks to her action USD two million were forfeited and refunded to Bangladesh.

402 In the case of Niko, Ms LaPrevotte Griffith “was confident that we could show that the assets in question were subject to forfeiture as proceeds of corruption by Niko in Bangladesh”. She did not explain what assets in the case of Niko would be forfeited “as proceeds of corruption”. Indeed, Niko did not receive payments from Bangladesh but had to make investments that produced returns both for Niko and BAPEX. Niko's project was welcomed by BAPEX and Petrobangla as it provided for production of gas from gas fields abandoned by other companies or too marginal to interest others.

403 The Respondents' case about Niko's corruption amounts to stating that from the time when it first proposed the project of marginal and abandoned gas fields in 1998 until October 2003, when the JVA was concluded Niko progressed by corruption. It identified the steps of this progress in three groups and for each of these groups they identify the evidence for the alleged corruption. In the Decision on the Corruption Claim, the Tribunals have examined each of the listed steps in each of the three groups and the alleged acts of corruption. The first of these three groups included the following steps:

¹⁰⁷ See in particular Decision on the Corruption Claim, Section 10.2. ↩

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Approval of Niko's proposal to be considered to develop marginal fields, FoU, and draft Procedure for Development of Marginal/ Abandoned Gas Fields.¹⁰⁸

404 The Tribunals considered these steps in sections 4.1 and 9.1 to 9.4 of the Decision on the Corruption Claim. They noted that the Respondents asserted that, when seeking to procure the JVA and the GPSA, Niko “did not have the technical and financial capacity to obtain these rights through legitimate procedures”. The Respondents argue that Niko used corrupt means to achieve its acceptance by the Government, Petrobangla and BAPEX as a competent partner for the development of marginal/abandoned fields: “the only way Niko could enter into the oil and gas market in Bangladesh” was “the promise and payment of bribes”.¹⁰⁹

405 The assertion about the lacking technical and financial capacity is based on the evaluation of Niko's bid in the 2nd bid round for PSC for Blocks 9 and 10 in 1997.¹¹⁰ Mr Elahi, who had not participated in the bid evaluation, testified that he "learned” that Niko “was disqualified from the bid process because it was found to be unqualified for such a project”; Ms LaPrevotte Griffith testified that, when she started her investigation,

...the first thing I learned is that Arthur Andersen had deemed Niko unqualified to explore gas in Bangladesh.¹¹¹

406 The Claimant contested the relevance of the PSC bid evaluation process and its results which it described as a “fundamentally different process” and it contested the scoring process applied in the evaluation of the PSC bid it concluded:

... it is entirely misleading for the Respondents to use the PSC bid evaluation results to cast aspersions on Niko's qualifications, particularly to undertake a marginal field development project.¹¹²

407 The Tribunals examined the evidence and noted that the evaluation did indeed rank Niko the lowest among the bidders; but there was no evidence for a disqualification or a finding that Niko was “unqualified to explore gas in Bangladesh”. The criteria used for the ranking in the bid evaluation included

¹⁰⁸ Respondents' Post-Hearing Brief of 12 July 2017, paragraph 4. ↩

¹⁰⁹ BMD, paragraph 1. ↩

¹¹⁰ About this bidding round and a letter by Arthur Andersen about this process, see Decision on the Corruption Claim, paragraphs 393 and 294. ↩

¹¹¹ Transcript of the April 2017 Hearing, Day 3, page 169, quoted at Decision on the Corruption Claim, paragraph 971. ↩

¹¹² C-CMC, paragraph 77. ↩

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the number of proposed wells and their depth and the seismic tests (weighted at 45%) and technical capability by the number of countries of activity. The Tribunals concluded that the ranking in the PSC bid process had little if any relevance with respect to Niko's qualification for its proposal concerning marginal and abandoned gas fields.¹¹³

408 There was no evidence in the record showing that, when BAPEX and Petrobangla received in 1998 Niko's proposal about the marginal and abandoned fields, Niko was considered unqualified for developing such fields. Quite to the contrary, when BAPEX commented on this proposal and Petrobangla prepared a note about the proposal on the basis of these comments,¹¹⁴ Petrobangla pointed out the interest of the proposed development of “these marginal fields [which] still have some salvageable infrastructure and produc[ible] quantum of gas”. Petrobangla's comments considered Niko's proposal “attractive” and noted: “We have not much to lose, if anything. We have rather much to gain if a proper MOU/contract is entered into safeguarding our basic interests”. The Respondents produced these comments and relied on them in another context. Later they expressed “doubts about the provenance of this document”. Having considered the Respondents' reasons for these doubts, the Tribunals saw no reason to doubt that the document reflected the considered joint opinion of BAPEX and Petrobangla.¹¹⁵ Indeed, the minutes of a high-level meeting at the Ministry of Electricity, Fuel and Minerals on 26 January 1999, record similar statements by the representative of Petrobangla.

409 In any event, the Tribunals noted that BAPEX negotiated the terms of the JVA and did not question the qualification of Niko for performing the work required under the JVA. The Tribunals concluded that “Niko's June 1998 Proposal was welcomed by the Respondents as an economically interesting contribution to the supply of gas in Bangladesh". The Tribunals also concluded that the evidence did not support the Respondents' assertion that “the only way Niko could enter into the oil and gas market in Bangladesh” was “the promise and payment of bribes”.¹¹⁶

410 The Framework of Understanding (FOU) was the next step listed by the Respondents in the first of the Respondents' groups of steps procured by corruption. It brought a change from what, according to the record, was discussed at the high-level meeting at the Ministry of Electricity, Fuel and

¹¹³ Decision on the Corruption Claim, paragraphs 980 – 983. ↩

¹¹⁴ Exhibit R-267. ↩

¹¹⁵ Decision on the Corruption Claim, paragraphs 995 – 997. ↩

¹¹⁶ Decision on the Corruption Claim, paragraphs 999 and 1004. ↩

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Minerals on 26 January 1999 just mentioned, that was chaired by the Secretary of the Department and attended inter alia by four Deputy Secretaries, the Chairman and two Directors of Petrobangla, and the Managing Director and General Manager of BAPEX. The minutes of the meeting record that after “details discussion” the gas fields of Chattak, Feni and Kamta “might be developed” as per Niko's proposal; the JVA “shall be finalised" and a MOU be signed.

411 That approach was confirmed in a letter of 25 May 1999 in which the Ministry informed Petrobangla of the Government's decision on the “Implementation of proposal of Niko Resources of Marginal Gas Fields Development and Production", providing that the “gas fields at Chattak, Kamta and Feni may be developed and produced under the concept of “Marginal Gas Field Development” under joint collaboration of Niko and BAPEX”. BAPEX had informed Niko already on 6 May 1999 of this development and invited Niko “to send your authorised representative to draft the Joint Venture Agreement as early as possible”.

412 At the initiative of the Respondents, the approach was changed. Instead of concluding the JVA, Niko had to accept an additional step, a study “to provide for the estimation of recoverable reserves [...] to predict the production characteristics of proven and potential reservoirs in the Study Area”. The FOU provided that this study was to be performed as a joint venture between Niko and BAPEX; it was signed on 23 August 1999. Niko claimed that it spent USD 1.5 million on its work for the Study. The Canadian International Development Agency (CIDA) had granted an amount of not exceeding Canadian Dollars 101’650 for a “Viability Study”. The work under the FOU produced the Marginal Field Evaluation of February 2000.

413 Finally, the Respondents presented as a step procured by corruption the “draft Procedure for Development of Marginal/ Abandoned Gas Fields”. This procedure was prepared during the first half of 2001 by the Ministry of Power, Energy and Mineral Resources. This procedure defines marginal gas fields and regulates the procedures for awarding contracts for the development of marginal/abandoned fields. It was approved by the Prime Minister on 14 June 2001.¹¹⁷

414 The charge sheet in the proceedings against former Prime Minister Khaleda Zia contained a passage concerning the Marginal Field Procedure: “the then Prime Minister (Sheikh Hasina) approved an illegal system called ‘Procedure for Developing Terminal [sic] and Abandoned Gas Fields on 14-6-2001”. The

¹¹⁷ Decision on the Corruption Claim, paragraphs 446 - 462, specifically paragraph 456. ↩

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High Court Division, in an order of 5 November 2015 concerning Sheik Hasina, concluded that “no such allegation that the process of approving the 'procedure' by her involved any unlawful financial or other transaction”. The criminal proceedings against her were quashed.¹¹⁸

415 Concerning the steps on the way to the JVA just discussed, the Respondents presented the following related acts of corruption:

• Sharfuddin Ahmed's efforts to earn US$ 1 million success fee, including spending US$100,000 on “incidentals” to get the FoU approved;
• Mr. Sharif's payments to lower level officials at Ministry of Energy;
• Mr. Sharif's payments of US$ 54,000 to the brother of the then Secretary of Energy.

416 The Tribunals examined each of these alleged acts of corruption. Before reporting on the conclusions reached by the Tribunals with respect to each of these allegations, the Tribunal notes a general contradiction in the Respondents case. That case, as mentioned already, relies on corrupt practices of Niko, from the time it entered Bangladesh. This includes the period just described from 1997 to the Procedure for Development of Marginal/Abandoned Gas Fields, adopted in June 2021:

... it is clear that Niko, from the moment it entered Bangladesh [...], used bribery and corruption to obtain favourable decisions from the Government and procure the JVA and GPSA.¹¹⁹

417 Elsewhere in their submissions, the Respondents had presented a different position. They argued that this alleged corrupt system, Niko's corrupt modus operandi, as described by themselves and the various Investigators, was set up only once the BNP Government with Prime Minister Begum Khaleda Zia at its head came to power; she was sworn in on 10 October 2001. Niko's systematic corruption, as described by the Respondents, thus can have started only in late 2001 or 2002. This is indeed what the Respondents have asserted in one of their submissions:

¹¹⁸ Exhibits R-211, R-230 and R-230; discussed in the Decision on the Corruption Claim at paragraphs 366-368. ↩

¹¹⁹ Respondents' First Post-Hearing Brief on the Corruption Claim, paragraph 4, quoting from the Respondents' Opening Statement at the April 2017 Hearing; HT 2017 Day 1, pages 72, lines 21 - 24, 122, line 12-123, line 22 (Mr Argueta). ↩

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The behind the scenes corrupt activities to influence the negotiations and approval of the JVA began in 2002.¹²⁰

418 It is true that the Respondents do not exclude that incidents of corruption occurred during the government of Sheikh Hasina who left office in July 2001. Such instances, however, did not in the Respondents' submission implicate that Government; they contend that during the years 1997 to 2001 the subsequent network of corruption did not exist – or at least was not connected to the power of the government then in place. Indeed, the criminal proceedings against Sheik Hasina that had been initiated with respect to the Niko case during her period in power were quashed while those against Khalida Zia continued.¹²¹

419 The conclusion to be drawn from this part of the Respondents' argument is that the Government, Petrobangla and BAPEX were not confronted with acts of corruption during this initial period (during which the first group of alleged acts of corruption occurred) and that their acts were not caused by corruption.

420 Turning now to the specific acts of corruption listed by the Respondents, the Tribunals have examined the role of Mr Sharfuddin Ahmed and his company Five Feathers and discussed their findings in section 10.3.2 of the Decision on the Corruption Claim. They noted that advice and assistance from a local consultant was a useful service and not in itself a ground for reproach, provided legalities are scrupulously observed; a Senior Commercial Officer of the Canadian of Foreign Affairs and International Trade noted that “Niko needs to be much more active on the ground [in Bangladesh], both in terms of senior executives from Calgary and through an effective local partner/agent which can deal with the government and other IOCs”.¹²²

421 Niko's use of Mr Ahmed was open and transparent; Mr Ahmed was involved in the presentation of Niko's June 1998 proposal and Five Feathers was mentioned in this context. Niko recognised that Five Feathers had been “actively supporting” its efforts. The Tribunals concluded from the evidence that the total amount paid to Mr Ahmed and Five Feathers was USD 60'000. Mr Khan testified that he had no indication that Mr Ahmed bribed anybody.

422 The Tribunals concluded:

¹²⁰ Respondents' Responses to PO No 13, paragraph 14. ↩

¹²¹ For a more detailed discussion see Decision on the Corruption Claim ↩

¹²² Exhibit C-195 and explanation in the Decision on the Corruption Claim, paragraph 1488. ↩

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From the evidence before the Tribunals, the Tribunals conclude that there is no evidence that Mr Ahmed or his company bribed anybody on Niko's behalf, nor did he make a commitment to pay bribes. There is no evidence in the record that the consultancy agreement required them to make such commitments nor is there any evidence that Niko itself had made such a commitment or planned to do so, intending to use Five Feathers as a "conduit".¹²³

423 The second alleged act of Niko's corruption was “Mr Sharif's payments to lower level officials at Ministry of Energy” related to the consideration of Niko's proposal, the FOU and the Marginal Fields Procedure. The Tribunals examined the allegation in section 11.3 of the Decision on the Corruption Claim. The Tribunals noted the Claimant's response to the allegation:

The allegation is hopelessly vague, and does not identify the amount of the payments alleged to have been made, the date of such payments, the recipients of such payment, or the alleged act induced or procured from such recipients.¹²⁴

424 The Respondents present a long extract from a “deposition” of Mr Shafikul Islam, the former accountant of Mr Sharif.¹²⁵ Mr Islam is recorded to have said that he “used to visit BAPEX, Petrobangla and the Ministry to deliver Niko's letters”; on these occasions he made payments to arrange “the pass for me to enter the Secretariat”. He mentioned more specifically that “At the end of 2003, during the Eid period, Mr Sayed Kabir in consultation with Qasim Sharif paid Taka three and half lac to different staff and officers of the Ministry, BAPEX and Petrobangla. Mr Islam also mentioned payments to “different staff officers of the Ministry, BAPEX and Petrobangla and he stated that Mr Sayed Kabir introduced Mr Sharif to various people at various places regarding the Niko agreement and advised him to give cash and valuable gifts to various individuals. Accordingly, Mr Qasim Sharif [...] gave cash and gifts to those individuals".

425 The Claimant explained payments on which Mr Islam had been more specific were the per diem for the persons attending the Second Joint Management Committee meeting in Calgary and produced vouchers and allowances for the period 20 November to 7 December 2003.¹²⁶

¹²³ Decision on the Corruption Claim, paragraph 1543. ↩

¹²⁴ Claimant's Second Post-Hearing Brief, page 17. ↩

¹²⁵ Shafikul Islam, a witness deposition as per Section 164 of the Bangladesh Criminal Procedure Code, dated 12 March 2008, Exhibit R-392, quoted at Decision on the Corruption Claim, paragraph 1835. ↩

¹²⁶ Claimant's Rejoinder on the Corruption Claim, paragraph 148 and Exhibit C-208. ↩

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426 The Tribunals examined the evidence and concluded:

In any event, the Niko project and the terms of the JVA were subject to a broad process of analysis and were examined over many years and considered in various committees by many high-ranking officials in the Ministry, in Petrobangla and in BAPEX. The Tribunals do not consider that the mostly unidentified “low level officials” in the Ministry made any effective contribution to the conclusion of the JVA. Payment to any of them, if it were proven, has not been shown to have procured that Agreement.¹²⁷

427 The third alleged act of Niko's corruption was “Mr. Sharif's payments of US$ 54,000 to the brother of the then Secretary of Energy”. The Tribunals examined this allegation in section 11.2 of the Decision on the Corruption Claim. The allegation is that during the period from December 1999 to November 2000, Mr Sharif made nine payments of USD 6'000 to Mr Jahangir E. Chowdhury. Mr Jahangir Chowdhury is Mr Sharif's uncle and the brother of the then Secretary of Energy, Tawfiq Elahi Chowdhury. The Respondents asserted that the payments were intended for the Secretary of Energy and describe the assistance which Niko drew from it as “Support for Niko's unilateral proposal to develop marginal fields and the FoU” and “to push Niko's “proposal through”.

428 The Claimant pointed out that there was “no direct evidence for the payments themselves” and that it had not been shown that the payments had a purpose of corruption. And they stated that there was not “any credible evidence to establish that such alleged payments had anything to do with Niko or its procurement of the JVA.

429 The Tribunals noted that the evidence for the payment was testimony by Ms LaPrevotte Griffith of what she heard from to unidentified persons who conducted interviews of Mr Sharif in Texas and Mr Jahangir Chowdhury in Australia. The explanations about the purpose of the payment had nothing to do with Mr Tawfique Elahi Chowdhury, the then Secretary of Energy, but they differed from each other. Ms LaPrevotte Griffith concluded that they were not a payment by Mr Sharif to his uncle but a payment by Niko intended as a bribe by Niko for the Secretary of Energy.

430 The Respondents established the link with Niko by relying on Ms LaPrevotte Griffith who had explained that the payments coincided with actions taken on behalf of Niko to approve, among other things, the FOU. She concluded:

¹²⁷ Decision on the Corruption Claim, paragraph 1842. ↩

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There was probable cause to believe that these payments were bribe/kickback payments in exchange for favourable rulings for Niko.¹²⁸

431 She explained the “exchange” at the April 2017 Hearing:

... Mr Chowdhury exerted influence at the January '99, May '99 meetings where the framework of understanding was being discussed and developed and was we think directly responsible or one of the participants in that the FoU was approved the August '99. Then in December his brother starts receiving nine payments.¹²⁹

432 The Tribunals noted that, as explained above, the FOU was not a “favourable ruling" requested by Niko but was required by the Ministry, Petrobangla or BAPEX. There is no evidence that it was discussed at the January and May 1999 meetings which concluded that the JVA “shall be finalised” and a MOU be signed. The record shows that the FOU appeared as a surprise to Niko when its representatives, following an invitation from BAPEX, had arrived in Bangladesh to finalise the JVA and, instead were required to conclude the FOU. The Tribunals found it difficult to believe that Niko would spend bribe money with the objective of being required to spend additional funds in the order of USD 1.5 million on a study instead of concluding the JVA.

433 The Tribunals also noted the Claimant's repeated assertion, without being contradicted, that Mr Tawfiq Elahi Chowdhury continued to be employed in a high Government position. There was no indication that any clarification was sought in the course of the Joint Investigation about the assertions concerning his involvement in the conclusion of the FOU, any influence of Niko in this respect and any payments to his brother by Niko or Mr Sharif. Nor did the Respondents,-indicate that they sought any clarification from Mr Tawfique Elahi Chowdhury when they made the bribery allegation.

434 The Tribunals also noted that, at the April 2017 hearing the Respondents accepted: “We cannot prove that the FoU was obtained by bribery. It seems to be tainted by bribery.”¹³⁰

435 The Tribunals concluded that

... the evidence produced does not justify assuming that Niko paid US$54,000 to Mr Tawfiq Elahi Chowdhury indirectly through his brother;

¹²⁸ WS LaPrevotte Griffith, paragraph 26. ↩

¹²⁹ Transcript of the April 2017 Hearing, Day 3, page 171, quoted in the Decision on the Corruption Claim, paragraph 1825. ↩

¹³⁰ HT 2017 Day 1, page 76, quoted in the Decision on the Corruption Claim, paragraph 1817. ↩

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in any event, even if such a payment had been made, it did not procure the conclusion of the FOU by Niko.

436 The Tribunals examined with the same depth and attention to the evidence the other allegations about corruption and the conclusion of the JVA and the GPSA. This examination considered in particular the evidence gathered by the Joint Investigation, to the extent the Respondents had made it available in the Arbitration. The conclusions which the competent authorities in Canada and the USA reached on the basis of this evidence have been recorded above. The Crown in Canada had considered Niko's guilty plea in the Agreed Statement of Facts and concluded that it was “unable to prove that any influence was obtained as a result of providing the Benefits to the Minister” and no other acts of corruption were held against Niko in Canada. And the Department of Justice in the United States considered Niko's guilty plea in Canada and found prosecution not necessary. On the basis of the evidence from the Joint Investigation and additional evidence from the Respondents the Tribunals reached conclusions that did not differ substantially from those reached by the Canadian and US authorities. The Tribunals recorded these conclusions the operative part of the Decision on the Corruption Claim, as reproduced below in Section 5.3.

437 The Tribunal has reviewed this decision and confirms the conclusion reached in it.

4.4 The Arbitrations and Court Proceedings in Bangladesh

4.4.1 Court proceedings in Bangladesh related to Niko and the blowouts

438 Several court proceedings in Bangladesh related to Niko and the blowouts were brought to the attention of the Tribunals and–at different occasions required their intervention.

439 The first of these proceedings was occasionally referred to as the BELA proceedings. A description of the proceedings was provided in the First Decision on the Payment Claim with further explanations in the Decision on the Corruption Claim.¹³¹ These proceedings were brought by the Bangladesh Environmental Lawyers Association (BELA) which filed on 12 September 2005 a Writ Petition No. 6911 against 10 respondents, including

¹³¹ ICSID Case No. ARB 10/18, First Decision on the Payment Claim, 11 September 2014, Section 7.2, Attachment 2 of the Award in that case, dated 24 September 2021; and Decision on the Corruption Claim, Sections 2.6.1 and 6.3. ↩

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• Bangladesh, represented by the Secretary, Energy Division, Ministry of Power, Energy and Mineral Resources (Respondent 1);
• the Secretary, Ministry of Law, Justice and Parliamentary Affairs (Respondent 2);
• the Secretary, Ministry of Environment and Forest (Respondent 3);
• Petrobangla (Respondent 4);
• BAPEX (Respondent 5); and
• Niko (Respondent 10).

440 The petition sought a declaration that the Niko/BAPEX Joint Venture Agreement was concluded without lawful authority and had no legal effect, that it should be “treated as a nullity having been procured through flawed process and resorting to fraudulent means and forged documents” and “should be treated as illegal; [having come] to an end as a result of material breach of the statutory and legal obligations”. In the petition BELA also requested that Bangladesh and BAPEX be

... directed to take immediate effective measures to realize full compensation for destruction of the valuable natural gas resources and the damage to live [sic] and property and environment by the blow outs resulting from the respondent No. 10's failure to discharge its legal obligations ...

441 Pending the hearing of the case, the petitioners applied for a number of injunctions and orders.

442 On the same day, 12 September 2005, the High Court Division (Special Original Jurisdiction) of the Supreme Court of Bangladesh, proceeding ex parte, gave directions for further proceedings on the petition and made inter alia the following order:

Pending disposal of the Rule, Respondents no. 1 to 9 are restrained from making any payment of [to?] no. 10 in respect of Feni Gas Field or any other account up to 22.10.05.

443 In addition, the order contained directions to Bangladesh, Petrobangla and BAPEX (Respondents 1, 4 and 5), inter alia

... to submit a report within 45 days of receipt of this order specifying the measures that have been taken against respondent no. 10 to recover

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compensation for the successive blow outs, [...] and freeze all bank accounts of respondent No. 10 maintained in Bangladesh.

444 The following day, on 13 September 2005, Niko filed “Civil Miscellaneous Petition No. 712 of 2005” in the Appellate Division (Civil Appellate Jurisdiction) of the Supreme Court of Bangladesh. It stated that it had learnt about the interim orders of the High Court Division from the daily newspapers and requested a stay of these interim orders. It explained in particular that the freezing of its bank accounts would lead to a stoppage of the day-to-day operations both for the gas supply from the Feni field and the relief operations from the Chattak field. Restraining payments to Niko would “add to the adverse effect on the finance and cash flow required for the continuous operations" of Niko “jeopardising and stopping gas production and supply”.

445 On 14 September 2005, the Appellate Division of the Supreme Court removed the freezing order concerning the bank accounts, but left the injunction against payments to Niko intact. It made the following order:

Let the application for stay be placed before the Court on 23^rd October 2005. The interim order so far it relates to freezing of all the Bank accounts of the Respondent No. 10 maintained in Bangladesh is stayed till that date. The Respondent No. 10 is restrained from making any foreign remittance from the Bank Account.

446 The High Court Division considered the matter again on 19 October 2005. It noted that the order freezing Niko's bank accounts had been stayed by the Appellate Division and concluded that “there is no scope to extend the previous stay order”. Concerning payments to Niko, the court found that no decision had been made by the Appellate Division and concluded:

Since the order retraining the respondents 1-9 from making any payment to respondent No. 10 in respect of any gas field or any other account passed by the High Court Division has not been modified by the Appellate Division that order shall continue.”

447 Niko filed on 23 October 2005 Civil Petition No. 1395 of 2005 (arising out of C.M.P. No. 712) for leave to appeal against the interim orders of 12 September 2005, essentially on the grounds exposed in the petition of 13 September 2005.

448 The Appellate Division addressed the petition on the same day, 23 October 2005, and left the situation unchanged. It made the following order:

The order of stay granted earlier is extended till 11^th December, 2005 on which date the leave petition will come up for hearing before the Court.

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449 On 12 December 2005, the Appellate Division extended its order for further six weeks; on 24 January 2006, it was extended for further two months, on 28 March 2006, for further three months and on 26 June 2006, for further six months. On 12 December 2006, the Appellate Division decided that “the earlier order of stay is still in force and hence tantamount to continue”.

450 The Appellate Division considered Petition No. 1395 of 2005 for a last time at a hearing on 3 October 2007. In its order of that day, the Appellate Division referred to the High Court's order of 12 September 2005 and the order which the Appellate Division had made in response to Niko's “leave petition”, i.e. the stay of the freezing of Niko's bank accounts in Bangladesh and the restraining order against making any foreign remittances from the Bank Account. It concluded

The aforesaid order passed earlier by this Division is extended till hearing of the aforesaid Writ Petition.

451 Thereafter the High Court Division held several hearings in the BELA proceedings which spanned a period of several months, starting in February 2009.

452 The Court rendered its judgment orally on 16 and 17 November 2009 and on 2 and 3 May 2010 in writing (the BELA Judgment).¹³² The Court found:

... JVA was not obtained by flawed process by resorting to fraudulent means.

453 To that extent the Petition was denied. With respect to the remainder of the Petition, relating to the compensation for the blowouts, the Court decided that the amount of the damage had to be determined by “the Court below after taking proper evidence or by mutual agreement amongst the parties involved”. The injunction was upheld insofar as it concerned the prohibition of payments to Niko. The Court made the following order:

... Niko is directed to pay the compensation money as per the decision to be taken in the money suit now pending in the Court of the Joint District or as per the mutual agreement among the parties. The respondents are restrained by an order of injunction from making any payment to [Niko]... This order of injunction shall remain in force till disposal of the mоnеу suit or till amicable settlement amongst the parties, whichever is earlier.

454 The BELA injunction was directed only against the JVA; at the time when it was first issued, the GPSA had not yet been concluded. By the time the

¹³² Exhibit CLA-143. ↩

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Judgment was issued, the GPSA had been concluded, and the Judgment makes some references to it. In particular it states that under the GPSA Petrobangla pays USD1.75 per Mcf while under identified other contracts Petrobangla pays USD2.75 or even USD2.90.

455 Petrobangla presented this injunction as a case of force majeure to justify its failure to pay the invoices for the gas delivered by the BAPEX/Niko Joint Venture from the Feni field. The Tribunals considered this defence and noted that the GPSA was conclude in d on 27 December 2016, over a year after the injunction was first made. The GPSA continued a clear commitment to make payment and Petrobangla continued to accept the gas deliveries and the invoices for them without informing Niko and the Joint Venture that it was prevented from meeting its payment obligation. The Tribunals concluded:

... Petrobangla made its payment commitments under the GPSA in full knowledge of the injunction prohibiting such payments. It took the risk that this injunction would continue even after the conclusion of the GPSA. It may not now rely on the injunction as excuse for not making the payments that it promised to make.

Therefore Petrobangla's failure to make the contractual payments is not excused by the defence of force majeure. Petrobangla is in default of its payment obligations under the GPSA

456 The injunction against payments to Niko remained in place despite the Tribunals' decisions concerning the Payment Claim. In a letter of 19 October 2015, providing an update on the proceedings in the Money Suit, BAPEX informed the Tribunals that Niko had filed a Civil Revision application (with entry No. 4580 dated 17 September 2015) with the High Court Division of the Supreme Court of Bangladesh seeking a stay of the Money Suit. Further to an order of the Court, Niko submitted an application requesting that the Court record the 21 September 2015 order of the High Court.

457 When the Tribunals issued their Decision on Exclusivity, the Respondents wrote on 8 August 2016 to inform the Tribunals that they “had already requested to have the stay on payments to Niko lifted before the Tribunals' 19 July decision”. They explained that the request for review had remained without success, because the file of the case could not be found:

The review petition is pending and under consideration of the Personal Secretary to the Honorable Chief Justice (High Court Division of the Supreme Court). However, there has been a difficulty in retrieving the case file in order to reopen the matter. The Supreme Court requires the original file to reopen the case to consider the review petition, but it

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appears that the office of the court clerk is unable to locate the file of the original case, which, at the end of proceedings, was transferred to the records section on 25 April 2010. Counsel for BAPEX and Petrobangla made a submission to the court on 16 June 2016 seeking to have the court recover the file so that it can address Respondents' original petition, and, when this is resolved, Respondents will make a submission informing the court of the Tribunals' decision on exclusive jurisdiction and reiterating the request to terminate the stay.

458 The Claimant objected on 12 August 2016, addressing different proceedings pending in Bangladesh, including the BELA Proceedings, the Claimant wrote:

... the BELA Injunction arguably still exists, and Petrobangla continues to assert that it operates to prevent payment for gas delivered from Feni field (and thus payment pursuant to the Third Decision in the Payment Claim). All of these issues are within the exclusive competence of the Tribunals. Neither Petrobangla nor BAPEX have taken any steps in this proceeding to give effect to the Tribunals' Decision on Exclusivity. The only action referenced by the Respondents in their 8 August letter is a 16 June 2016 inquiry by Petrobangla's counsel as to the whereabouts of the court file. This predates the Decision on Exclusivity. Respondents have done nothing to bring the Decision on Exclusivity to the attention of the court.

459 The Respondents protested on 19 August 2016 against this description of their action. They argued that they had “done everything possible under the procedures of the Supreme Court of Bangladesh to have that injunction reviewed and reversed" but failed to succeed because the file could not be found. They added that they would make a further submission with the Court.

460 On 29 November 2016 the Tribunals invited the Respondents to report on their action in this respect. The Respondents replied on 7 December 2016, confirming that

... the court's file in the BELA suit was transferred to a filing facility and could not be located, which has prevented the court from addressing the matter

461 The Respondents added that despite a complaint with the Registrar of the court “the file has not been traced, and the court has not taken up the review petition". They added that Bangladeshi counsel for the Respondents will continue to follow up on this matter. They announced that they would be able to make further submissions with the court “when the Supreme Court is

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addresses the petition for review and is in a position to consider such further submission”.

462 Since then no further information has been provided about search for the file and any action on the BELA injunction.

463 The Tribunals considered the BELA Judgement in the context of their examination of the Corruption Claim.¹³³ They noted the comments about this judgment by the Alam court which had pointed out that the BELA court had not considered corruption. The Tribunals note that, indeed, the allegations of “flawed processes” and “fraudulent means” in the BELA case did not include the corruption charges which the petitioner in the Alam case made. In the BELA Judgment no findings were made with respect to corruption, although, by the time of that judgment, the ACC investigation was well advanced; the ACC Charge Sheet, which contained the essence of the corruption allegations including the Niko case, had been issued on 2 May 2008, two years before the BELA Judgment.¹³⁴

464 The Tribunals also pointed out that the BELA Judgment was issued on 2 and 3 May 2010, at a time when only RfA I had been received with the Centre on 12 April 2010; RfA II was received by the Centre only on 3 May 2010. In other words, no ICSID Tribunal had been established; the BELA Judgment did not intrude on the exclusive jurisdiction of these Tribunals.

465 Claims concerning Niko's liability for the two blowouts were first brought in Bangladesh by what was referred to as the Money Suit, to which the Claimant reacted by commencing the Arbitration in ICSID Case No ARB/10/11.¹³⁵

466 On 27 May 2008, Petrobangla served legal notice on Niko, claiming Tk746.50 crore as damages for the blowouts. Niko responded on 9 June 2008, denying that it had liability for any damages arising from the blowouts at Chattak and that Petrobangla suffered the alleged damage. It added that the claims brought by Petrobangla had to be resolved by arbitration and that it was willing to resolve the issues between the Parties through arbitration conducted through ICSID, as agreed between the Parties.¹³⁶

467 In the proceedings on Jurisdiction, the Claimant stated that the Government and Petrobangla“appeared to be in agreement that the claims could be arbitrated under ICSID provided the arbitration was held in Dhaka”. It

¹³³ Decision on the Corruption Claim, Section 6.3. ↩

¹³⁴ See Decision on the Corruption Claim, paragraph 689. ↩

¹³⁵ See Decision on Jurisdiction, paragraph 108. ↩

¹³⁶ See First Decision on the Payment Claim, paragraphs 79 and 80. ↩

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presented a letter by its Counsel to a lawyer in Dhaka. No other written evidence for these negotiations has been produced. In any event the Claimant does not contend that agreement was reached in this respect.¹³⁷

468 The case then was initiated on 15 June 2015. Plaintiffs were the Government of Bangladesh (represented by the Secretary, Ministry of Energy and Mineral Resources) and Petrobangla, as Plaintiffs, filed before the District Judge in Dhaka, Money Suit No 224 of 2008 before the 2nd court of the Joint District Judge, Dhaka against (i) Niko Resources (Bangladesh), (ii) Brian J. Adolph, (iii) Peter Mercier, (iv) GSM Inc. (v) George M. Lattimore, as Defendants.

469 The Plaintiffs sought Tk. 746,50,83,973/- plus 12% interest, as compensation for "losses sustained due to burning of gas and destruction of mineral resources and natural resources which are mainly losses of movable property”. The losses relate to the loss and damage caused by the two blowouts in the Chattak field and are specified in four Schedules with the following titles:

Schedule A: Gas burnt at Chattak field;

Schedule B: Sub-surface loss at Chattak field;

Schedule C: Additional sub-surface loss at Chattak field;

Schedule D: Environmental Losses at Chattak Gas Field.¹³⁸

470 In the Arbitrations, the Tribunals were informed that, on 17 October 2013, Petrobangla filed an attachment application in the Money Suit, seeking to attach approximately USD 27 million, as invoiced by Petrobangla under the GPSA. The Claimant filed a request for provisional measures in the Arbitrations, followed by a conditional request for provisional measures filed by Petrobangla on 28 February 2014. After written exchanges, the Tribunals addressed these applications during the hearing on the Payment Claim and Provisional Measures which was held from 28 to 30 April 2014. At the end of this hearing the Parties reached an understanding with regard to their respective requests for provisional measures, which the Parties also provided

¹³⁷ Reported in the Decision on Jurisdiction, paragraph 104, with references. ↩

¹³⁸ People's Republic of Bangladesh v. NIKO Resources (Bangladesh) Ltd., Money Suit No. 224/2008 (2d Court of Joint District Judge), Complaint, 15 June 2008, Exhibit C-6. See also Decision on Jurisdiction, paragraph 102. ↩

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to the Tribunals in written form. The Parties' understanding was embodied in the Tribunals' Procedural Order No 6, issued on 1 May 2014.¹³⁹

471 In the agreement recorded in PO No 6, Petrobangla agreed to withdraw its attachment application in the Money Suit and Niko agreed that it

... will not directly or indirectly dispose of its assets in Bangladesh until disposal of the Money Suit without the prior consent of Petrobangla and the Government of Bangladesh.

472 With respect to the Money Suit, Niko agreed to withdraw its application for a stay and gave the same undertaking of non-withdrawal of assets to the court. Some procedural steps were also agreed. The Agreement concluded by the statement:

The above will otherwise be without prejudice to the parties' positions in the ICSID arbitration.

473 Further to the Tribunals' request of 7 October 2015, BAPEX informed the Tribunals on 19 October 2015 that the Money Suit was “currently pending hearing before the Joint District Judge, Second Court, Dhaka (“the Court”). It referred to the agreement that the Tribunals had recorded in PO No 6 but did not explain the action that was taken before the Court of the Money Suit in implementation of the that agreement.

474 BAPEX reported that in July 2014 the Court continued to organise the proceedings, fixing time for the filing of Niko's Written Statement (statement of defence). Niko sought on 22 July 2014 further and better particulars regarding allegations of negligence by Niko. The Court denied this request and fixed a new date for Niko's written statement on 30 March 2015; at a further request by Niko the filing date was again extended to 30 June 2015. On that date Niko submitted the Written Statement in its own name and in the name of three other defendants. The Court framed the issues and on 4 August 2015, struck out the names of two defendants. On 4 August 2015, the Court also rejected the petitions for striking out the names of the defendants. The Court fixed the time for cross-examination of witnesses and decided procedural issues in this respect. Niko then filed a request for the Civil Revision, seeking a stay of the Money Suit. The Court fixed the next date of hearing for 15 October 2015.

475 In its 19 October 2015 letter, BAPEX stated that, if Niko continued to apply for a stay of the Money Suit, it would be that case would be completed within

¹³⁹ See First Decision on the Payment Claim, 11 September 2014, Attachment 2 to the Award in ICSID Case No ARB/10/18, Sections 4.2.2 and 4.2.3. ↩

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the next two years. Appeal to the High Court Division of the Supreme Court of Bangladesh was likely to take at least two to three years. A judgment from the High Court Division can be appealed before the Appellate Division of the Supreme Court of Bangladesh, the apex court. The appeal before the Appellate Division would likely take another two to four years.

476 Subsequently, the Claimant informed the Tribunals that Petrobangla was “actively and vigorously pursuing” the Money Suit and that the court was “currently hearing witness testimony from various officers and representatives from Petrobangla, the Government of Bangladesh, and BAPEX on the blowouts and the consequences of the blowouts at Chattak”. It added that on 25 July 2016, “Niko filed an application for adjournment based on the Tribunals' Decision on Exclusivity” and that this application was rejected on 8 August 2016. The Claimant also mentioned that on 24 May 2016 the High Court Division directed the Money Suit court “to proceed to complete the trial of the suit as expeditiously as possible preferably within 4 (four) months from the date of receipt of this order."

477 The latest information made available to the Tribunal about these proceedings are references to the Money Suit contained in the written version of the Alam Judgment of November 2017. The judgment mentions information provided by counsel, stating that the case is “now pending”.¹⁴⁰

478 A further set of court proceedings in Bangladesh was initiated on 9 May 2006, leading to an injunction against Niko and others (referred to as the 2016 Injunction and the Alam Injunction).¹⁴¹

479 As noted above, on 9 May 2016, Professor M. Shamsul Alam filed Writ Petition No. 5673 in High Court Division of the Supreme Court of Bangladesh under Article 102 of the Bangladesh Constitution (the Writ Petion). Professor Alam argues, inter alia, that the JVA and GPSA were procured by fraud and are void ab inito and sought a declaration to this effect. He also requested the Court to attach Niko's assets, including the interest of an indirect Niko affiliate in Block 9 “to provide adequate compensation for the 2005 blowouts”. In the interim, the Writ Petition asked for the Court to stay operation of the JVA and GPSA “to ensure that [Niko] and [Niko Canada] are not able to obtain any benefits under them,” and to “stay any payments made to [Niko] and [Niko Canada] or any of their affiliates or subsidiaries, including payments made in pursuance of the gas supplied from Block 9 which is 60% owned by [Niko Canada] ... .”

¹⁴⁰ Decision on Liability, paragraphs 216 and 217, quoting the Claimant's letter of 12 August 2016, quoted in the Decision on the Corruption Claim, paragraph 355. ↩

¹⁴¹ Third Decision on the Payment Claim, Section 7 and Claimant's Request for Provisional Measures of 19 May 2016. ↩

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480 The Respondents stated that Professor Alam did not seek a decision on liability but a determination of the legality of the Government's authorization to enter into the JVA and GPSA.¹⁴²

481 On the same day, 9 May 2016, the Court ordered a temporary stay of the JVA and GPSA for a period of one month (the “Stay Order”). The Court also ordered the Government of Bangladesh, Petrobangla and BAPEX “not to give any kind of benefit to [Niko or Niko Canada] and not to make any kind of payments to [Niko or Niko Canada] or any of their affiliates or subsidiaries, including payments made in pursuance of the gas supplied from Block-9 ... during the period of stay.”

482 The High Court Division of the Supreme Court issued its judgement on 24 August 2017, declaring, inter alia, that the JVA and the GPSA were “without lawful authority and of no legal effect and thus void ab initio”. The Judgement will be discussed below in Section 4.4.3.

4.4.2 Dealing with the Court Proceedings in the Arbitration and the Decision on Exclusivity

483 One of the jurisdictional issues that the Tribunals faced during the first phase of the Arbitrations concerned the scope of the arbitration clauses in the two Agreements and specifically that in the JVA. The issue concerned essentially the relation to the Money Suit and the Tribunals' jurisdiction ratione materiae which the Tribunals addressed in the Decision on Jurisdiction. The Claimant had requested a declaration that it had “no liability for any damage" and argued that the Tribunals' jurisdiction extended to the claims made in the Money Suit; the Respondents argued that jurisdiction under the JVA arbitration clause concerned contractual claims and did not extend the claims of the Government and Petrobangla in the Money Suit. BAPEX insisted that the claims in the Money Suit were not contractual but were based on "tort and statute law” and “criminal and statutory liability".

484 The Tribunals found that there can be no doubt that the Tribunals have jurisdiction to determine whether Niko has any liability for the two blowouts under the JVA and to make the requested declaration if it deemed it to be well founded. The issues were whether the requested declaration concerning “any liability" extended beyond the liability under the JVA to other grounds for liability, such as those mentioned by the Respondents.

485 While the basis for arbitral jurisdiction is contractual, the subject matter jurisdiction of arbitral tribunals need not be limited to contractual claims.

¹⁴² Respondents' Response to Niko's Request for Provisional Measures, 1 June 2016, paragraph 10. ↩

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Other grounds of liability may be included, depending on the scope of the arbitration agreement and limits on arbitrability.

486 The Tribunals accepted that the disputes were “arising directly out of an investment” and thus were arbitrable under the ICSID Convention. They noted that the arbitration clause applied to the disputes “arising in connection with the performance or interpretation ...” of the JVA and did not contain any limit as to the legal basis on which claims are made. What is required is that the dispute be in connection with the performance of the JVA. The performance of the JVA touches on a variety of substantive matters which are regulated not in the agreement itself but by laws, regulations and practices concerning Petroleum Operations, as this appears from a number of provisions in the JVA and is set out in a general provision in Article 26.2.4 which prescribes that Niko as the Operator shall:

... conduct all Petroleum Operations in a diligent, conscientious and workmanlike manner, in accordance with the applicable law, this JVA and generally accepted standards of international Petroleum industry designed to achieve efficient and safe development and production of Petroleum and to maximize the ultimate economic recovery of Petroleum from the JVA Area.

487 The Respondents had not given any reason why claims “in connection with the performance” of the JVA must by necessity be contractual claims in the narrow sense in which the Respondents used the term and the Tribunals did not see any such reason. The Tribunal understood disputes “in connection with the performance” of the JVA in a wider sense, including sources of liability other than the agreement itself. The question what these sources are and which obligations, contractual or other, fall to be considered concerns the substance of the dispute was a question of the merits of the dispute and did not have to be determined at the jurisdiction stage of the Arbitration.

488 The Tribunals therefore concluded that they had jurisdiction ratione materiae concerning “any liability”, irrespective of its source.

489 Concerning jurisdiction ratione personae, the Tribunal noted that Petrobangla was not party to the JVA; it had no personal jurisdiction over Petrobangla with respect to claims based on the that agreement.

490 The Tribunals also noted that they were not called upon to adjudicate upon the responsibility of Petrobangla and Bangladesh. Their task was rather to determine the rights and duties of Niko and BAPEX in connection with the performance of the JVA. However, the Government and Petrobangla assigned to BAPEX rights and obligations which otherwise are theirs. That was seen in the terms of some provisions of the JVA and was recorded in very clear terms

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in paragraph 14 of the JVA Preamble. There BAPEX warrants that it has the necessary approvals and then continues:

The responsibilities and obligations of Petrobangla and the Government in all relevant Articles, Annexes and Amendments under this JVA has been assign [sic] to BAPEX.

491 The Tribunals clarified that, when dealing with responsibilities and obligations that were assigned to BAPEX, they were not assuming jurisdiction to adjudicate upon the responsibility of third parties. Rather, they would determine responsibilities and obligations assigned to BAPEX, a party to the JVA and as such subject to the Tribunals' jurisdiction.¹⁴³

492 In the Decision on Jurisdiction the Tribunals therefore decided that they had “jurisdiction under the JVA and between the Claimant and BAPEX to decide (a) the Claimant's request for a Compensation Declaration”;¹⁴⁴ the reasons for this decision made it clear that this jurisdiction applied to “any Claim”, including the claims raised by the Government and Petrobangla in the Money Suit.

493 With respect to the Payment Claim between the Claimant and Petrobangla, the relation with the Courts of Bangladesh arose first in the context of the BELA injunction, discussed above, on which Petrobangla relied in an attempted force majeure justification for not paying for the gas delivered by the Joint Venture. The issue was resolved by the Tribunals in the First Decision on the Payment Claim of 11 September 2014 on grounds which did not have to consider the Tribunals' jurisdiction in relation to that of the Courts of Bangladesh: the injunction prohibiting payment to Niko was a risk assumed by Petrobangla against which it failed to take adequate action and which does not excuse its failure to make payment under the GPSA.

494 The Tribunals nevertheless considered that, when they decided that Petrobangla owed to Niko the outstanding invoice amounts, the injunction was still in place and, under the law of Bangladesh, was binding on Petrobangla. The injunction provided that it

... shall remain in force till disposal of the money suit or ill amicable settlement among the parties, whichever is earlier.

495 The Claimant had argued that the problem of the injunction could be resolved by an agreement by Petrobangla and Niko on the basis of the Decision on the

¹⁴³ Decision on Jurisdiction, Section 10. ↩

¹⁴⁴ Decision on Jurisdiction, paragraph 575(1). ↩

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Payment Claim. The Tribunals invited the Parties’ engagement in such negotiations.

496 The Tribunals also addressed the powers of the Tribunals in relation to the injunction of the Bangladesh court. The Tribunals recalled that Petrobangla and BAPEX, exercising rights and powers of the Government as described in the Preambles of the JVA and referred to in the GPSA, have agreed in the GPSA to submit all disputes with Niko to ICSID arbitration. In its Decision on Jurisdiction, the Tribunals found that they had jurisdiction to decide Niko's claim against Petrobangla under the GPSA. This includes jurisdiction with respect to Provisional Measures according to Article 47 of the ICSID Convention and Rule 39 of the ICSID Arbitration Rules, including such measures which the Tribunal may recommend on its own initiative.

497 The Tribunals also explained:

The jurisdiction of the present Tribunal is exclusive with respect to the merits of the dispute validly brought before it. Since the Parties have not availed themselves of the possibility afforded under Rule 39 (6) of the ICSID Arbitration Rules to request provisional measures from judicial or other authorities, the Tribunal's exclusive jurisdiction also extends to provisional measures.¹⁴⁵

498 The Tribunals explained that, by virtue of its ratification of the ICSID Convention, the People's Republic of Bangladesh and all of its organs, including the courts, are bound by this Convention and must give effect to awards rendered in ICSID arbitration.

499 The Tribunals also pointed out that, when the High Court Division and the Appellate Division of the Bangladesh Supreme Court were seized of issues affecting the contractual relationship between Niko and Petrobangla, and when they issued and partially confirmed the injunction against payment to Niko, the present Arbitration had not yet commenced. As far as the Tribunals were able to determine from the procedural records of these court proceedings, as they were filed in the present proceedings, no reference had been made in the Bangladesh court proceedings to the existence of the contractual provision which required that disputes under the GPSA be submitted to ICSID arbitration.

500 The seizure of the ICSID Tribunals had created a new situation. The payments which Niko must make under the GPSA must be decided by the ICSID

¹⁴⁵ First Decision on the Payment Claim, paragraph 286, emphasis added. ↩

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Tribunals, including any injunctions against such payments. The Tribunals concluded that they had

... no reason to believe that, when this exclusive jurisdiction, founded on the ICSID Convention, is brought to the attention of the courts in Bangladesh, in particular the High Court Division having issued the injunction, these courts would disregard the international obligations assumed by Bangladesh when adhering to that Convention.

501 The Tribunals were confident that the First Decision on the Payment Claim settled the dispute with respect to that claim and that the remaining issues were susceptible to a mutually acceptable resolution crafted by the Parties themselves. The Tribunals nevertheless remained seized of the dispute in the event such a resolution would not be achieved.

502 It turned out that the Parties were unable to agree on an amicable implementation of the Decision on the Payment Claim. The Claimant had made several alternative proposals which could have responded to the “amicable settlement” provision of the BELA injunction.¹⁴⁶ The Respondents insisted on deferring any payment to Niko until the Compensation Declaration in the proceedings under the JVA had been completed. As no progress towards an agreed solution was made, the Tribunals decided the issues in the Second Decision on the Payment Claim on 14 September 2015, ordering payment into an escrow account.

503 By that time, the Respondents had appointed new counsel and the proceedings on the Compensation Declaration were changed, as described above. In this revised approach the relation with the Money Suit arose again.

504 As explained above, in the proceedings about the Tribunals' jurisdiction the Respondents had sought to distinguish between the liability under the JVA and liability under “tort and statute law” and other bases. In the Decision on Jurisdiction, the Tribunals determined that, ratione materiae, their jurisdiction extended “beyond the liability under the JVA to other grounds" and they mentioned expressly the grounds which the Respondents had mentioned.¹⁴⁷

¹⁴⁶ Second Decision on the Payment Claim, paragraph 40. ↩

¹⁴⁷ Decision on Jurisdiction, Section 10.2 on Jurisdiction ratione materiae and specifically paragraphs 494, 497 and 498. ↩

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505 When the extension of the procedure to the Full Scope of Liability had been defined at the PHC of 1 October 2015 and the Claimant accepted it by its letter of 5 October 2015, the Claimant wrote:

For the first time, Niko faces in two different forums affirmative claims for precisely the same liability as concerns the two blowouts: the claims of BAPEX for lost gas production and environmental damages before these Tribunals; and the claims asserted by Petrobangla and the Government for precisely the same liability and damages in the Money Suit. The present situation is irreconcilable with Article 26 of the ICSID Convention, pursuant to which “[c]onsent of the parties to arbitration under this Convention shall ... be deemed consent to such arbitration to the exclusion of any other remedy.

506 In its response on 6 October 2015, BAPEX raised again the distinction between the legal bases invoked in the Money Suit and in the Arbitration; it sought to limit the scope of the November 2015 hearing:

BAPEX understood that the scope of the hearing would be to address whether or not Niko's actions breached the JVA and caused or contributed to one or both of the blow-outs. BAPEX did not understand that, and does not consent to proceed on the basis that, the alternative approach discussed at the pre-hearing conference includes assessment of breaches of laws or legal instruments other than the JVA.

507 BAPEX also relied on the approach adopted by its prior counsel to argue that the examination of bases other than the JVA had not been adequately briefed; it referred to

... issues on which Niko and BAPEX's prior counsel did not provide adequate briefing. The only issue that is ripe for decision is the question whether Niko breached the standard of care under the JVA.

508 In the Respondents' letter of 19 October 2015, BAPEX insisted that it was not a party to the Money Suit and that Niko had mischaracterized the Money Suit:

Niko asserts that the Government and Petrobangla are pursuing claims under the JVA. However, the Money Suit does not make claims or seek compensation based on violations of the JVA. As explained in the Money Suit complaint the damages sought [...] are damages arising out of tortious liabilities [...]. [T]he plaintiffs are seeking damages caused by negligence, lack of skill and proper supervision, which come within the ambit of tortious liabilities and not breach of contract and therefore, the arbitration clause inserted in the JVA has no manner of application in

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this case. ‘Damages for tortious liabilities' are distinct and separate from the liabilities arising out of ‘Breach of Contract' [...]

509 The Respondents argued that the Money Suit is compatible with the ICSID Arbitrations because in “the Money Suit, the People's Republic of Bangladesh is seeking compensation for injury, inter alia, due to the loss of gas deposits underlying the land of Bangladesh owned by the Republic, on behalf of the people of Bangladesh”. In seeking compensation for the loss of the gas in the subsoil of the territory of Bangladesh, the Government and the Ministry are pursuing claims of the Republic and the people of Bangladesh. These claims for compensation for loss of these ownership rights to the gas in the subsoil, as contrasted to the loss of the right to develop and produce that gas, are not claims arising from rights assigned to BAPEX. They are independent rights of the people of Bangladesh vested in the Republic and being protected by the actions of the Government and the Ministry in the Money Suit. The Respondents asserted that the rights were distinct and they were held by different parties with different legal claims:

Different adjudicatory bodies have jurisdiction to resolve disputes regarding them. This Tribunal has jurisdiction to adjudicate claims related to BAPEX's rights and the courts of Bangladesh have jurisdiction to hear claims related to the ownership rights of the people and the Republic of Bangladesh represented by the Government and the Ministry. The competence to enforce environmental laws and prosecute environmental claims on behalf of the people of Bangladesh and the Government has likewise not been delegated to either Petrobangla or BAPEX and is properly being pursued in the Money Suit.

510 The Tribunals noted that the distinction between the legal bases for liability, which BAPEX sought to reintroduce, had been considered in the Decision on Jurisdiction; the Tribunals had rejected the argument based on it. The Tribunals did not agree that this distinction should limit the scope of their decision on liability and sought to ensure that all grounds on which BAPEX intended to rely had been clearly identified. Further to a reference at the PHC,¹⁴⁸ the Tribunals gave the following directions in their letter to the Parties of 7 October 2015:

Having accepted the change in the scope of the procedure requested by the Respondents and the resulting expansion of the arbitrations, the Tribunals will decide the Claimant's request for a declaration on the basis of the obligations identified by the parties and will consider the

¹⁴⁸ As the matter was merely mentioned but not discussed, it was not recorded in the Summary Minutes, but it was mentioned by the Respondents at page 27 of B-CD.9. ↩

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obligations so identified as complete for the purpose of the requested declaration. They will not accept that for the purposes of their decision on the Claimant's request for a non-liability declaration any issues concerning breach and liability be reserved.

511 The Respondents were offered the possibility to complete the list of obligations and breaches for the Tribunals' examination and decision on the Compensation Declaration, “specifying the source of each obligation and its precise content”. After further correspondence concerning the laws and standards to be considered, the Tribunal concluded in PO No 12 of 21 October 2015:

The list of Breaches of Applicable Laws and Standards that must be considered by the Tribunals when making their determination concerning the requested declaration is now complete. The Tribunals will examine by reference to the Breaches alleged until now the Claimant's request for a declaration according to which “Niko breached no obligation or law as concerns the two blowouts in 2005 at Chattak field”.

512 In the Tribunals' understanding, all laws and standards relevant for Niko's liability for the two blowouts, without distinction between those raised under the JVA and on other legal bases and without the forum in which they were raised, were considered in the proceedings that followed and in the Decisions dealing with this liability.

513 In the proceedings on the implementation of the Decision on the Payment Claim new issues in the relation to proceedings in the courts of Bangladesh arose in 2016. During the proceedings leading to the Third Decision on the Payment Claim of 26 May 2016, the Parties were in consultation about an escrow agreement. The draft of such agreement was proposed by the Claimant and was modified to reflect the observations by the Respondents. At the November 2015 Hearing the arrangements for the escrow agreement were accepted for implementation. Petrobangla informed the Tribunals that, on 10 December 2015 it had filed a petition with the BELA court seeking review of the judgment imposing the BELA 2005 Injunction. On 6 January 2016, the Respondents confirmed that Petrobangla” “has committed to making payment into the escrow account as soon as the injunction is modified or lifted”. The Respondents informed the Tribunals on 6 January 2016 that their counsel in the court proceedings had informed them that he anticipated that the petition would be dealt with within the next three months.

514 The Tribunal concludes that this did not happen. Instead, the Respondents filed on 25 March 2016, in the Arbitrations their Corruption Claims. In their Third Decision on the Payment Claim of 26 May 2016, the Tribunals

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considered the question whether the possibility of a finding by the Tribunals that corruption did occur and that the Respondents corruption claim were justified would require the Tribunals to suspend the Respondents' payment obligation until the Corruption Claim had been decided. The Tribunals considered that the acts of corruption alleged in the context of the conclusion of the GPSA had been examined already in the Decision on Jurisdiction; and they considered that in their submission of 29 April 2016, the Respondents had argued that, in case of avoidance, the Claimant could make a claim for enrichment by the gas delivered. The Tribunals concluded that under a possible claim for enrichment, Niko could claim for enrichment, valued on the basis of the contract price.

515 The Tribunals concluded that that there was no justification for deferring their Third Decision on the Payment Claim or to suspend its effect until the Corruption Claim had been decided. They ordered that Petrobangla must pay the outstanding amounts forthwith.

516 Shortly before the Tribunals issued this Third Decision on the Payment Claim, the Respondents informed the Tribunals on 12 May 2016 of the Alam Injunction that had been ordered on 9 May 2016. The Claimant filed on 19 May 2016, a request for interim measures. In their Third Decision on the Payment Claim, the Tribunals confirmed that their jurisdiction was exclusive.¹⁴⁹ They announced procedural directions and invited the Claimant to consider whether, in light of the Decision and the forthcoming procedural order, it wished to amend its request for interim measures.

517 On 1 June 2016, the Claimant revised its request for interim measures. It withdrew “its request for a declaration as concerns Petrobangla's obligation”. It referred to the Tribunals' earlier decisions on their jurisdiction and added that

Niko nonetheless considers that it would be useful for the Tribunals to state in unequivocal terms that their jurisdiction over these questions is exclusive of all other remedies. Niko therefore maintains its other requests for declarations.

518 With respect to the injunction in the Alam proceedings, the Claimant maintained “its request for an order requiring specific action by the Respondents as concerns the Stay Order and the Writ Petition”. The Claimant requested

¹⁴⁹ Third Decision on the Payment Claim, paragraphs 107 and 108. ↩

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... the Tribunals to declare that no court is competent to order provisional measures of any kind concerning matters within the exclusive jurisdiction of these Tribunals. As ICSID Arbitration Rule 39(6) recognizes, a national court may address provisional measures only in the event that the parties have in the agreement recording their consent provided for such a thing. Neither the JVA nor the GPSA here provides for such intervention by a court.

519 In the revised version, the Claimant sought the following relief: “to make payments to Niko” and amended its request of 19 May 2016:

(a) Declaring that these Tribunals have exclusive jurisdiction over the questions of: (i) the validity of the JVA and GPSA as concerns Niko, BAPEX and Petrobangla, and their successors, predecessors, assignors and assignees; (ii) whether Niko is liable to BAPEX or any of its successors, predecessors, assignors and assignees and if so, what compensation is due; and (iii) any requests for interim or provisional measures concerning any matter within the exclusive jurisdiction of these Tribunals, including any injunction, stay of payment, attachment or other relief.

(b) Ordering BAPEX and Petrobangla to consent to the removal of the interim injunction in Writ Petition No. 5673 before the Supreme Court of Bangladesh, High Court Division, and to take all measures to request and support the removal or discontinuance of such interim injunction and dismissal of the Writ Petition.

520 The Respondents had been invited to comment on the Claimant's request and submitted their comments on 1 June 2016. They argued that the Claimant had misrepresented the proceedings concerning the Alam injunction. The writ petition had been made by a distinguished scholar, highly qualified to deal with the relevant matters. They stated:

The petitioner in the Writ Petition proceeding is a legitimate public interest litigant seeking redress under Article 102 of the Constitution of Bangladesh.

521 The Respondents asserted that they had no contact, direct or indirect, with Professor Alam and they did not “spoon feed” documents.

522 Concerning the jurisdiction of the Tribunals concerning matters in the Alam proceedings, the Respondents argued

... Niko wrongly states the scope of the jurisdiction of the Tribunals in these arbitrations. Niko seeks to end the proceedings before the Supreme

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Court of Bangladesh, but the existence of this arbitration does not deprive the Supreme Court of jurisdiction to hear a petition from a citizen of Bangladesh who is not a party to these proceedings. The State of Bangladesh is not a party to these ICSID proceedings and has not consented to this arbitration. The Tribunals do not have jurisdiction over the State, including its courts. The overlap of subject matter and the fact that the parties in these proceedings are among the defendants in the Writ Petition proceeding do not deprive the Supreme Court of jurisdiction.

523 The Respondents also contested that the Claimant had made out the urgency of the request. Moreover, the request was seeking the protection of companies of the Niko Group, other than the Claimant; but the Claimant could seek protection only of its own rights. The Respondents also contested the Claimant's reliance of Article 26 of the ICSID Convention that does not have support the exclusive meaning attributed by the Claimant.

524 On 15 June 2016, the Respondents commented on the Claimant's revised request of 1 June 2016. The Respondents confirmed the position which they had expressed in their written submission of 1 June 2016, contesting that the proceedings before the High Court Division were in violation of Article 26 of the ICSID Convention. The Respondents stated:

The State of Bangladesh is not a party to these proceedings. The jurisdiction of the Tribunals does not preempt the jurisdiction of the Supreme Court of Bangladesh to order the measures it deems appropriate in proceedings under the Constitution instituted by a citizen of Bangladesh who is not a party to the ICSID proceedings for the purpose of protecting the rights of the people of Bangladesh. Nothing in the ICSID Convention creates an obligation on the courts of a State to abstain from exercising their constitutional jurisdiction when seized by a non-party to the arbitration, especially where the State is not a party to the ICSID arbitration in question.

525 The Parties developed their positions in further submissions, the Respondents on 7 and 12 July 2016 and the Claimant confirmed its request for provisional measures on 23 June 2016 and made further submissions on 11 and 13 July 2016.

526 The Tribunals decided the Claimant's application concerning the Alam Injunction in their Decision Pertaining to the Exclusivity of the Tribunals' Jurisdiction on 19 July 2016 (the Decision on Exclusivity).

527 The Tribunals considered the Parties' submissions and prior decisions concerning their jurisdiction and powers related to the issues raised by the Claimant's request. They referred in particular to their Decision on

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Jurisdiction, that had confirmed the Tribunals' jurisdiction ratione materiae over the subject matter of the two Agreements; and to the First and Third Decisions on the Payment Claim which had clarified that the Tribunals' jurisdiction was conclusive and extended to provisional measures.

528 The Tribunals confirmed their “exclusive jurisdiction to determine the issues that are validly brought before [it]”. They clarified the distinction between the personal and substantive jurisdiction and the impact on the jurisdiction of the courts in Bangladesh:

This finding does not affect the personal jurisdiction of the courts in Bangladesh in other respects. These courts may well receive and determine claims by persons over which the Tribunals do not have jurisdiction and adjudicate such claims. In making their decision involving other parties, the courts of Bangladesh, however, are bound to conform to and implement the decisions rendered by these Tribunals that are within the competence of these Tribunals. This means, for instance, that it is for these Tribunals, and the Tribunals alone, to decide whether the JVA and the GPSA were procured by corruption, whether the blow- outs were caused by Niko's breach of the standards it had to observe under the JVA and the amount of the damage caused by such a breach. When seized by a claim of a party not subject to the jurisdiction of the Tribunals, a court in Bangladesh may entertain that claim but it must conform in its decision to those of the Tribunals.

529 The Tribunals explained that, if it were otherwise, the international commitments of the State of Bangladesh “could be rendered ineffective by the simple expedient of any third parties claiming to be affected in their rights by the actions and occurrences over which the Tribunals have jurisdiction", creating the risk of decision conflicting with Bangladesh's obligations as a party to the ICSID Convention. They added:

This is particularly striking in a case in which the plaintiff does not seek to vindicate his own rights, but acts by way of a derivative action invoking rights of public bodies which the plaintiff, in his vision of the public interest, prefers to be pursued in national courts rather than before the international tribunal whose jurisdiction have been accepted by those public bodies, including delegation of the State as a signatory to the ICSID Convention.

530 The Tribunals noted that such a conflicting position had been taken by the Respondents when they argued that “a court in Bangladesh may order measures in conflict with the decisions of the Tribunals, simply because the application is made by a person not party to the Convention and the

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Arbitrations [...] Accepting this position would subvert the international obligations assumed by Bangladesh by virtue of its decision to become a party to the ICSID Convention. The Tribunals are not prepared to give effect to such a position."

531 The Tribunals considered the form in which their decision on the Claimant's request should be issued. They concluded that the relief granted is not provisional but requires a final determination of the issues raised. Therefore, the Tribunals were of the view that the requested relief, while justified in substance, cannot take the form of provisional measures. Indeed, in the letter accompanying its submission on 1 June 2016, the Claimant had pointed out that a statement in “unequivocal terms that [the Tribunals'] jurisdiction over these questions is exclusive of all other remedies” was useful.

532 Considering the Respondents' submissions in response to the Claimant's request, the Tribunals concluded that “a further clarification of the jurisdictional issues was required” and that such clarification had to be provided in the form of a declaratory decision. The Tribunals therefore granted in substance the relief requested but did so in the form not of a provisional measure but in a decision in the following terms:

The Tribunals:

1. Declare that the Tribunals have sole and exclusive subject matter jurisdiction with respect to all matters which have validly been brought before [them], notably

(a) The validity of the JVA and the GSPA, including all questions relating to the avoidance of these agreements on grounds of corruption;

(b) The liability of Niko under the JVA for the blow-outs that occurred in the course of its activity in the Chattak field and the quantum of the damage for which it may be responsible in case such liability were found to exist;

(c) The payment obligations of Petrobangla towards Niko under the GSPA for gas delivered, the jurisdiction for injunctions seeking to prevent such payments and to retract such injunctions;

533 The Claimant also had requested that the Tribunals order a specific action by BAPEX and Petrobangla in the following terms:

(b) Ordering BAPEX and Petrobangla to consent to the removal of the interim injunction in Writ Petition No. 5673 before the Supreme Court of Bangladesh, High Court Division, and to take all measures to request and

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support the removal or discontinuance of such interim injunction and dismissal of the Writ Petition.

534 The second part of this request was more general than the first specific order, requesting “all measures" and applying to “such interim injunction”. Given the general nature of the jurisdictional clarification, the Tribunals expressed the direction for further action also in a broad nature and ordered BAPEX and Petrobangla

(a) to intervene with all courts and other authorities in Bangladesh that are or may be concerned with issues identified above under (1) to bring to their attention the exclusive jurisdiction of the Tribunals in respect of these issues and the international obligations of the State of Bangladesh resulting therefrom under the ICSID Convention; and

(b) to take all steps necessary to terminate any proceedings and orders by the courts in Bangladesh which are in conflict with this order.

535 The Respondents wrote on 25 July 2016, objecting to the Decision on Exclusivity in the following terms:

Specifically, without limiting the scope of our objections, Respondents disagree with the Tribunals’making a declaration and order that effectively extend the reach of the arbitration agreements of the JVA and the GPSA beyond the signatories’sphere and scope of consent. Respondents also object to the Tribunals' decision to exceed the relief requested by Claimant without previously affording the Parties an opportunity to comment on their power to do so.

Respondents note for the record that their compliance with the Tribunals’ order and obligations deriving thereunder is without prejudice to such disagreement and Respondents’substantive and procedural rights. Respondents reserve all of their rights with respect to post-award remedies regarding the Tribunals' Decision.

536 The Tribunals noted the Respondents' objection and the announcement of their compliance. In PO No 14, they invited the Respondents to inform the Tribunals about the manner in which they complied with the Decision on Exclusivity.

537 On 8 August 2016, the Respondents responded in writing. With regard to the Writ Petition, the Respondents stated that they were “preparing to file an affidavit as soon as possible requesting the termination of proceedings inconsistent with the order of the Tribunals, and in particular the prohibition on payments to Niko”.

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538 On 12 and 16 August 2016, the Claimant responded to the Respondents' letter, arguing that neither Respondent had taken any steps in the Alam Proceeding to give effect to the Tribunals' Decision on Exclusivity.

539 On 16 August 2016, the Respondents notified the Tribunals that they had filed on 14 August 2016, an Application in connection with the Writ Petition informing the court of the Tribunals' Decision on Exclusivity and requesting it to issue an order vacating the order prohibiting payments to Niko. A copy of this application was attached to the Respondents' letter. In a letter of 19 August 2016, the Respondents disputed the Claimant's characterization of the Respondents' actions in connection with the Alam Proceedings and their compliance with the Decision on Exclusivity.

540 The matter was again addressed at the Status Conference on 30 January 2017. The summary minutes record the following:

The Respondents referred to their submission of 14 August 2016 filed with the court hearing the writ petition of Professor Alam, stating that since then, they have been awaiting the court's decision. The Claimant asserted that no efforts have been made by the Respondents to lift the injunctions. The Respondents objected to this statement.

541 Despite the Respondents' submission to the High Court Division concerning the Tribunals’Decision on Exclusivity, that court continued with its proceedings on the Alam Writ Petition. It held hearings on 11 April 2017, and on several days during the months of July and August 2017.

542 On 10 August 2017, the Claimant complained to the Tribunals that the Government presented arguments supporting a finding of corruption and judgment in favour of the petitioner and that the Government contested the application of the exclusive jurisdiction of these Tribunals, as recognized in the Decision on Exclusivity, to the Writ Petition proceedings. The Claimant noted that the only step taken by Petrobangla and BAPEX in the Alam proceedings had been the application that the Respondents had transmitted under cover of their letter of 16 August 2016 to these Tribunals. The Court had taken no action on that application, and the Respondents had done nothing to pursue the application. The Claimant asserted that the conduct of Petrobangla and BAPEX, and of the Government of Bangladesh, could be reconciled neither with their obligations under Article 26 of the ICSID Convention nor with the Tribunals' order that Petrobangla and BAPEX “take all steps necessary to terminate any proceedings and orders by the courts in Bangladesh which are in conflict with” the Decision on Exclusivity. No specific action was, however, requested from the Tribunals.

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543 The Respondents responded on 16 August 2017, stating that the Respondents “have no authority over the Government of Bangladesh and cannot respond to accusations against the Government in these arbitration proceedings”. The Respondents requested the Tribunals to ignore the Claimant's letter of 10 August 2017.

544 The Tribunals have considered the Respondents'objections. They have considered their jurisdiction and its scope at repeated occasions, as explained above. They confirm the conclusions reached at these occasions: their jurisdiction on matters validly brought before them is exclusive and the courts of Bangladesh must give effect to and therefore comply with the Tribunals' substantive findings as a matter of respect for the ICSID Convention to which Bangladesh is a signatory.

545 Concerning the Decision on Exclusivity, the Tribunals confirm its paragraph 1 and hold that BAPEX and Petrobangla must comply with this decision in their action.

4.4.3 The Alam Judgment

546 On 24 August 2017, the Respondents informed the Tribunals that the High Court Division had rendered its decision and had, on 24 August 2017, announced it orally (the Alam Judgment): the Court declared the JVA and the GPSA “to be without lawful authority and of no legal effect and thus void ab initio”. The assets of Niko and Niko Canada, including their shareholding in interest in Tullow Bangladesh Limited concerning Block 9 were attached. The written version of the High Court's Judgement, containing detailed reasons, was issued on 19 November 2017.

547 The Respondents wrote to the Tribunals on 21 November 2017:

The judgment of the Supreme Court is relevant to the Tribunals' decision on the Corruption Claim because“[t]he validity, interpretation and implementation of [the JVA and GPSA] shall be governed by the laws of Bangladesh.”

[...]

In determining the Corruption Claim, these Tribunals must apply the laws of Bangladesh as articulated in the jurisprudence of the Supreme Court and should give particular consideration to the Supreme Court's judgment in determining how the laws of Bangladesh would be applied. Respondents are prepared to provide a more detailed assessment of the significance of this judgment should the Tribunals invite further input from the Parties on this matter.

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548 In its submission of 11 December 2017, the Claimant described the Judgement as “fundamentally illegitimate”. It asserted that the Judgment:

... was issued by a court with no authority to resolve disputes of fact or to hear more than summary evidence. The judgment's disingenuous assertions that disputed facts were undisputed and its leaps of logic confirm its results-driven, partial approach. The Respondents assert that the Writ Petition Judgment is persuasive authority. Review of the document leads to the conclusion that it is neither persuasive nor an authority legitimately considered in this forum.

549 In a further submission of 11 December 2017, the Respondents insisted on the relevance of the Alam Judgment:

The judgment confirms prior Supreme Court jurisprudence relied on by Respondents to show that the JVA and GPSA are void ab initio under Bangladeshi law [and it] confirms that the acts admitted by Niko were corruption under the laws of Bangladesh and Niko violated these laws in the establishment of its investment.

550 The Tribunals considered the Alam Judgment in the Decision on the Corruption Claim.¹⁵⁰

551 Article 102 of the Bangladesh Constitution, in the relevant passages reads as follows:

The High Court Division may, if satisfied that no other equally efficacious remedy is provided by law

a) on application of any person aggrieved, make an order

(i) ...

(ii) declaring that any act done or proceeding taken by a person performing functions in connection with the affairs of the Republic or of a local authority has been done or taken without lawful authority and is of no legal effect [...]

552 The High Court Division of the Supreme Court recorded the opinions presented by the parties to the proceedings and concluded that:

... from 2003 till 2006 the Respondents No 4 and No 5 [Niko and Niko Canada] had set up a corrupt scheme to illegally obtain gas exploration

¹⁵⁰ Decision on the Corruption Claim, Sections 2.5 and 6.4. ↩

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rights in Bangladesh. Based on the undisputed facts, we find that the JVA and GPSA have been procured by corruption and thus render them void ab initio. The rights and assets of [Niko and Niko Canada] in Block 9 PSC for which [Niko Canada] was found to be the least qualified of seven bidders in 1997, have also been obtained through the corrupt scheme and are thus being seized and confiscated as proceeds of crime as well as to provide compensation for the 2005 blowouts. All the rights, assets, and property of [Niko and Niko Canada], obtained from the State through the corrupt scheme, shall revert back to the State.

In view of the above observations, we are inclined to hold that the Rule deserves merit and is bound to succeed.

Accordingly the Rule is made absolute. The Joint Venture Agreement for the Development and Production of Petroleum from the Marginal/Abandoned Chattak and Feni Fields (“JVA”) dated 16.10.2003 between [Niko and Niko Canada] is declared to be without lawful authority and of no legal effect and thus void ab initio and the Gas Purchase and Sale Agreement for the sale of gas from Feni Gas Field (“GPSA”) dated 27.12.2006 between [Petrobangla] as Buyer, and a joint venture between [BAPEX and Niko], as Seller, are also declared to be without lawful authority and of no legal effect and thus void ab initio. The assets of [Niko and Niko Canada], including their shareholding interest in Tullow Bangladesh Limited concerning Block-9 are hereby attached.

553 The Tribunals accepted that the Agreements are subject to the law of Bangladesh and have referred to the decisions of the Supreme Court and its Divisions for content of this law. They stated clearly:

The Tribunals recognise the authority of the Supreme Court in the interpretation of the laws of Bangladesh and accept, as asserted by the Respondents, that the judgments of this Court are “directly relevant to the decision of the Tribunals on the Corruption Claim”. As shown above in Section 6.2, the Tribunals have carefully analysed the relevant jurisprudence of this court.¹⁵¹

554 They also noted the Claimant's observation that the Court proceedings under Article 102 of the Constitution have “no authority to resolve disputes of fact or to hear more than summary evidence”. Indeed, in the Alam Judgment, the Court noted Niko's argument that the corruption allegations were disputed; it

¹⁵¹ Decision of the Corruption Claim, paragraph 718. ↩

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had argued that “only admitted facts can be relied upon”. The Court addressed this argument by stating:

We are of the view that we do not need to rely on any disputed question of fact in this situation since, in addition to admitting to making payments of bribes to the then State Minister for Energy AKM Mosharaf Hossain for obtaining and retaining business interests in Bangladesh for its subsidiaries, [Niko] brazenly admits to making payments of over US$ 4 million to Mr. Qasim Sharif and US$ 500,000 to Mr. Salim Bhuiyan for their services in making “payments to Government officials” and for “arranging meetings with Government officials”.

555 Apart from the fact that Niko did not admit any corruption except for the guilty plea in Canada, the alleged admissions to which the Court refers are far from supporting the conclusion of the “corrupt scheme to illegally obtain gas exploration rights in Bangladesh” which the Court found. The “corrupt scheme” which the Court found to have been created by Niko, in the argument of the Respondents started when Niko first came to Bangladesh in 1997; for the Court, however, the scheme starts only in 2003, when the Government changed.

556 The Tribunals have examined the factual statements made by the Court and noted that it is replete with statements of fact that differ from “admissions” by Niko. The Tribunals gave some examples in the Decision on the Corruption Claim.

557 The Tribunals noted that, when determining whether the Agreements are void or voidable, they take account of the principles of Bangladeshi law, in particular with respect to the application of Article 102 of the Constitution. In the application of this law to the fact of this case, however, they are bound neither by the Alam nor the BELA Judgments.

4.5 The Proceedings following the Decision on Liability until the Decision on Heads of Recoverable Loss

558 The procedure that followed the Decision on Liability of 28 February 2020 was described in detail in the Decision on Heads of Recoverable Loss.¹⁵² The Tribunal summarises here the principal steps of this phase in the procedure.

559 The procedure on the Compensation Declaration had been adjusted in October 2015 to take account of the Respondents' requests. It expanded the scope of the Arbitration in ICSID Case No ARB/10/11 and provided additional

¹⁵² Decision on Heads of Recoverable Loss, Section 3.2. ↩

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time for the Respondents to present the quantification of the losses resulting from the blowouts. The details of that procedure were then agreed by the Parties and approved by the Tribunals at the November 2015 Hearing. The November 2015 timetable, recorded in the Summary Minutes of that hearing, provided the following steps and dates following the Decision on Liability

• Respondent's Memorial on Damages: 25 March 2016;
• Claimant's Counter-Memorial on Damages: 29 July 2016;
• Witness Notification: 5 August 2016;
• 10 August 2016: Pre-hearing conference; and
• 29 August - 2 September 2016: Hearing on Damages in Paris.

560 When it resumed the proceedings on damages, the Tribunals consulted the Parties regarding the next steps in the proceedings. On 3 March 2020 the Tribunal referred to November 2015 Timetable and invited:

• the Respondents to state whether they wished to amend their submission of 25 March 2016 and, if so, indicate how much time they request to be allocated for such amendment;
• the Claimant to state whether it confirms the four-month period originally scheduled for its Counter-Memorial on Damages;
• both Parties to inform the Tribunals whether they wish to hold a procedural conference by telephone ...

561 In the correspondence that followed the Respondents requested that the agreed procedure be modified to accommodate a “full assessment of environmental damage” by their experts; they stated that this assessment required nine months and could start only once the “present travel restrictions” are lifted and its experts can travel to Bangladesh.

562 The Claimant objected to the extension of the proceedings to new quantifications and to the requested adjustment of the procedure. It insisted that the approach adopted in November 2015 be maintained.

563 The Claimant also announced its intention to assert a set-off. The Respondents objected to the introduction of such a set-off and the Claimant developed its argument concerning its right to introduce a set-off claim. The

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Respondents reserved their right to challenge the admissibility of any such claims and contested the Tribunals' jurisdiction over them.

564 The Tribunals summarised their understanding of the Parties' positions and sought further clarifications as follows.

565 The Tribunals accepted that the Respondents be given the opportunity to make an amendment to its Memorial on Damages, expecting that by that amendment the Respondents will: (a) identify with specificity which loss and damage presented in the Memorial on Damages satisfies the requirements of the Tribunals' findings on Niko's liability for the Chattak 2 blowout and the limitation of such liability; and (b) where necessary, adjust accordingly the Respondents' claims as set out in their Memorial. The Tribunals invited the Respondents: “to state whether the Decision on Liability requires any other amendments of their Memorial on Damages and, if so, identify the relevant passages in the Decision on Liability”.

566 Concerning the Claimant's Counter-Memorial on Damages, the Tribunals expected that the Claimant will address the Respondents' quantification of Niko's liability as amended, considering in particular the Tribunal's findings on the scope of that liability and its limitation. The Tribunals invited the Claimant to specify:

(i) whether, in addition to such explanations concerning the scope of liability and previous submissions concerning quantum including expert reports, it intends to produce (a) any new technical argument concerning the loss and damage caused by the Chattak 2 blowout and (b) new evidence and expert opinions in this respect; and

(ii) whether the claim on which the Claimant intends to rely for the intended set-off is established already or requires evidence and argument and a decision by the Tribunal.

567 Both Parties were further invited to indicate:

(iii) whether and to what extent the present COVID-19 situation and the existing and anticipated restrictions in this regard affect their capacity to prepare the submissions for the quantum phase, distinguishing between (a) legal argument, in particular concerning the question whether and to what extent Niko's liability extends to loss and damage of the type claimed; and (b) obtaining expert advice on the quantification of this loss and damage; and

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(iv) availability for a hearing on quantum for seven days (as the Claimant suggests) or shorter, (a) in the first half of 2021 (b) after October 2021 or (c) after July 2022.

568 The Tribunals also invited the Parties to address the expected effect of the COVID-19 situation on the Parties' work programme and proposed possible hearing dates.

569 The Respondents explained existing restrictions and necessary precautions in communications between counsel and their client in Bangladesh. With respect to the work of their experts they described difficulties with respect to field work:

The environmental experts have indicated that significant additional fieldwork will be required to determine the extent of the environmental damage caused by Niko's breach of the JVA.”

570 The Respondents also pointed out the uncertainty about further developments in general and specifically the effect of the COVID-19 situation on their experts “ability to operate safely and without putting the health of the people of Tengratila at risk”.

571 The Claimant explained with respect to “the potential set-off [that had] not yet been articulated, Niko will need to present its contractual and legal basis” and made proposals concerning the timing. With respect to the impact of the COVID-19 situation, the Claimant believed that it would impact its capacity to prepare legal argument or witness statement”. It expected that counsel and experts would be working remotely for the foreseeable future. It “anticipated that usual time frames for work-flows will be increased somewhat, but not by any material amount”.

572 The Tribunals considered the scope of the issues to be addressed. Considering the number of witnesses and experts, the Claimant suggested that more than five days may be required for the evidentiary hearing; it planned for seven days. The Tribunals were of the view that, for the full scope of the heads of loss as now quantified or announced, the time for the evidentiary hearing could hardly be less than seven days. Consultation concerning the availability of the Parties and the members of the Tribunals showed that a seven-day evidentiary hearing could not be held before late June 2021.

573 In this situation the Tribunals noted that legal argument identifying the heads of recoverable loss could be heard earlier during a hearing of one or two days which could take place in the fall of 2020. They issued Procedural Order No 24 on 3 April 2020, providing for subsequent procedural steps as follows:

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(i) By 17 August 2020 (later extended to 7 September 2020): Claimant's Counter-Memorial on Damages, as provided by the November 2015 programme, presenting also the Claimant's argument concerning the effect of the Decision on Liability on the heads of recoverable loss as well as argument on the justification of the intended set-off claim.

(ii) By 17 August 2020 (extended also to 7 September 2020): the Respondents' Amendment to the 2016 Memorial on Damages as they had proposed as an alternative approach in a communication of 11 March 2020.

574 The Tribunal specified that, in these submissions, the Parties were required to identify with specificity which heads of recoverable loss presented in the Memorial on Damages of 25 March 2016 (including the environmental damage reserved for subsequent quantification) satisfy the requirements of the Tribunal's findings on Niko's liability for the Chattak 2 blowout and the limitations of such liability. The Respondents were also asked to address the admissibility and justification of the requested changes from the November 2015 agreed procedure.

(iii) A hearing for oral argument on the issues addressed in these submissions was envisaged for September/October 2020 at a date to be agreed forthwith. The Tribunals clarified that the Parties would be given an opportunity to respond to their opponent's argument identifying the heads of recoverable loss in light of the Tribunal's findings. The Tribunals pointed out that the issues to be argued at that Hearing concerned essentially legal analysis which each Party would have performed in preparation of its 17 August 2020 written submission. Other issues, requiring factual evidence and expert opinion were to be addressed in a subsequent phase.

575 The Tribunals further informed the Parties that they would issue a Decision on the heads of recoverable loss following the fall 2020 hearing for oral argument, with the intent to conduct an evidentiary hearing in July 2021.

576 The Claimant filed its Counter-Memorial on Damages on 7 September 2002, accompanied by factual exhibits and legal authorities, and

1. Second Expert Report of Gaffney Cline (Gaffney Cline II);
2. Expert Report of Stuart Wright (Wright I);
3. Second Witness Statement of Randal Glaholt (WS Glaholt II);

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4. First Witness Statement and Expert Opinion of Grant Kelly (WS Kelly I);
5. Fourth Witness Statement of Brian Adolph (WS Adloph IV); and
6. Fourth Witness Statement of William Hornaday (WS Hornaday IV).

577 The Respondents filed also on 7 September 2020 BAPEX's Amendment to the Memorial on Damages accompanied by factual exhibits and legal authorities and

1. Supplemental Expert Report of Jeffrey Hughes on Field Development Costs for the Chattak West Gas Field (Hughes II);
2. Supplemental Expert Report of Steven A. Wilson (Wilson II);
3. Supplemental Report on Geomechanical Damage and Gas Loss at the Chattak West Gas Field, Bangladesh (GeoMechanics II);
4. Supplemental Expert Report of James F. Latham PE and Michael J. Novicki PE, Ryder Scott Company PE (Ryder Scott II); and
5. Updated Quantum of Damages Report, Paul A. Carpenter PhD, the Brattle Group (Brattle II).

578 After the Hearing for oral argument had been agreed for 19 and 20 November 2020, the Respondents requested (i) clarification of the agenda for the November 2020 Hearing, (ii) leave to file a submission responding to the Claimant's set-off claim and its admissibility, and (iii) the organization of a pre-hearing conference.¹⁵³ On 2 October 2020, the Tribunals confirmed that the set-off claim and its admissibility was among the topics to be addressed at the November 2020 Hearing and informed the Parties that further written submissions prior to 22 October 2020 were permitted. The Tribunals further confirmed its intention to hold a pre-hearing conference.

579 Subsequently, BAPEX filed a Written Presentation in Advance of the 19-20 November 2020 Hearing, addressing legal issues related to heads of loss. The submission was accompanied by new evidence and legal authorities. The submission also set out the Respondents' legal argument on the Claimant's set-off claim. The Claimant informed the Tribunals that it did not consider it

¹⁵³ Decision on Heads of Recoverable Loss, para. 87. ↩

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necessary to make a written submission or introduce new legal authorities prior to the November 2020 Hearing.

580 A pre-hearing conference was held on 4 November 2020. The Tribunals were represented at the Pre-Hearing Conference by their President, in view of the wide range of time zones involved. The List of Issues to be addressed at the November 2020 Hearing was discussed, including the following:

3.1. Criteria for distinguishing recoverable heads of loss from those which are excluded by Clause 27.2 of the JVA and Section 73 of the Contract Act; for the Tribunals it is important to understand, in light of the Tribunals' findings in the Decision on Liability, the reasons why the Parties consider each of the losses claimed as recoverable heads of loss or deny recoverability;

3.2. Legal issues concerning the Government's tort claim;

3.3. Admissibility and justification of the Claimant's set-off claim, including the question whether heads of loss relied upon are recoverable in light of the Tribunals' decision on liability;

3.4. The procedure for the quantification of recoverable claims, following the Tribunals' forthcoming Decision on Heads of Claim.

581 At the Pre-Hearing Conference, the Parties confirmed in principle their agreement with the identification of the issues listed, subject to some adjustments and clarifications. Disagreement arose, however, with respect to item 3.1 of the List of Issues insofar as Claimant understood that this issue should not be limited to distinguishing recoverable loss from losses that were excluded by Article 27.3 of the JVA and Section 73 of the Contract Act but that all issues of liability that arose from the submissions should be addressed. The Respondents objected and argued that adopting the broad definition of the issue would go beyond the scope that had been announced for the November 2020 Hearing.

582 With respect to item 3.3 of the List of Issues, it was agreed that this issue be limited to the admissibility of the set-off defence and the Tribunal's jurisdiction over it. If the Tribunals determined in the Decision on Recoverable Loss that the set-off defence would be admissible, it was agreed that liability and quantum of that defence would be subject of the final phase of the arbitration.

583 The Parties were invited at the Pre-Hearing Conference to explain their respective positions regarding the scope of agenda item 3.1 in writing after the Pre-Hearing Conference, which they did on 6 November 2020.

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584 The Tribunals prepared Summary Minutes of the Pre-Hearing Conference, which were provided to the Parties for comments and thereafter finalized taking into account the Parties' observations. The Summary Minutes were thus sent to the Parties on 10 November 2020.

585 The Tribunal considered the Parties' positions on the scope of agenda item 3.1 as expressed orally and in their 6 November 2020 submissions and issued Procedural Order No 25 on 15 November 2020. The Tribunals clarified that agenda item 3.1 concerned

all claims by BAPEX and the question whether the claims are recoverable in principle. If the Claimant “den[ies] recoverability”, its argument at the Hearing is not limited to specific grounds of its denial. The Tribunal sees no need to modify the definition of the issue in item 3.1 of the List of Issues.

586 The Tribunals further noted in PO No 25 the scope of agenda item 3.3, limited to the admissibility of the set-off claim, as agreed during the Pre-Hearing Conference; and they recorded that otherwise the List of Issues was confirmed without prejudice to subsequent clarifications in consultation with the Parties. Attached to PO No 25 were (i) the List of Issues, (ii) a Protocol Regarding Remote Hearing Matters and the Hearing Agenda, including time allocation and connection details. No comments were subsequently received from the Parties on the remote hearing protocol.

587 In order to assist the Parties in their hearing preparation and as the Tribunals had done on prior occasions, the Tribunals sent to the Parties a list of questions related to the agreed List of Issues. The introduction to the list stated

The Tribunals presume that most if not all of these questions have been identified already by the Parties in their preparation of the forthcoming November 2020 Hearing. The below list summarising some of the Tribunals' questions may nevertheless assist the Parties in focusing their presentations. The list is by no means complete and may not be taken in any way as a prejudgement of the Tribunals on any of the issues it must decide; and it should not be taken as limiting in any way the Parties' argument at the Hearing.

588 The November 2020 Hearing took place as scheduled on 19 and 20 November 2020 by video-conference. In light of the place of residence of the hearing participants (Wellington, Dhaka, Manama, Geneva, Paris, Washington, D.C. and Calgary), it was agreed that each hearing day would consist of two 2-hour sessions, i.e. a total of 8 hearing hours, organized as follows:

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589 The Hearing was attended by the three members of the Tribunals, the Tribunal Secretary and staff of the ICSID Secretariat, the Parties' Counsel and staff of their law firms, as well as representatives of the Claimant and of the Respondents and the Honourable State Minister, Ministry of Power, Energy and Mineral Resources and other members of the Ministry. A complete list of participants was distributed to the Parties as Annex B to the Summary Minutes of the November 2020 Hearing prepared by the Tribunals.

590 The Parties presented their argument on the issues that had been identified and responded to the questions of the Tribunals. Prior to the start of their respective presentations the Parties distributed to the Tribunals and their opponent electronic copies of the slides shown during their presentation. These were uploaded to the Box account established for these cases and recorded as RH-1 to RH-3 and CH-1 and CH-2.

591 Concerning item 3.4 of the agreed agenda for the Hearing, the Respondents presented BAPEX's Proposed Procedural Schedule for Quantification of Recoverable Claims. This schedule provided for a reply by the Respondents on Heads of Damage 1 and 2, followed by the Claimant's rejoinder, a hearing and the Tribunal's “Decision on the Quantification of Damages under Heads of Damage 1 and 2 and Order Requiring Payment of Monitoring Costs Arising Out of Head of Damage 3". This decision was then to be followed by proceedings on BAPEX's Head of Damage 3, starting with a submission of the Respondents to be filed “9 months from when the World Health Organisation declares the COVID-19 pandemic over”. According to the Respondents, the proceedings in this phase were to consist of an exchange of written submissions, a hearing and the Final Award.

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592 The Claimant objected to this proposal and the change of the procedural approach adopted at the end of the November 2015 Hearing. It took the position that further monitoring was neither required nor justified, and requested that the claims be decided on the basis of the evidence on the record.

593 The Respondents announced BAPEX's intention to file requests for production of documents. The Claimant objected that a phase for document production had not been provided in the agreed programme and was inadmissible. The Tribunals examined with the Parties whether document production could be organised without causing delay to the procedure, affording both Parties the opportunity for such production. Further to the discussion and agreement at the Hearing, the Tribunal issued on 1 December 2020, Procedural Order No 26, setting directions for the document production procedure.

594 Sound recordings and transcripts were made of the November 2020 Hearing and deposited in the Centre's archives and provided to the Parties and the Tribunals. Transcript corrections were provided by the Parties after the Hearing and corrected transcripts were subsequently circulated. The Tribunals prepared Summary Minutes of the Hearing and provided them to the Parties in draft form; they were finalized following two rounds of comments.

595 As noted above, further to the agreement on document production reached at the November 2020 Hearing, the Tribunal issued on 1 December 2020, Procedural Order No 26, setting directions for the document production procedure.

596 Following the November 2020 Hearing and a discussion with the Tribunal about the Tribunals' Question No 12, the Respondents wrote to the Tribunals on 5 December 2020 with respect to the Government's claim for lost gas:

In light of Respondents' more complete understanding of the Tribunals’ question, Respondents consider that the loss to the Government could be determined in relation to alternative gas supplies. The valuation of the loss on this basis would require further analysis, with input from valuation experts. Respondents respectfully inform the Tribunals that they are prepared to provide such analysis now or in the subsequent quantification phase

597 On 15 April 2021, the Respondents wrote to the Tribunals, “to provide an update to the Tribunal regarding the work of BAPEX’s environmental damages experts". With the letter the Respondents communicated a note from Delphic HSE concerning “the planned health, environmental and monitoring and

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environmental conditions study (the Study) to be carried out in Trengratila, Bangladesh”. The note stated that “Delphic HSE is planning to start the Study in November 2021” but identified “[s]everal significant risks to the Study [...] primarily related to COVID-19”.

4.6 The Decision on Heads of Recoverable Loss

598 The Tribunals examined the Parties' written and oral submissions, the evidence produced and the expert reports. After deliberation, they rendered their Decision on Heads of Recoverable Loss on 18 May 2021, within the scope agreed before and at the November 2020 Hearing and defined in further detail in Section 6 of that Decision.

599 In Section 6 of that Decision, the Tribunals summarised the discussion leading to the definition of the scope of this decision as it was confirmed at the November 2020 Hearing and they concluded:

... the present Decision will determine Niko's liability in principle for the claims presented by the Respondents. Where this requires the consideration of facts, the Tribunal will rely only on facts that are not contested and when contested facts must be considered, the Tribunal will assume that the Respondents' allegations are correct.

600 The Tribunals clarified:

These assumptions are of course not factual findings. To the extent they remain relevant for the decision on claims that are admitted in principle, they will have to be proven in the next phase of the proceedings like any other contested fact that is relevant for the Tribunal's decision. The Claimant emphasised, specifically in the context of the Lost Gas Claim, that “the Factual and Expert Opinions that have been presented by BAPEX in support of its Claim [...] are [...] highly disputed as set out in Niko's Counter-Memorial on Damages”, adding:

... we are proceeding with this Hearing today on the basis of an assumption that BAPEX can establish those facts as pled.

601 The Tribunals also pointed out that two other requests were added to the scope of the Decision on Recoverable Loss:

(i) a request by the Respondents that the agreed procedure be modified to accommodate a “full assessment of environmental damage” by their experts; and

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(ii) a set-off claim by the Claimant, considered at this stage within the limits of the Parties' argument, without considering the merits of the claim.

602 With respect to the criteria for distinguishing recoverable from excluded losses, the Tribunals examined the argument of the Parties and the authorities on which they relied, in particular with respect to Section 73 of the Contract Act and Article 27 of the JVA, as it had been discussed already in the Decision on Liability.

603 The Tribunals noted that they continued to be faced with the difficulty of having to determine whether the losses claimed by the Respondents “naturally arose in the usual course of things”. [They had] not received much guidance in this task, except for “the test of likelihood and foreseeability”, as recommended by the Respondents”. The Tribunals added:

When determining the usual course of things according to the first paragraph of Section 73 of the Contract Act, the Tribunal must, however, remain mindful of the distinction resulting from the second paragraph which excludes “remote and indirect loss and damage”. As indirect loss and damage is excluded by the second paragraph, natural flow and the usual course of things in the first paragraph must be direct loss and damage. In the opinion of the Tribunal this leaves no room for intervening events.

604 The Tribunals found support for this understanding in the English decision in Saint Line v. Richardson, a case already discussed in the Decision on Liability and referred to by the Respondents at the Hearing. In the words of Atkinson J:

Direct damage is that which flows naturally from the breach without other intervening cause and independently of special circumstances, while indirect damage does not so flow.¹⁵⁴

605 With respect to the second type of loss or damage that must be compensated under the first paragraph of Section 73 of the Contract Act, sometimes referred to as "special", the Tribunals concluded that it required proof of specific contractual understanding of the parties. The Tribunals concluded that it was not correct to consider whether the loss was “reasonably foreseeable at the time of the JVA”. The Tribunals explained:

¹⁵⁴ Saint Line Ltd v. Richardsons, Westgarth & Co Ltd, [1940] 2 KB 99, RLA-70, page 103, quoted at HT 2020 Day 1, pages 111, 113, and Claimant's Presentation, 19 November 2020, Slide 8, quoted in the Decision on Heads of Recoverable Loss, paragraph 228. ↩

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Such reasonable foreseeability is a relevant criterion when determining the usual course of things; in the context of Section 73, first paragraph, second type of loss, what is required is that the parties “knew when they made the contract” that the claimed loss would likely result from the breach of the contract.

606 While the examination of the legal provisions and their interpretation produced some guidance, the task of identifying recoverable loss required a case by case analysis. The Tribunals concluded:

Having carefully considered the Parties’argument and the legal authorities on which they relied, the Tribunal concludes that the question whether the losses claimed by the Respondents in this arbitration are recoverable or excluded by Section 73 of the Contract Act or Article 27.2 of the JVA must be determined specifically for each claim. While some general considerations and guiding principles have emerged and were set out above, there did not appear a readily applicable definition distinguishing between recoverable and excluded losses. The determination must be made in a case-by-case analysis, in which the Tribunal exercises its judgement.¹⁵⁵

607 Against this background, the Tribunals examined the three heads of loss.

608 The First Head of Loss concerned gas that escaped the Reservoir due to the blowout of the Chattak 2 well, also referred to as the Blowout Gas. Depending on the method for estimating the gas loss, different methods applied. When applying the flow rate method, as this had been done by the Gas Loss Committees, the loss was considered in three periods. The Tribunals identified the factual issues that remained to resolved for the quantification. With respect to the third period also questions of liability remained outstanding, in case it would be determined that gas continued to escape from the Reservoir, after the completion of the Chattak 2B relief operation.

609 Concerning the loss of the Government due to the Blowout Gas, the Tribunals found that

... loss of the blowout gas is a loss not only for BAPEX but also for the Government, even though the two are affected differently. This loss was caused by Niko's breach of its obligations as Operator that produced he Chattak 2 blowout.

[...]

¹⁵⁵ Decision on Heads of Recoverable Loss, paragraph 236. ↩

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BAPEX's claim for the Government's losses is a claim under the JVA. It is not a claim for indemnification of a third party under Article 27.2, first sentence. As the Respondents declared at the Hearing it is a “claim to damages in contract under the JVA”. Nor is the claim an assigned freestanding claim in tort. In view of this conclusion, it is not necessary [to] examine whether the claim also meets the requirement of a separate tort claim.¹⁵⁶

610 This left the question whether the Government's loss was recoverable and how it had to be quantified. The Tribunals identified as one of the issues:

The question there concerns what is compensable, is it the loss of the cheaper gas or is it the loss of the costs of electricity production by use of substitute fuels.

611 The Tribunals identified points that remained to be clarified and concluded:

In any event the compensation which BAPEX may claim on behalf of the Government may not exceed the difference between the price that Petrobangla would have paid to the BAPEX/Niko Joint Venture and the market price, determined by reference to the price the Government or Petrobangla paid to comparable gas producers in Bangladesh.

612 The Second Head of Loss concerned the loss of production due to damage to the Overburden and drilling hazards caused by the Chattak 2 well blowout.

613 The Respondents asserted that, due to the blowouts and the continued seepage of gas, an additional loss occurred. This loss does not consist in the gas that escaped from the Reservoir but in the gas that remained in it. According to the Respondents that gas can no longer be extracted from the Reservoir and therefore must be treated as lost. The Respondents clarified that the gas in the sands below the Reservoir (Sands 2 to 8) are not to be treated as lost.

614 The Tribunals considered the argument of the Respondents and their experts to support this loss. They argued that the first blowout and the gas that escaped from the Reservoir was trapped in the Overburden had created geotechnical damage there and rendered drilling any further wells too risky and no longer feasible. This explanation was strongly contested by the Claimant and its experts. For the purpose of the decision they had to make, the Tribunals assumed that the assertions by the Respondents and their

¹⁵⁶ Decision on Recoverable Loss, paragraphs 309 and 312. ↩

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experts were correct and the Reservoir of Sands 1 and 2 had become incapable of being developed.

615 The Tribunals examined whether the claimed loss arose naturally in the usual course of things from the breach. It observed that the demonstration leading to this conclusion relied on several factual assumptions, such as the shale layers of a specific form and distribution that in the view of the Respondents' experts were of the size, shape and number that they prevented the gas from migrating to the surface and caused gas traps of such importance that the risk of further blowouts made the risk of drilling through the Overburden excessively high; the flow of gas was not stopped by the Chattak 2B relief operation and continued for over ten years; drilling wells in a direction that avoided the areas with trapped gas would have been technically difficult and not feasible.

616 The Tribunals concluded:

The damage for which the Respondents seek compensation under their second head of loss, thus would depend on several supervening events and would have developed only over time as the result of a failure to take any action to stop the allegedly continuing seepages. Such damage cannot be accepted as a damage that “naturally arose in the usual course of things” from Niko's breach of its duties as prudent operator.

In any event, the intervening events would make such a damage “indirect” and “consequential” by any definition of these terms and thus would exclude the loss according to Section 73, second paragraph of the Contract Act and Article 27.2 of the JVA, as explained above in Section 7.3.

617 The Tribunals also examined whether the Parties knew, when concluding the JVA, that Niko's breach of its duties as Operator would likely cause the loss of the gas remaining in Sands 1 and 2. The Tribunals noted that there was no evidence or even allegation that the Parties knew or should have contemplated that the breach of Niko's duties as Operator would likely result in the loss claimed under this head. The Tribunals noted:

397.... even after the breach of Niko's duty had been committed and the Chattak 2 blowout had occurred, the Parties did not contemplate a loss as claimed by the Respondents. They assumed that drilling the sands above the Reservoir remained possible. As discussed above in Section 8.3.2, Niko submitted work programmes for drilling one or more production wells. BAPEX and the Government did not object that the drilling of such wells had become too hazardous or that the gas in the Reservoir had been lost; they rather posed conditions of performance

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which Niko did not accept. The development of the Reservoir, in the eyes of the Parties, remained technically feasible and not precluded, despite the blowouts and the hazards attributed to them.

398. This excludes, in the eyes of the Tribunal, that the Parties, when they concluded the JVA, knew or even contemplated these hazards and a resulting loss of the gas from the Reservoir as a likely result of a breach of Niko's obligations as the Operator.

618 The Tribunals concluded that the Second Head of Loss for which the Respondents claim, if it were found to have occurred, would not be a damage that had to be compensated under Section 73, first paragraph of the Contract Act. In any event it would be excluded by the second paragraph of that section and by Clause 27.2 of the JVA. The Tribunals decided that Second Head of Loss is not recoverable.

619 The Third Head of Loss concerned environmental loss caused by the Chattak 2 well blowout.

620 This head of loss comprises a large group of losses including “immediate impacts on the local population, agriculture, pisciculture and environment of Tengratila" as well as “long-term effects on the environment and people in Tengratila". These losses frequently were referred to as “environmental losses”. The Tribunals used this term to refer to all losses that may enter into the Respondents’third head of loss, including losses to the health and property affected by the blowouts.

621 The Tribunals considered the reports about the blowouts, the losses caused and their assessment, including the variations in the Respondents' approach to these claims.

622 Given the incomplete presentation of the environmental claims in this Arbitration, the Tribunals adopted a cautious approach in their determinations about the recoverability of these claims in principle. They considered specifically those items of damage and loss to which the Respondents have attributed particular attention in their more recent submissions, viz. seeping gas and arsenic contamination. The Tribunals also considered specifically the proposals for abatement action by Mr Wilson, the only two items of environmental loss for which the Respondents had made a complete claim in the arbitration, including quantification.

623 Concerning seepages, the Respondents asserted that relief well Chattak 2B did not completely seal the Chattak 2 well and that, despite the declared success of the relief operation, gas from the Reservoir continued to escape. This gas found its way through the Overburden above the Regional Shale and

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continued to cause seepages in a wide range around the Chattak 2 well. For the Respondents these seepages are a major source of continuing environmental losses. In their letter of 17 September 2015, the Respondents had explained that BAPEX was pursuing claims concerning the gas seepages by separate action; however, in its Memorial on Damages and thereafter BAPEX included the alleged gas seepages in its claims for lost gas and for environmental losses caused by the seepages.

624 The Claimant firmly denied the assertion that the Chattak 2B relief well did not properly seal the blowout well and that gas continues to escape from the Reservoir as a result of the blowouts. It also challenged the proposition that certain asserted losses, such as those resulting from arsenic, were direct.

625 The Tribunal deferred its decision on this claim until the Parties had been given the opportunity to present further argument and evidence in the proceedings on quantification. The issue is now addressed below in Section 7.5.6.

626 With respect to arsenic contamination, the Respondents asserted that the blowouts caused an increase of the arsenic content in the water with effects on the health of the population and pisciculture. They stated that “the blowouts are likely to be a major, if not the sole primary, cause of the high level of arsenic poisoning present in people living in Tengratila”. The Respondents recognised that prior to and independent of the Chattak blowouts, there were, as explained by the Respondents, “known issues with arsenic in the groundwater in Bangladesh"; their environmental experts stated that “arsenic in drinking water is a known hazard in the region in general”. They asserted, however, that arsenic contamination increased in the region as a consequence of the blowouts and relied on reports about such increase.

627 The Claimant contested the conclusions of the Respondents' environmental experts and asserts that they are “wholly unsupported by evidence” and relied on contrary evidence, in particular testimony about recent test results showing arsenic levels below health threshold.

628 The Tribunals assumed, as part of the legal analysis, that the Respondents were correct and arsenic levels did increase and examined the explanations about the causes of such increase:

629 It was uncontested that the gas did not contain arsenic. If the blowouts did cause an increase of arsenic in the water, this must have had its origin in the soil. In the explanations given by the Respondents and their experts the arsenic had its origin in the minerals in the soil ejected by the blowout or disturbed by it. If the soil so ejected contained these minerals, the experts

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explained that the arsenic was not naturally water soluble. “The arsenic containing compounds in minerals can react under different conditions to form water soluble compounds which have greater mobility and are more bioavailable”.¹⁵⁷ Other explanations about the process by which arsenic can become soluble and contaminate water were of similar complexity. The experts could not determine which of these processes would have been prevailing in the alleged increased arsenic contamination. The Tribunals were

... unable to consider any of the different processes described by the experts as a natural result of Niko's fault as Operator when it decided on the casing depth and performed the wiper trip in the course of which the first blowout occurred; nor is there any indication that the Parties knew, when they concluded the JVA, that any of these processes would result from this fault as Operator. Indeed, there is no indication that the occurrence of such a process was reasonably foreseeable by a diligent operator.

630 The Tribunals concluded that Niko was not liable under Section 73, first paragraph of the Contract Act for any increase in the arsenic content of the Tengratila drinking water that may have occurred following the first blowout. The loss and damage caused by such increase is remote and indirect and it is consequential and thus excluded by Section 73, second paragraph of the Contract Act and by Article 27.2 of the JVA, respectively.

631 Mr Wilson's projects: The Respondents submitted a report by Mr Wilson in which he presented projects of abatement and mitigation in the Reservoir area. The projects were based on the assumption that gas continued to seep from the Reservoir to the surface and caused a risk to the population. Mr Wilson had two projects to deal with this risk.

632 For the first project, Mr Wilson had noted that some of the villagers in Tengratila used the seeping gas as an “informal cooking gas supply system” causing “a significant risk of explosion to the residents in buildings". The Tribunals noted that the first project concerned a risk that does not arise directly from the seepages but from the decision of the villagers to use the seepages for cooking purposes. The Tribunals observed:

That may be an economically reasonable decision, drawing an advantage from the problem of the seepages. It is nevertheless an intervening event of the type that breaks the chain of causation for Niko's liability.

¹⁵⁷ Explanation in BBL I, quoted at paragraph 560 of the Decision on Heads of Recoverable Loss. ↩

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633 The second project proposed consisted in a soil vacuum extraction procedure intended to remove “the gas from the shallow ground below the buildings and open spaces”. The Tribunals found that several factual and legal questions remained to be addressed and reserved its decision.

634 For these reasons the first of Mr Wilson's projects was found not recoverable and the claim for the second was reserved. It is now decided in below Section 9.5.6.

635 The Tribunals noted that BAPEX was not claiming for its own environmental losses but for environmental losses of the Government. The Tribunals concluded that

... the Government may claim for damage to the environment, just as it may claim, on different grounds explained above in Section 8.4.4, for the gas lost as a result of the Chattak 2 blowout. Such claims must be presented within the framework of the JVA and by BAPEX as the Government's assignee.

636 The Tribunals accepted that if the Government had taken action to mitigate damage caused by Niko it can claim for reimbursement of the related expenses. The Tribunals considered the case where the need for protective and remedial action arose and no action was taken by the Government. The Government referred to the “limited resources" of the Government and Niko's obligation. The Tribunals expressed the view that

...this question cannot be answered in the abstract. The Tribunal is aware of the limited resources of the Government and understands that the available resources may not be sufficient to pay for all actions of some importance; a choice must be made. The allocation of funds to Governmental action obviously is a matter of setting priorities.

The Tribunal will have to consider in each case what conclusions must be drawn from the Government's decision to take or not to take any remedial or mitigating action, taking into consideration the specific situation of the Government that, in this respect, differ from those of a private claimant.

637 With respect to claims for individuals having suffered losses, the Tribunals observed that in Article 27.1 of the JVA Niko assumed express responsibility for “conservation, safety of life, property, crops, fishing and fisheries, navigation, protection of environment”, listing many details of this responsibility. When implementing the JVA, Niko submitted to the Department of Environment an Environmental Impact Assessment (EIA) that

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contained express commitments, in case of a blowout, to pay compensation to the affected population.

638 When the blowouts occurred, the Government took an active role, through the Ministry of Power, Energy and Mineral Resources and the Ministry of Environment and Forestry and through various authorities at the local and regional level, in the assessment of the damage caused by the two blowouts and the distribution of compensation paid by Niko to the affected population. The Deputy Commissioner Sunamganj chaired the Local Losses Committee. With the assistance of several concerned officers of the Doarabazar Sub- district, the UP Chairman concerned and its Executive Officer, that Committee gathered information about the families, businesses and others affected by the blowouts, prepared detailed lists indicating the loss of each of them and organised the distribution.

639 The compensation to the persons so identified was agreed with Niko and paid by it. It was then distributed, as described above, by the local authorities. The Tribunal sees in this report and Niko's involvement in its preparation and implementation, as well as, more generally, in the work of the Environmental Losses Committees, clear evidence of the active role played by the Government, at the Ministerial level and through local authorities, in the assessment of the losses suffered by the individuals affected, in the collection of the compensation from Niko and the distribution to the individuals concerned. These activities are legitimate governmental action; the legitimacy of this action is uncontested by Niko.

640 The Tribunals concluded that the Government is entitled to act for the individuals who have suffered loss from the blowouts, provided it proceeds along the lines that were adopted in the compensation to the local population, as described in the reports presented in these proceedings. BAPEX, as the Government's assignee, may claim on the Government's behalf.

641 The Tribunals also considered the Respondents' requests (i) to make advance payments on account of monitoring and surveying costs and (ii) to “hold this proceeding open until such time as a complete survey and monitoring of the Tengratila area can be conducted and BAPEX can provide the fullest possible accounting of environmental and health related losses”. The Tribunals considered both requests unjustified and dismissed them.

642 Finally, the Tribunals considered the Claimant's Set-off claim.

643 With its Counter-Memorial on Damages, dated 7 September 2020, the Claimant introduced a request which came to be referred to as its “set-off claim". Niko sought the following relief:

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Declare that BAPEX is liable to Niko for damages suffered as a result of BAPEX's breaches of the JVA and wrongful deprivation of Niko's right to produce gas from Chattak West;

Fix the amount of Niko's losses in an amount to be proven at the hearing, but which Niko contends to be at least USD 114.1 million, and set this amount off against any amount for which Niko is determined to be liable to BAPEX;

In the alternative, declare that the Tribunal and the Centre have jurisdiction over Niko's claim in set-off, that BAPEX is liable to Niko for damages suffered as a result of BAPEX's breaches of the JVA and wrongful deprivation of Niko's right to produce gas from Chattak West, fix the amount of Niko's losses in an amount to be proven at the hearing, but which Niko contends to be at least USD 114.1 million, and set this amount off against any amount for which Niko is determined to be liable to BAPEX;

Declare that Niko owes no compensation to BAPEX.¹⁵⁸

644 The Claimant argued that BAPEX's failure to approve Niko's proposals for further drilling since 2005 was a breach of the JVA. The Claimant asserted that this breach entitled it to at least USD 114.1 million as damages and requested this loss be set off against the claims of BAPEX.

645 The Claimant relied on the request for damages only for the purpose of set- off. It did not seek an award for any amount that may have remained after the set-off and denied that its request for damages may be described as a “claim”.

646 The Respondents object to the set-off claim as late and hence inadmissible under the ICSID Rules and under the law of Bangladesh.

647 The Tribunals considered first whether the set-off claim was admissible in the pending Arbitration proceedings.

648 The Respondents had argued that the claim was an “ancillary claim” governed by Rule 40 of the 2006 Arbitration Rules applicable to these proceedings. That rule requires that ancillary (“incidental or additional”) claims “shall be presented not later than in the reply and a counter-claim no later than in the counter memorial, unless the Tribunal, upon justification by the party presenting the ancillary claim and upon considering any objection of the other

¹⁵⁸ CMD, paragraphs 458 – 461. ↩

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party, authorizes the presentation of the claim at a later stage in the proceeding".

649 The Claimant argued that its set-off claim was admissible according to Arbitration Rule 40 and fell within the jurisdiction of the Tribunal.

650 The Tribunals explained that the relevant issue was not the Claimant's declaration of set-off but the introduction in this Arbitration of the Claimant's request for damages. This is an ancillary claim. The Arbitration was introduced as a request for a declaration of non-liability. BAPEX had not raised a claim for liability. It did so only in its Memorial on Damages of 25 March 2016, when it claimed compensation in the amount of USD 118 million. The Claimant replied to this claim by the Counter-Memorial on Damages. In that submission it raised its set-off claim and thus complied with ICSID Arbitration Rule 40(2).

651 The Tribunals added that the set-off claim was closely related to BAPEX's claims. They concluded:

... the set-off claim meets the time requirement of ICSID Arbitration Rule 40(2)

[...]

... even if the Set-off Claim were not otherwise admissible under Arbitration Rule 40, the Tribunal would have authorised it under its subparagraph (2).¹⁵⁹

652 The Respondents' alternative argument was in substance that, if the claim were procedurally admissible it would be time barred under the applicable law. The Parties differed about (i) the issue to which the time-bar applied, (ii) the law applicable to the time-bar issue and (iii) the application of that law to the facts of the case.

653 The Claimant argued that “the limitation period for a claim in set-off or a defence in set-off runs from the filing of the Claim for the recovery of money that is sought to be set off. And it is not in dispute that that period began in March 2016”. The Respondents considered the issue by reference to the “underlying claim”, viz. the damages claim on which the Claimant relied for the set-off.

654 The Parties argued by reference to the law of Bangladesh and the UNIDROIT Principles about the conditions for set-off. The Tribunals concluded that, before examining whether the Claimant may rely on set-off as a defence, the

¹⁵⁹ Decision on Recoverable Loss, paragraphs 703 and 710. ↩

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damages claim must be considered in order to determine whether it is “legally recoverable”. If this were not the case, the question of set-off would not arise. The time-bar question therefore had to first be asked with respect to the damage claim.

655 Concerning the law applicable to the time-bar for the damages claim, the Respondents argued that “under Bangladeshi law, time-bar is an issue of substance" and relied on the choice Bangladesh law in the JVA applied also to statutory time-bar; the Bangladesh Limitation Act [2008] was applicable; the Act provides for a limitation period of three years. The Respondents also referred to Article 10.2(1) of the UNIDROIT Principles which also provide for three years.

656 The Claimant pointed out that, in the discussion of the limitation issue with respect to the Corruption Claim, the Respondents had taken the opposite position, asserting that the limitation was a procedural issue; and that Bangladesh's limitation period had no application in the ICSID arbitration.

657 The Tribunals considered the choice of law clause in Article 13 of the JVA:

The Validity, interpretation and implementation of this JVA shall be governed by the laws of Bangladesh.

658 The Tribunals observed that there was no indication in the record of the Arbitration that the Parties, when agreeing that the “implementation” of the JVA was to be governed by the law of Bangladesh, intended that the law applicable to the creation of the claim for damages or for breach of the contract would be different from the law that rendered such a claim ineffective by the operation of a time-bar.

659 The Tribunal concluded that the Parties' choice of the applicable law extended to the question whether Niko's claim for damages against BAPEX for breach of the JVA is time-barred.

660 Aware of the controversy about the nature of the time-bar rules, procedural or substantive, the Tribunals also considered the Claimant's position arguing that the time-bar issue was procedural and that it had to be determined by reference to Article 44 of the ICSID Convention which reads:

Any arbitration proceeding shall be conducted in accordance with the provisions of this Section and, except as the parties otherwise agree, in accordance with the Arbitration Rules in effect on the date on which the parties consented to arbitration. If any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question.

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661 The Tribunals observed that neither the ICSID Convention nor the ICSID Arbitration Rules contain provisions on limitation of action. If the choice of law would not be treated as including the Bangladesh Limitation Act and the matter would be treated as procedural, it would be for the Tribunals to decide. In such a decision on the temporal limitation of Niko's claim for damages, the Tribunals would have to take account of the nature of that claim. The relevant rules and principles would be those concerning the breach of contract under domestic law, as they apply under the Bangladesh Contract Act, not principles applicable in international law based on State responsibility.

662 The Tribunals therefore perforce sought guidance from practice relating to international commercial contracts and comparative law. The Parties had referred the Tribunal to the UNIDROIT Principles. The Claimant argued, as quoted above, that the Tribunals should be guided by these principles “not as governing law, but, rather, as international best practices that the Tribunals may properly consider in exercising their authority under Rule 44 [recte: Article 44 of the Convention]".

663 No other reference had been provided by the Parties to guide the Tribunals if they were to determine the applicable time-bar as a procedural issue under Article 44 of the ICSID Convention. The three-year period under the UNIDROIT Principles therefore would apply also if the limitation issue were considered procedural.

664 The Tribunals therefore applied a three-year period of limitation.

665 The Tribunals noted that the first case of a breach on which the Claimant relied occurred in November 2005. Other breaches occurred at various occasions thereafter. The last of these occasions was in May 2012. The Tribunals held that these occasions were repeated breaches, not a continuing breach. The Tribunals concluded:

... limitation period for Niko's breach of contract claim commenced in November 2005; subsequent breaches occurred until May 2012, initiating further limitation periods.

666 In order to preserve Niko's rights to a damages claim, the claim had to be made by November 2008 and with respect to subsequent breaches prior to May 2012 by May 2015. It was made only in the Claimant's Counter-Memorial on Damages of 7 September 2020.

667 The Tribunals also considered the Claimant's argument that the claim should be treated as having been made with the Request for Arbitration; they noted that that request did not contain a damages claim and did not reserve such a claim. Moreover, the Claimant's attempt to rely on Section 15 of the

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Bangladesh Limitation Act, providing for discounting periods during which proceedings are suspended, would be of no assistance. The Procedural Order No 13 on which the Claimant relied was issued in May 2016, after the period of limitation had expired in May 2015.

668 The Tribunals concluded:

Niko's claims for breaches by BAPEX of the JVA allegedly committed at various dates between November 2005 and May 2012 are time-barred. The Claimant's set-off relying on these claims is therefore denied.

669 On the basis of these considerations the Tribunals rendered the Decision on Heads of Recoverable Loss in terms set out below in Section 5.5.

4.7 Proceedings following the Decision on the Heads of Recoverable Loss until the completion of the case

For the evidentiary hearing on damages it was originally envisaged that 8 sitting days were required and that the hearing could be held from 10-19 August 2021, excluding as sitting days the weekend of 14 and 15 August 2021. The November 2015 Timetable then envisaged a hearing on in Paris from 29 August to 2 September 2021. The Parties recognised, however, that the scope for the proceedings following the Decision on Heads of Recoverable Loss would be determined to a large extent by that decision. Details for this stage of the proceedings were reserved.

4.7.1 The CMC of 8 June 2021: organising the procedure concerning the Lost Gas and its Valuation and the Environmental Claims

670 When the Decision on Heads of Recoverable Loss was notified to the Parties on 18 May 2021, the Tribunals invited the Parties on the same day to consultation about the planning of the remainder of the procedure. The Tribunals suggested to hold a case management conference (CMC). They identified the following subjects for that CMC, considering in particular the restrictions in place due to the Covid 19 pandemic:

(i) The evidentiary hearing currently scheduled for 10 to 19 August 2021, the venue and other logistic matters, including restrictions relating to the conduct of a physical meeting and considerations relating to remote participation, possible alternatives, the scope of the hearing, including witnesses and experts and the issues to be addressed;

(ii) Further submissions of evidence and argument in preparation of that hearing; and

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(iii) The Respondents' document production request [of January 2016], as revised to take account of the [18 May 2021] Decision.

671 Following an invitation from the Tribunals, the Parties proposed on 4 June 2021 to add further points to these agenda items. The Claimant requested an update on the status of the Tribunals' work on the Claimant's request for the issuance of an award in the Payment Claim and confirmation that the Decision on Heads of Recoverable Loss did not address or decide the evidentiary burden that any party must carry out to prove an assertion made by that party. The Respondents indicated that they wished to discuss the next steps in the remainder of the proceedings on the Compensation Declaration and whether a second round of written pleadings on quantum should be included in the next steps on the procedure.

672 The Tribunals then requested the Parties to provide precise details of the evidence on record of the Arbitrations that the Parties considered necessary for the quantum phase on the Compensation Declaration, indicating the issues to which the evidence related and current place of residence of the relevant witness/expert. The Claimant responded on 8 June and the Respondents on 9 June 2021, providing the requested information.

673 The CMC was held on 8 June 2021 by video conference, starting at 9pm in Manama, 8pm in Paris/Geneva, 2pm in Washington, D.C and 12pm in Calgary, corresponding to 6am in Wellington, 12am in Dhaka on 9 June 2021. The CMC was attended by the Members of the Tribunal, the Parties and their counsel, and members of the ICSID Secretariat. The Tribunal prepared Summary Minutes that were sent in draft form to the Parties on 21 June 2021 for comments. They were revised and finalised to reflect the edits and additions suggested by the Parties in their communications of 24 June 2021 and delivered to the Parties on 3 July 2021.

674 At the CMC the Tribunals explained that the intention of the identification of evidence was not to determine in a binding manner, at this stage already, the evidence for the next phase of the arbitration but to obtain information that would help to understand the scope of the hearing and the required organisational arrangements. In response to the Claimant's inquiry whether the Decision on Heads of Recoverable Loss addressed or decided the evidentiary burden that any party must carry to prove an assertion made by that party, the Tribunals confirmed that it did not intend to decide this question.

675 The discussion at the CMC regarding the evidence related to the quantum phase of the proceedings on the Compensation Declaration was focused on the lost gas and its valuation and on the Environmental Claims.

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676 With respect to the Lost Gas and its Valuation, the Respondents stated that new evidence including new expert reports was required, both with respect to the lost gas and the valuation of that gas. They explained that the Claimant's experts had filed extensive new reports and evidence to which the Respondents and their experts had not had an opportunity to respond. The Respondents also noted that their experts had not made the specific calculations to provide gas loss values in accordance with the subdivision into time periods, as identified by the Tribunal in its Decision on Heads of Recoverable Loss. The Respondents also argued that certain factual questions relating to the second blowout had to be examined, in particular where the bridging of the Chattak 2 well occurred and what happened with the bridging during the second blowout. Another issue concerned the success of the Chattak 2B relief well and the question whether it succeeded to stop the flow from the Reservoir or not; in case seepages continued, Niko's request for a production well would have to be considered. These questions required determination by the experts. In the Respondents' view, these and some other issues had not been specifically addressed by the Parties in the submissions on record, and the Respondents would need to be given an opportunity to provide further evidence and expert opinions.

677 The Claimant objected to the introduction at this stage of new evidence and expert opinions. The Claimant reminded the Respondents of the agreed procedure and recalled that a number of these aspects had been addressed in submissions, some of which dating back to 2014. According to the Claimant the Tribunals should decide the outstanding issues on the basis of the materials on record.

678 The Tribunals reminded the Parties of the wealth of information already on record. They pointed out in particular that the November 2015 timetable provided for a Memorial on Damages by BAPEX and a Counter-Memorial by the Claimant followed by a hearing on damages. The Respondents were given an opportunity for an additional submission; they filed an Amendment to BAPEX's Memorial on Damages. All three of these submissions were accompanied by evidence and expert reports.

679 The Respondents noted that if additional written submissions are not permitted, their experts would need sufficient time on direct examination to address the technical issues raised by the Claimant's experts in their reports annexed to the Counter-Memorial on Damages and the specific technical issues noted in the Decision on Heads of Recoverable Loss.

680 In the discussion on the scope of witness evidence and expert opinions required for the Tribunals to decide the quantum of the recoverable loss,

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reference was made to the list presented by the Claimant before the CMC. The Respondents provided information on the corresponding experts named by them. With respect to the specific points which the Respondents had identified as needing further evidence and reports, the Claimant pointed out that the Respondents had presented a method for quantifying the lost gas that did not distinguish between the three periods identified in the Decision on Heads of Recoverable Loss; by contrast, the Claimant had produced expert reports that allowed such distinction. The experts having provided these opinions had to be available at the hearing and their opinions be tested by the Parties and the Tribunals. Similar conclusions were reached with respect to other controversial issues concerning the quantification of the gas lost.

681 With respect to the valuation of the lost gas, the Claimant explained that, in addition to the pricing of that gas, other calculations are required to determine the value of the share BAPEX would have had in the lost gas. The relevant calculations are on the record. The Parties agreed that this aspect of the case – the valuation of the lost gas – could be addressed in written submissions and that there was no need for a hearing on these matters. It was agreed that in order to fix the time for the written submissions the Parties would consult their respective experts and revert to the Tribunals within 3 weeks of the case management conference with a proposal for this procedure.

682 With regard to the Environmental Claims, the Respondents expressed their intention to develop the claims by providing further expert reports once their experts could travel again to Bangladesh. The Tribunals confirmed their ruling set out in their 18 May 2021 decision, denying the Respondents' request. The Respondents then confirmed that the claims to be decided by the Tribunals in the Arbitrations are those that had been made in the Money Suit, based on the report of the Third Environmental Losses Committee, dated 15 September 2005 and any necessary update.

683 The Tribunals and the Parties then discussed the procedure how to address the Environmental Claims on the basis of the existing record. The Parties and the Tribunals identified the table in that report, reproduced at paragraph 460 of the Decision on the Heads of Recoverable Loss, as a starting point for presenting the Parties' positions on the Environmental Claims. In this procedure, the Parties specify, by reference to each of the eleven types of losses in the table, their position on (i) the justification of the claim for this loss; (ii) the specific amount claimed/admitted (including credit for any payment made already by Niko); and (iii) the evidence on record in this Arbitration, relied upon for that claim. The Tribunals may then decide the Environmental Claims on the basis of the table so completed and the

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evidence relied upon without any further submissions and without a hearing on these issues.

684 It was agreed that the submission based on the table would first be presented by the Respondents. The time limit for this completion remained to be fixed within a timeframe in the order of one month to six weeks. The Claimant would respond within a period of the same length. No other procedure was proposed for addressing the Environmental Claims within the framework of the agreed timetable.

685 The Claimant accepted this procedure including the timeframe. The Respondents' counsel requested time to consult their client.

686 At the CMC, the Tribunals further discussed with the Parties matters of hearing organisation in particular in light of the global heath situation and travel restrictions due to the COVID-19 pandemic. Following a discussion with the Parties at the CMC, it was agreed that subject to the availability of the respective experts, the evidentiary hearing would be held from 8-12 November 2021, with 13 November 2021 in reserve. It was agreed that each hearing day would comprise of 5 sitting hours with a 30-minute break and short mid-session breaks as needed in between, each day starting at 10pm in Dhaka, 7pm in Manama, 5pm in Geneva and Paris, 11am in Washington and 9am in Calgary.¹⁶⁰

4.7.2 The Respondents' Document Production request

687 The Respondents had filed a document production request on 8 January 2016. The Claimant had replied to this request on 18 January 2016. The request had been discussed at the February 2016 Hearing.¹⁶¹

688 At the June 2021 CMC, the Respondents were requested to review their document production request and indicate for each requested document the relevant issue and a justification for the document's relevance. The Respondents filed their updated requests on 22 June 2021, and the Claimant responded on 6 July 2021. In Procedural Order No 28, issued on 30 July 2021, the Tribunals summarized the request and observations as follows:

689 The Redfern Schedule submitted to the Tribunals set out the Respondents' requests as they had been defined in the original version, drafted prior to the Tribunals' Decision. Some of these requests are marked as withdrawn, others continue to be pursued. With respect to the requests which continue to be

¹⁶⁰ Summary Minutes of the 8 June 2021 CMC; See also Summary Minutes of the Hearing. ↩
¹⁶¹ See above Section 4.2.5. ↩

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pursued, the Respondents did not present a modified request, adjusted to the issues remaining after the Decision. Instead, they preserved the original request and added a column in the Redfern Schedule with comments by which the requests were reduced or modified and occasionally expanded. In order to understand the Respondents' various requests, one therefore would have had to amalgamate the two columns and extract from the original request the remainder that the Respondents continue to pursue. This was not of assistance to the Tribunals' examination of the requests.

690 Moreover, in response to a number of the requests, the Claimant accepted the production of requested documents but did so subject to its General Objection, as discussed below; it also made its acceptance of a number of requests subject to the condition of reciprocity. As a result, the Respondents still have not received the documents which the Claimant is prepared to produce. The Respondents therefore were not in a position to determine finally whether and to what extent the production which will be made is compliant and, if it is not, specify what remains to be produced. The Tribunals, in turn, cannot make a clear decision on which documents remain to be produced.

691 Against this background, the Tribunals in PO No 28

found it necessary to summarise their understanding of the request as it remained after the Decision and respond to it accordingly. The Tribunals concluded that it was not practical for the Tribunals' ruling on the requests so adapted to add an additional column to the already voluminous Redfern Schedule submitted by the Parties. The Tribunals therefore present their decision in the present form of a Procedural Order.

692 The Tribunals set out its rulings in relation to each specific request whether the Parties had reached an agreement, whether the request had been withdrawn and for those requests to be ruled upon, set out its analysis and reasoning.

693 Following a request for clarification by the Claimant of 4 August 2021, the Tribunals provided a clarification on PO No 28 and confirmed that they did not wish to receive documents exchanged between the Parties.

4.7.3 PO No 27 and further steps concerning the quantity of lost gas, its valuation and the Environmental Claims

694 Further to the June CMC and subsequent correspondence, based on the procedure agreed with the Parties, the Tribunals confirmed the next steps in Procedural Order No 27, which provided the following steps:

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1. The Hearing for argument and evidence on the quantity of lost gas was fixed for 8 to 12 November 2021, with 13 November 2021 in reserve.
2. With respect to the quantity of the gas lost, the Parties, their witnesses and experts were scheduled to be heard at the November 2021 Hearing. PO No 27 specified:

   The Parties and their experts will present their views on the basis of the evidence on record. No new evidence will be admitted at the hearing. Following the hearing, the Tribunals will issue their award.¹⁶²

3. It was further specified that (i) on 20 August 2021 the Respondents were to file updated argument and evidence regarding the valuation of the lost gas, concerning the claim by BAPEX and that by the Government; and that (ii) on 1 October 2021 the Claimant was to file its Response to the Respondents' submission. PO No 27 specified:

   There will be no further submission on this issue and the Tribunals will make their ruling on the basis of argument and evidence on record by that time.¹⁶³

4. It was also determined that on 20 August 2021, the Respondents were to file a submission on the Environmental Claims as specified in paragraph 16 of the Summary Minutes of the 8 June 2021 CMC; and that on 1 October 2021, the Claimant's response to the Respondents' submission was due:

   The Tribunals will make their decision on the Environmental Claims on the basis of these submissions and any evidence on the record without any further submissions or hearing.¹⁶⁴

695 As in the case of other procedural orders and summary minutes issued following discussions between the Tribunals and the Parties, PO No 27 was sent to the Parties in draft form for comment. No changes to the draft were requested and the PO was issued in finalized form on 30 July 2021.

696 In accordance with the procedural calendar fixed by PO No 27, on 20 August 2021, BAPEX filed two submissions: one concerning Quantum for Updated

¹⁶² PO No 27, paragraph 6. ↩
¹⁶³ PO No 27, paragraph 3. ↩
¹⁶⁴ PO No 27, paragraph 4. ↩

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Gas Loss Calculations and the other on the Environmental Claims. Together with these submissions, BAPEX filed the Second Supplemental Expert Report of Ryder Scott (Ryder Scott III), the Second Supplemental Expert Report of Jeffrey Hughes (Hughes III), the Second Supplemental Expert Report of the Brattle Group (Brattle III), the Second Expert Report of Bretton, et al. (BBL II), the Second Supplemental Report of Steven Wilson (Wilson III), and Exhibits R-452 through R-471.

697 The Parties exchanged documents further to PO No 28 and introduced some of them in the Arbitrations. On 15 September 2021, the Parties communicated to the Tribunals their agreement recording productions that were made and their introduction as exhibits. The agreement contained the following passages:

The Parties have agreed that Respondents may submit any new documents from the Claimant's production pursuant to PO 28 into the record by 1 October 2021, coinciding with Claimant's Submissions on Quantum for Updated Gas Loss Calculations and Submission on Environmental Claims. Claimant reserves the right to address any such records at the Evidentiary Hearing on Damages;

The Parties have agreed that Claimant will introduce any new exhibits from the above referenced production from both Claimant and Respondent along with its 1 October 2021 Submissions on Quantum for Updated Gas Loss Calculations and Submission on Environmental Claims;

Neither Party will introduce new documents into the record after 1 October 2021, unless so ordered by the Tribunal upon prior application and a showing of good cause.

698 The Tribunals agreed with and approved the timetable proposed by this agreement and, in their reply of 16 September 2021 added:

The Tribunals wish to clarify that only those documents should be introduced into the record and submitted to the Tribunals that the Parties consider relevant for the quantification of the gas losses. The Tribunals expect that the Parties' submissions of 20 August and 1 October 2021 provide the information about the relevance of the documents so produced for the Tribunals' decision.

699 On 1 October 2021, the Claimant filed its Reply on Quantum for Lost Gas Calculations and on the Environmental Claims, together with the Fifth Witness Statement of William Hornaday (WS Hornaday V), an Expert Report

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of John Wright (Wright IV), the Third Expert Report of Gaffney Cline (Gaffney Cline III), and exhibits and legal authorities.

700 With reference to the Parties' agreement of 15 September 2021, the Respondents confirmed on 1 October 2021, that they did not wish to introduce additional evidence.

4.7.4 PO No 30 and the October 2021 Pre-Hearing Conference

701 On 19 October 2021, the Tribunals issued Procedural Order No 30 dealing with matters of hearing organisation. In advance of the pre-hearing conference (PHC) scheduled for 21 October 2021, the Tribunals set out a number of discrete issues to be addressed at the November 2021 Hearing for the Parties' consideration and indicated that these would be considered with the Parties at the PHC:

(i) The methodology for quantifying the lost gas;

(ii) The volume of the gas lost during the first period up to the Chattak 2A blowout on 24 June 2005;

(iii) The Chattak 2A blowout and its effect on the gas flow;

(iv) The volume of gas lost during the second period from the Chattak 2A blowout until the completion of the Chattak 2B relief operation;

(v) The question whether the Chattak 2B relief operation effectively sealed the Chattak 2 wellbore;

(vi) The volume of gas lost, if any, following the completion of the Chattak 2B relief operation.

702 In PO No 30, the Tribunal further sets out its understanding for the methodology for estimating the quantity of lost gas and the need for possible further submissions:

The Claimant quantifies the loss specifically by reference to each of the three periods. It objects against the method on which BAPEX relies, arguing that this method fails to address specifically the periods before and after the blowout at Chattak 2A, and after the completion of the Chattak 2B relief operation. The Tribunal will have to determine whether that method, described by the Claimant as “simplistic mathematical average daily gas flow rate (up to 4 September 2005) and the extrapolation of that flow rate to future periods”, may be applied or whether the loss in each of the three periods must be assessed

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separately. If the Parties and their experts wish to respond to the method of their opponent by presenting the results which, in their opinion, that method produces, they should do so in writing before the November 2021 Hearing. The Parties are invited to consult about any further submissions on this issue before the November 2021 Hearing.

703 The Tribunal further invited the Parties to submit prior to the Hearing (i) a list of the relevant submissions and supporting evidence for each issue and (ii) an updated hyperlinked index.

704 The Pre-Hearing Conference was held on 21 October 2021. As previously agreed, the PHC was attended by the President of the Tribunal, the Secretary of the Tribunal and representatives of the Parties and their counsel:

705 During the PHC, the November 2021 Hearing dates and sitting hours were confirmed as set out in the Summary Minutes of the 8 June 2021 CMC. With regard to the scope of the hearing and further written submissions, the PHC discussions were summarized in the Summary Minutes as follows:

5. It was confirmed that the November 2021 Hearing was limited to argument and evidence concerning the quantification of the gas lost as a result of the first blowout. No further written submissions are foreseen except on the issue of methodology, as described in item 4 of Procedural Order No 30. The Parties wish to avail themselves of the opportunity for further written submissions on this issue and will revert to the Tribunal with respect to the dates for the submissions. The Respondents expressed a reservation of rights concerning further submissions. The Parties differ in their understanding about the exact terms of this reservation and about the discussion relating to it. Their statements about the terms in which the discussion at the PHC should be recorded in these Summary Minutes are attached herewith.

706 At the PHC, the Tribunal indicated that the Tribunal may have questions not only in relation to quantum but also on other issues that are before the Tribunal, including the pricing of the gas lost and the environmental damages claims. The Tribunal wished to reserve some time for these questions and it was agreed that to the extent possible, the Tribunal would provide indications of such questions in advance of the November 2021 hearing.

707 The Parties agreed with the list of issues set out in PO No 30. In addition,

... [t]he Respondents wished to include questions concerning the conditions for approval of drilling further production wells as “mitigation” measure, and the conditions imposed by BAPEX on further drilling by

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Niko, and the impact, if any, that such “mitigation” measure would have on gas escaping from the Reservoir, if it were assumed that the Chattak 2B relief operation did not completely seal the Chattak 2 wellbore. The President explained that the Tribunal had considered these questions as part of issue (vi); the questions could be considered as a separate issue (vii) or as part of issues (v) or (vi). In any event, they would be included in the scope of the hearing. The Respondents reserved the right under item 4 of Procedural Order No 30 to respond in writing, if needed, to Claimant's method for estimating the quantities of lost gas before the November 2021 Hearing.

708 Concerning the sequence of these issues, the following order was agreed at the PHC:

a. Issue (i) Methodology

b. Issue (iii) Chattak 2A blowout

c. Issue (v) Chattak 2B

d. Volume of gas lost in each of the three phases as describe in issues (ii), (iv) and (vi), including the issue concerning production wells as possible mitigation measure.

709 Concerning the Hearing agenda, it was agreed to proceed as follows:

a. General opening statements on Day 1: one hour each for BAPEX and Niko, in this order.

b. Three hours for each issue identified in PO No 30.

c. No oral closing is envisaged; the directions for post-hearing submissions and submissions on costs will be given at the end of the November 2021 Hearing.

710 For each of the six issues listed in PO No 30, it was agreed to include an opening presentation by counsel, an opening presentation by any expert(s) followed by cross-examination of experts and witnesses.

711 It was further agreed that all experts and witnesses may attend the entire hearing. The Summary Minutes of the PHC stated in this regard:

It was agreed that, as a matter of principle, all experts and witnesses may attend the entire hearing by being connected. Those witnesses and experts concerning a specific issue may be grouped and questioned collectively. If a Party is of the opinion that a witness should be

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sequestered while a specific issue will be examined, it must make a specific request in advance, identifying the witness and the issue and the reasons for sequestration.¹⁶⁵

712 In this regard, on 6 November 2021, the Respondents informed the Tribunal that the Parties had differing positions on the question of sequestration and made the following request:

...Respondents' respectfully request that all fact witnesses shall be sequestered from the proceedings until they have testified. This includes sequestration from general Opening Statements. Allowing fact witnesses to be able to sit in on the Opening Statements would provide with strategic advance and foreshadow their cross-examinations.

713 The Tribunal pointed out that a different agreement had been reached at the PHC on this subject, as recorded at paragraph 14 of the Summary Minutes. It denied the Respondent's request on 7 November 2021.¹⁶⁶

714 At the PHC other issues concerning the hearing organisation, completing the directions that had been given in PO No 30, and recorded in the Summary Minutes. The Tribunal had expressed the wish to have graphic representations of the wellbore in the different stages relevant for the experts' explanations:

By 1 November 2021, the Parties will produce, for the use at the Hearing, a bundle of graphic representations of the well bores in their successive stages (showing in particular the wellbore before the blowout, the location of the bridging and the final state), possibly using Mr Wright's depiction of the Chattak 2, 2A and 2B wellbores in his 2021 report. The Parties shall try to agree on a joint representation; if they fail to agree, each Party may submit its own set of representations. The Parties may agree on other graphic representations they jointly wish to provide in advance of the Hearing.

715 The Summary Minutes of the PHC were sent to the Parties in draft form on 26 October 2021 and revised and finalized to reflect the edits and additions suggested by the Parties (the Parties' mark ups were annexed to the Summary Minutes as Annex B).

¹⁶⁵ Summary Minutes of the PHC, paragraph 14. ↩
¹⁶⁶ Summary Minutes of the Hearing, paragraph 21. ↩

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716 On 25 October 2021, the Parties exchanged lists of fact and expert witnesses they intended to call and issues on which each fact or expert witness would be expected to testify.

Each side named its own experts available at the November 2021 Hearing and those of the opponent experts whom it wished to cross examine, identifying for each expert the relevant topics on the agenda. The Respondent also announced that it wished to cross-examine Mr Adolph. The resulting programme was presented in the form of the following table:¹⁶⁷

¹⁶⁷ See also Summary Minutes of the Hearing, paragraph 18. ↩

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717 In further exchanges between the Tribunal and the Parties the further details were agreed, allocating time allocating time to the topics, the Parties and their experts and to the Tribunal, reflecting also the different time zones in which the participants were located.

718 On 29 October 2021, the Respondent submitted Ryder Scott's Third Supplemental Expert Report (Ryder Scott IV) regarding methodology of quantifying gas loss per paragraph 4 of PO No 30. The Claimant submitted a response to this report on 5 November 2021.

719 On 1 November 2021, the Claimant submitted a set of wellbore drawings as it had been agreed at the PHC. Later that day, the Tribunal confirmed receipt and gave the following directions:

The Tribunal understands that the Parties were unable to agree on a joint submission of drawings representing the wellbores in their successive stages. The drawings now submitted by the Claimant are, according to the Claimant's statement, those of Mr Wright, as they were produced previously by the Claimant in the arbitration.

In order to facilitate and focus the discussion at the forthcoming hearing, the Respondents are invited, by Thursday 4 November 2021, to identify on or by reference to each drawing those aspects on which it disagrees.

720 BAPEX submitted a new set of drawings later that day. The Tribunal noted that the drawings differed from those that its expert, Mr Hughes, had previously presented and from those of Mr Wright. In the accompanying message, the Respondent objected to the Tribunal's reliance on "demonstrative exhibits produced by one Party as the primary images [...] in adjudging the Parties' competing claims”; the Respondent stated in particular that Mr Wright had “included opinion commentary on those slides and depictions with which Respondents have fundamental disagreements”. Even if the Respondent were given the opportunity to comment, the demonstrative drawings produced by the Claimant “would still depict the facts from Claimant's perspective, and their use as the primary source of images by the Tribunal would be highly prejudicial to Respondent”. The Respondent requested that the Tribunals “use ... at the hearing and in their deliberation process” the “complete set of images showing the sequence of well events ...”.

721 On 3 November 2021, the Tribunal issued Procedural Order No 31 addressing (i) the Respondent's requests for a further response included in their comments on the draft Summary Minutes of the 21 October 2021 PHC, (ii) the issue regarding the well bore drawings, and (iii) the timeline for submission of demonstratives.

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722 Regarding the Respondent's request for a further written response, the Tribunal stated in PO No 31:

1. The Tribunal considered the Respondents' requests, as recorded in their comments on the draft Summary Minutes of the 21 October 2021 Pre-Hearing Conference (PHC),

(a) “to respond fully in writing to the Claimant's Counter-Memorial, including the six witness and expert statements attached”; and

(b) “to allocate additional time at the Hearing for an oral presentation” and “that they be given the fullest possible opportunity at the Hearing to respond with counsel argument and expert testimony to unaddressed matters in the Counter Memorial."

2. The Tribunal noted that the Respondents have presented their positions on the blowout damages in three written submissions accompanied by expert reports, submissions that were progressively narrowed as the Tribunal decided certain aspects concerning the Compensation Claim with the intention to assist the Parties in focusing their submissions. The previously agreed procedure for the remainder of the proceedings on the Compensation Claim did not provide for any further written submissions (see paragraphs 3 and 4 of Procedural Order No 27); only remaining issues on the quantities of lost gas were to be addressed orally at the November 2021 Hearing. In an additional submission invited by the Tribunal subsequently, the Respondents were given the opportunity to make a fourth submission on an important issue on quantification and did so by the Ryder Scott expert report of 29 October 2021.

3. The Tribunal also took note of the agreement which the Parties reached following the 21 October 2021 PHC concerning the agenda for the November 2021 Hearing, including the allocation of time. It accepted this allocation and concluded from the fact that it was agreed by both Parties that the agreed allocation satisfies the Respondents' concern also in respect to the time required for any “unaddressed matters”.

4. If the Respondents see any “unaddressed matters” in the Claimant's Counter-Memorial which can only be addressed by a further written submission, they are invited to specify these by Friday 5 November 2021.

723 On 6 November 2021, the Respondent responded to the Tribunal's invitation regarding the ‘unaddressed matters' on 6 November 2021. The Respondent

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maintained the request for responsive pleadings including additional reports by several of their experts and reserving all rights.

724 Regarding the wellbore drawings, the Tribunal recalled the instruction given by the Tribunal at the PHC, as recorded in the Summary Minutes and quoted above. The Tribunal gave an account of the production of the wellbore drawings produced by Mr Hughes and by Mr Wright and the Tribunal's request for a set of drawings to assist them in understanding the explanations of the Parties and their experts. The Tribunal recalled its request for explanations about the relevance of the differences between the drawing sets. The Tribunal confirmed its interest in the drawings but wished to avoid spending time at the hearing on this issue. On 3 November 2021, the Tribunal noted in PO No 31 with regard to the well bore drawings the history regarding the well bore drawing issue. The Tribunal concluded in PO No 31:

Given that the Parties' experts, in their account of the “sequence of events” have illustrated these events by drawings, the Tribunal prefers to refer to these drawings as they had been produced. In order not to privilege the representation by the expert of one of the Parties over those of another, the Tribunal confirms its request to receive from the Respondents explanations how their understanding of the events differs from that represented by Mr Wright. If the Respondents wish to illustrate these explanations by reference not only to the Hughes drawings on the record but also by referencing aspects of the 1 November 2021 Drawings, the Respondents may do so, provided that they explain also how the information differs from that represented in Mr Hughes' drawings and identify the sources from which the Respondents have taken the differing information.

725 The Respondent explained areas of disagreement with the Claimant and with Mr Wright's drawings and commentary on the wellbore on 4 November 2021.

726 On Day 4 of the Hearing, the issue of the well bore drawings arose again, the Claimant arguing that the new drawings contained new evidence and the Respondent contesting it. The substance of the exchange is recorded in the Summary Minutes of the November 2021 Hearing. The Tribunal considered both sets of drawings without being affected by any missing information.

4.7.5 The November 2021 Hearing

727 The November 2021 Hearing was held from 8-13 November 2021 by video conference.

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728 As indicated in Annex A – Record of Attendance to the Summary Minutes of the Hearing, the following persons attended the Hearing:

Members of the Tribunal
Mr Michael E. Schneider President
Prof Jan Paulsson Arbitrator
Prof Campbell McLachlan Arbitrator

ICSID Secretariat
Ms Frauke Nitschke Secretary of the Tribunal
Ms Ekaterina Minina (days 1-5) ICSID Paralegal

For the Claimant
Counsel
Mr Barton Legum Dentons
Mr Gordon Tarnowsky KC Dentons
Mr Anthony Cole (days 1 & 5) Dentons
Ms Rachel Howie Dentons
Ms Laura McPhee Dentons

Party Representative
Mr Glen Valk Niko

Witnesses
Mr Grant Kelly (day 6) Kaizen Safety Group
Mr Bill Hornaday Niko
Mr Brian Adolph Niko

Experts
Mr John Wright John Wright Co
Mr Bill Cline GaffneyCline & Associates
Mr Rawdon Seager GaffneyCline & Associates
Mr Joshua Oletu GaffneyCline & Associates

For the Respondent
Counsel
Mr Derek C. Smith Foley Hoag
Ms Christina Hioureas Foley Hoag
Ms Alejandra Torres Camprubí Foley Hoag
Ms Diana Tsutieva (day 1) Foley Hoag
Mr Richard Maidman Foley Hoag
Mr Sudhanshu Roy Foley Hoag
Ms Natalia Tchoukleva Foley Hoag

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Ms Sun Young Hwang Foley Hoag
Mr Moin Ghani Alliance Laws
Mr Imtiaz U Ahmad Asif Aequitas Chambers

Party Representatives
Mr Shaheena Khatun (days 1-4, 6) Joint Secretary (Development), Energy & Mineral Resources Division
Mr Abdullah Arif Muhammad Joint Secretary (Development), Energy & Mineral Resources Division
Mr Md. Shaheenur Islam (days 1-3, 4-5) Director (Production Sharing Contract), Petrobangla
Mr Syed Ashfaquzzaman Secretary, Petrobangla
Mr Mohammad Ali Managing Director, BAPEX
Mr Howlader Ohidul Islam General Manager, BAPEX
Mr Merajul Alam Deputy General Manager, BAPEX

Experts
Mr Michael Nowicki Ryder Scott
Mr James Latham Ryder Scott
Mr Michael Bruno Geomechanics
Mr Jeffrey Hughes HTK
Mr Steve Wilson EPG

Court Reporter
Mr Trevor McGowan

IT Support
Mr Adam Kirn Hennessey WBG IT
Mr Brian Bucher DOAR
Mr Kevin High Foley Hoag
Mr James Herrity DOAR
Ms Silvia Gomez Foley Hoag
Ms Sarah LeBarron Foley Hoag
Ms Samanta Kolenovic Foley Hoag
Ms Yara Zhu Foley Hoag
Ms Melika Mostowfi (day 6) WBG IT
Ms Kiana Mozaffari (day 6) WBG IT

729 The previously agreed hearing agenda was confirmed and applied as follows, with a modification on Day 6, agreed by the Parties on the morning of 13 November 2021:

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730 The Respondent's Counsel started on Day 1, by an opening statement addressing general issues and, in addition, gave an introductory presentation on each of the agreed topics. The Claimant's counsel made initial submissions responding briefly to those made by the Respondent's counsel regarding general issues and the agreed topics. The following topics were addressed, and experts and witnesses examined.

• Opening Statements by each Party;
• Agreed Topic 1: Methodology (issue (i) in PO No 30):
  • Parties' Counsel Presentation
  • Expert Presentation/Examination of Ryder Scott (J. Latham & M. Nowicki)
  • Expert Presentation/Examination of Gaffney Cline (B. Cline, R. Seager, J. Oletu)
  • Expert Presentation/Examination of J. Wright
• Agreed Topic 2: Chattak 2A blowout (issue (iii) in PO No 30):
  • Parties' Counsel Presentation
  • Expert Presentation/Examination of J. Hughes
  • Expert Presentation/Examination of Dr. Bruno
  • Expert Presentation/Examination of J. Wright
• Agreed Topic 3: Did Chattak 2B effectively seal the Chattak 2 wellbore? (issue (iv) in PO No 30)
  • Parties' Counsel Presentation
  • Expert Presentation/Examination of J. Hughes
  • Expert Presentation/Examination of M. Bruno
  • Expert Presentation/Examination of S. Wilson
  • Expert Presentation/Examination of J. Wright
  • Witness Examination of B. Adolph, called by the Respondent
  • Witness Examination of G. Kelly, called by the Respondent
• Agreed Topics 4 & 5 (combined per the Parties’ 13 November 2021 agreement): Volume of gas lost until completion of Chattak 2B (issues (ii) and (iv) in PO No 30) and Volume of gas lost following the Chattak 2B completion and BAPEX's conditions for production wells (issues (vi) and (vii) in PO No 30)
  • Parties' Counsel Presentation
  • Expert Presentation/Examination of Ryder Scott
  • Expert Presentation/Examination of J. Hughes
  • Expert Presentation/Examination by Gaffney Cline Associates
  • Witness Examination of B. Hornaday, called by the Tribunal.

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731 On each of these topics, the expert reports and the witness statements were taken as direct evidence; the experts were given the opportunity for a presentation on the topic for which they were named. The Parties then were given the opportunity for cross-examination and redirect examination of the experts and the witnesses. In the case of Mr Hornaday, a witness called by the Tribunal, both Parties were given the opportunity to ask further questions and they did so.

732 The agreed hearing agenda set out the time that each Party and the Tribunal would have at the opening of the Hearing and for each Topic. The Tribunal clarified that this time schedule had to be handled in a flexible manner. The overall time allocation had to be equal for the Parties, but time not used in one of the agreed time slots could be used in other slots.

733 As the November 2021 Hearing progressed, the examinations of the experts by the Parties and the Tribunal exceeded the time allocated to the time slots per the agreed hearing agenda.

734 On Day 3 of the Hearing, during the examination of the Respondent's experts, an issue arose in relation to part of the “working papers” of Ryder Scott in preparation of their first report. The incident, the Parties' positions and the Tribunal's decision were recorded in detail in the Summary Minutes (paragraphs 25 – 31). The Tribunal summarises the issue here:

735 That report contained a table showing “Estimated Remaining Recoverable Contingent Gas Resources”, showing a low estimate, a best estimate and a high estimate. The calculations were based inter alia on a petrophysical analysis for each of the three estimates. That analysis was part of the working papers attached to the report with respect to the best and the high estimate but not for the low estimate. It turned out that the petrophysical analysis for the low estimate had been made available to the Claimant during the document production, but the Claimant did not produce it in the Arbitration as an exhibit.

736 In the morning of Day 3, the Claimant's counsel communicated with the Respondent's counsel team, asking them to make sure that the Ryder Scott experts had their “working papers” available at the cross-examination. These papers had previously been produced to Niko but not introduced by Niko into the record.¹⁶⁸ When later in the day the examination of the experts commenced, the Respondent's counsel advised at the Hearing that they were

¹⁶⁸ Summary Minutes, November 2021 Hearing, paragraph 26. ↩

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in the process of printing the documents to be available during cross-examination. In order to avoid loss of time, the Claimant's counsel proposed to put to the experts the factors he had taken from the working papers, questioning the expert on the assumption that this information about the factors was correct and, if the expert were not able to confirm immediately, giving him the opportunity to verify the assumption as soon as the working papers were made available to him. The expert replied that this was agreeable to him.

737 The Claimant proposed that one of the Claimant's experts (Mr Oletu) would project them on the screen accessible to all participants and that the examination of the Ryder Scott experts proceeded on this basis. The Tribunal accepted this procedure and instructed that the documents shown on the screen be given exhibit numbers.

738 The Respondent's counsel objected to both the procedure for questioning the expert witnesses on these documents and to their introduction into the record of the Arbitration. The Respondent's counsel recalled the exchanges and agreements concerning the production of documents, in particular PO No 27 and stated:

There was an agreement between the Parties that the record was closed after the submission of your Counter-Memorial. These documents are not in the record. They may be Ryder Scott's documents, but they're not in the record, and I am certainly not in agreement that documents not in the record can be introduced at the moment of cross-examination and be used.

739 The Claimant's counsel stated that these documents had not been included in the record because they were part of the experts' Working Papers; these papers showed the analyses and the data underlying the explanations in the experts' report, showing how the experts had reached the opinions in their report.

740 The Tribunal deliberated and decided as follows:

Our understanding is that the question goes to the assumptions made by the experts. The assumptions are either in their head or in their working papers. So, providing the working papers to assist the experts in the answer to the question of their assumptions is, in our view, something perfectly legitimate. On top of it, these working papers have been shared between the parties. The fact that they have not been introduced into the hearing, from our perspective, is no detriment because it's the experts' own papers; it is something very different from new exhibits, on which

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we have regulated the rule that there should be no new exhibits in the hearing.

On that basis, the Tribunal accepts the method adopted now. We have now presented by Mr Oletu the relevant document, the experts have confirmed that this is part of their working papers, and we allow counsel for Claimant to proceed on that basis with the cross-examination.

741 Following this decision by the Tribunal, the Respondent's counsel made the following declaration:

I won't interrupt any further to get on the record our disagreement, but I want to reserve our rights, and we will explain our position to the Tribunal in writing subsequently.

742 The Claimant referred again to pages from the Ryder Scott Working Papers on Day 6; the Respondent objected again and the Tribunal confirmed its earlier decision.

743 On Hearing Day 5, following discussions with the Tribunal, the Parties prepared a revised Agenda for Hearing Day 6. They proposed, “in order to allow better calibration of time, for cross-examination of experts to take place before any specific time allocated to Tribunal's questions (expecting they will, as they consider fit, ask questions during the experts' testimony otherwise)”. The proposal provided for the following sequence:

Topic 3 (cont’d):
Hughes redirect
Bruno cross-examination and any redirect
Wilson cross-examination and any redirect
Wright cross-examination and any redirect
Tribunal questions

Topics 4 and 5:
Respondent's counsel/Ryder Scott presentations
Claimant's counsel/GCA presentations
Tribunal questions (if any) for any of Messrs. Hornaday, Adolph, Glaholt, and Kelly
Adolph cross-examination and any redirect (pursuant to Respondent request to question Mr Adolph)
Kelly cross-examination and any redirect (pursuant to Respondent request to question Mr Kelly)
Ryder Scott cross-examination and any redirect
GCA cross-examination and any redirect
Tribunal questions

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744 The Tribunal accepted this proposal which was implemented with slight changes in the sequence and, at the Respondent's request on Day 6, an additional presentation by Mr Hughes was made at the beginning of Topics 4 and 5. Upon the further request of the Respondent, Mr. Hughes was permitted to continue his presentation at the end of Day 6 after all other presentations and questioning had been completed.

745 Given the travel and meeting restrictions during the Covid 19 pandemic, the hearing had to be organised remotely, spanning distant time zones, hence, the time management of the Hearing was a particular challenge. The Tribunal made special efforts to ensure that the Parties and their experts had available to them the time that had been agreed. In order to ensure that the Parties could complete the programme in the modified form as jointly requested by them, the Tribunal accepted, despite the inconvenient hour, to extend the hearing on Day 6 by an additional sitting hour.

746 As indicated in the time log sent by the Secretary of the Tribunal to the Parties on the last Hearing Day, the time used by each Party and the Tribunal was as follows:

Claimant: 8h25min
Respondent: 8h28min
Tribunal questioning: 4h49min
Procedural matters: 3h30min
Total hearing time: 25h12min

747 Hearing Exhibits: In the course of the Hearing, the Parties provided electronic copies of presentations and demonstratives in accordance with the Hearing Protocol. These documents were uploaded to the Box account established for this Arbitration. A full list of these documents was annexed to the Summary Minutes of the Hearing as Annex D.

748 Referring to a question of the Tribunal on Day 1, the Respondent submitted in writing at the end of the Hearing a “Response to the Tribunal's Request on Technical Requirements with Respect to Niko's Proposed Additional Production Wells".

749 Real-time transcription was provided by Mr Trevor McGowan, and transcripts were sent to the Parties and the Tribunal at the end of each Hearing Day. Sound recordings were made of the Hearing and uploaded to the Box account established for this proceeding and deposited in the archives of the Centre.

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750 The Summary Minutes of the Hearing were sent to the Parties on 14 December 2021, inviting the Parties to provide comments. The Parties commented on 21 December 2021. The Tribunal proposed revisions to the Summary Minutes on which the Parties were invited to comment; the Claimant had no further comment; the Respondent's comments were received on 3 February 2022. Following an invitation by the Tribunal, the Claimant provided observations on the Respondent's comments on 8 February 2022. The Tribunal invited the Respondent to respond to the Claimant's comments with a view to further reduce the remaining differences between the Parties, and the Respondent's comments were received on 18 February 2022.

751 The Summary Minutes of the Hearing were revised and finalized on 17 March 2022 to take into account the Parties comments.

4.7.6 Post-hearing matters and completion of the proceedings

752 On Day 6 of the Hearing, the Parties and the Tribunal discussed post-hearing matters. After further consultation with the Parties, the Tribunal issued Procedural Order No 32 on 16 December 2021 setting out the post-hearing procedural calendar. PO No 32 recorded that the Parties agreed that the evidentiary record was and would remain closed unless the Tribunal ordered otherwise on a showing of good cause.

753 On 10 December 2021, the Parties provided their mutually agreed corrections to the transcript of the November 2021 Hearing.

754 Further to an inquiry from the Tribunal on Day 5 of the November 2021 Hearing, the Claimant identified on 10 December 2021 references in the Claimant's submissions and the record of contemporaneous evidence concerning the reduction in gas flows at surface immediately following the completion of Chattak 2B relief operation.¹⁶⁹ With leave from the Tribunal, the Respondent responded to the Claimant's 10 December 2021 communication on 21 December 2021.

755 On 14 December 2021, the Parties reverted to the Tribunal on a question discussed on Day 4 of the Hearing concerning the duration of the initial flare of the Chattak 2A blowout prior to bridging. They communicated the following agreement:

The parties have discussed and note that the evidence in the record indicates two possible periods.

¹⁶⁹ Provisional HT 2021 Day 5, page 93:17-22. ↩

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1. The Report of the Second Gas Loss Committee at Annex R-4, pages 6-7 states a period of 12.17 days (or 292 hours) starting on June 24 and ending when “the Relief well choked off on July 7”.

2. Exhibit C-45 (the Grace Report on the Chattak 2A Blowout) indicates at page 7 that the blowout initiated at 0300 on 24 June. Exhibit C-47 (which contains the 6th Bi-Weekly Environmental Report from Niko) states at PDF 6: “On July 5, 2005 at 21:30 the Chhatak 2A blowout bridged". This evidence suggests the period was 282.5 hours, or 11.77 days.

The parties agree that period between the Chattak 2A blowout and its bridging, for purposes of gas loss calculations, is approximately 12 days in duration.

The parties reserve their right to explain in the Post-Hearing Briefs the impact of the parties' agreement as to the period between the Chattak 2A blowout and its bridging on any particular gas loss calculation.

756 On 23 December 2021, and in response to an inquiry from the Tribunal on Day 1 of the November 2021 Hearing, the Parties submitted an agreed consolidated glossary containing the reservoir experts' terminology and definitions.

757 As requested by the Parties on Day 6 of the November 2021 Hearing, according to the post-hearing programme, the Tribunal submitted on 26 January 2022 the Tribunal's Questions to the Parties for the Post-Hearing Briefs. The Tribunal pointed out that these questions were not meant to restrict in any way the Parties' submissions. In presenting its questions, the Tribunal also set out its preliminary understanding of the Parties' positions on some of the contested issues, expecting the Parties to correct any errors in this understanding.

758 In its message of 31 January 2022, the Tribunal, with regard to the designation of the Parties on the Respondent side following the completion of ICSID Case No ARB/10/18 the following clarification:

... concerning the Claimant's observation regarding the designation of the Parties on the Respondent side, the Tribunal recalls that following the Joint First Session in the two cases initiated by the Claimant, the formation of an identically composed arbitral tribunal in each of the two cases and the agreement to proceed with the two cases in a concurrent manner, correspondence and submissions followed this concurrent approach and hearings were held jointly in the presence of all Parties in

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the two cases. By Procedural Order No 29 of 24 September 2021, the Tribunal in ICSID Case No ARB/10/18 closed the proceedings in that case and rendered on the same date its Award. Since then there is no longer any justification for listing Petrobangla in the remaining proceedings concerning ICSID Case No ARB/10/11. The Tribunal therefore has removed Petrobangla from the case reference and refers to the Respondent side in the singular.

759 On 2 March 2022, the Parties submitted their post-hearing briefs. Together with its submissions, the Claimant submitted a Summary List of Niko's Submissions Regarding Damages for Lost Gas. The Respondent submitted Legal Authorities RLA-481 and RLA-482 with its submission.

760 On 9 March 2022, the Claimant addressed the Tribunal stating that the Respondent's post-hearing brief “purport[ed] to express new opinions without support in the existing evidentiary record or (b) advance[d] claims or legal theories not discussed at the hearing in November” 2021. The Claimant requested that “the Tribunal accord no weight to those portions of the Respondent's submission”.

761 The Respondent objected to the Claimant's description of its submission on 10 March 2022, stating that the Respondent had relied on the Tribunal's 25 January 2022 questions and those raised by the Tribunal on Day 2 of the Hearing. The Respondent stated:

Whilst Respondent maintains the position on volumes of gas lost and relevant methodologies it expressed at the Hearing, in the alternative, and when the Tribunal's List of Questions required so, Respondent provided further calculations adapted to the periods and concepts requested by the Tribunal. These encapsulate Respondent's “latest position” on the contested issues addressed by the Tribunal's List of Questions. To request that Respondent refrains from submitting such calculations would tantamount to depriving it of its due process rights and its obligation to respond fully to the Tribunal's List of Questions.

762 Referencing paragraph 12 of PO No 32, the Respondent stated that it recognized that the record was closed to new factual evidence but considered the submission of new legal authorities as always open to the Parties.

763 Following an invitation by the Tribunal of 15 March 2022, the Claimant responded on 22 March 2022, identifying a list of the paragraph and footnote references which according to the Claimant “purport[ed] to express new opinions without support in the existing evidentiary record or (b) advance[d] claims or legal theories not discussed at the hearing in November”. The

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Respondent objected to the Claimant's 22 March 2022 communication on 23 March 2022, reiterating that the quoted passages were responsive to questions posed by the Tribunal.¹⁷⁰

764 In its Procedural Order No 33, issued on 8 April 2022, the Tribunal noted that the Respondent's Post-Hearing Brief and in particular the passages identified by the Claimant contained assertions of fact and argument that had not been presented by the Respondent. The Tribunal also notes some similar assertions in the Claimant's Post-Hearing Brief. PO No 33 continued as follows:

The Tribunal is conscious of the fact that the November 2021 Hearing dealt with a broad range of evidence and expert opinion. It is in the nature of such a hearing that it may open new perspectives on the Parties' respective cases and may give rise to adjusted argument. When the Tribunal communicated after the Hearing its questions to the Parties, it pointed out therefore the importance it attributed to “understand the Parties' latest position” on the issues that had arisen, “in particular in response to the criticism raised by their opponent” at the November 2021 Hearing. It also pointed out that, by inviting the Parties to address in their Post-Hearing Briefs the matters arising from the Tribunal's January 2022 Question, the Tribunal did not wish to limit in any way the scope of the Parties' post-hearing submissions.

Understanding that the argument and evidence presented at the November 2021 Hearing and responding to the January 2022 Questions, could lead a Party to adjust its argument, the Tribunal sees no objection to such adjustments, provided that such adjustments are presented on the basis of the evidence in the record. Where such adjustment consists in argument and opinion that have not been previously presented, the opposing party must however be given an opportunity to comment.

In the explanations to the January 2022 Questions, the Tribunal also set out its preliminary understanding of the Parties' positions on some of the contested issues and expected the Parties to correct any errors in this understanding. The Tribunal notes that in their Post-Hearing Briefs, the Parties have indeed identified such errors and clarified their positions.

In this respect, too, the opposing party must be given an opportunity to consider the correction and clarification and to address the position as corrected and clarified.

¹⁷⁰ PO No 33, paragraph 6. ↩

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For these reasons, the Tribunal does not exclude or disregard any of the passages in the Respondent's Post-Hearing Brief but gives both Parties an opportunity to respond to their opponent's Brief. These briefs must be limited to rebuttals of statements in the opponent's Brief and may not produce new evidence.

765 The time for these Reply Post-Hearing Briefs was fixed for 9 May 2022; on this date these replies were submitted by the Parties. The Respondent attached a Summary List of its Submissions Regarding Damages for Lost Gas to its submission.

766 Further to the programme as recorded in PO No 32, the Parties submitted at the time limits extended by PO No 33 on 31 May 2022 their cost submissions and on 21 June 2022 replies to their opponent's submission. The Respondent submitted Legal Authorities RLA-483 to RLA-485 with its first cost statement.

767 The Tribunal was working on the Award and deliberating as the work progressed. It updated the Parties about the progress of this work

768 On 24 July 2024, the Respondent provided an update on pre-award interest and related matters up to 30 June 2024, accompanied by Exhibit R-455 “Brattle Workpaper D – Revised and Updated Gas Loss Damages” and Exhibit R-456 “Brattle Workpaper E, Updated Environmental Damages Calculations.xlsx.". The Tribunal confirmed receipt of this submission and responded as follows:

The Tribunal has taken note of the new calculations provided by BAPEX. Considering the decision on closing the record of this case, as recorded in paragraph 6 of the October 2021 PHC, the Tribunal will proceed as follows: If it reaches the conclusion that the new calculations and other changes presented in the letter are relevant and admissible, the Tribunal will consider revisiting the closure of the record and will afford the Claimant an opportunity to comment on the Respondent's calculations.

769 BAPEX provided a further update on 10 January 2025.

770 On 17 April 2025, the Tribunal addressed to the Parties the following message:

The Tribunal refers the Parties to the World Bank Report 2006 exhibited in these proceedings (Ex R-207, page 65, para. 194), which discusses emission reductions and carbon sequestration. It attaches hereto a link to a subsequent World Bank Country Climate and Development Report on Bangladesh dated October 2022, and directs the Parties' attention to Table 6 (pages 49-50). The Parties are hereby given an opportunity to

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comment by simultaneous submission on April 28, 2025 on its relevance, if any, to the quantum of the claim for atmospheric pollution in the present proceedings.

771 The Parties submitted their comments on 28 April 2025. The comments of BAPEX were accompanied by 14 Annexes.

772 On 22 August 2025, the Tribunal offered the Parties the opportunity for an update to their latest statement of costs. These updates were provided on 5 September 2025.

773 On 27 September 2025, the Tribunal issued Procedural Order No 34. It noted that following the updated cost submissions, dated 5 September 2025, no application was made thereafter. The Tribunal concluded that the Parties had full opportunity to argue all relevant issues in the Case for the Compensation Declaration and closed the proceedings in ICSID Case No ARB/10/11 in accordance with ICSID Arbitration Rule 38(1).

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5 PRIOR DECISIONS OF THE TRIBUNAL

774 As explained in the previous section, ICSID Case Nos ARB/10/11 and ARB/10/18 were conducted concurrently. The two Tribunals constituted in ICSID Case Nos ARB/10/11 and ARB/10/18 rendered during the course of the proceedings altogether eight decisions and the Award on the Payment Claim in ICSID Case No ARB/10/11; five of these decisions relate directly to the Compensation Declaration or are relevant to it.

5.1 The Decision on Jurisdiction

775 The proceedings in the two Arbitrations were commenced against the Government of Bangladesh, Petrobangla and BAPEX. The Respondents raised objections against the Tribunals in both cases. These objections were decided in the Decision on Jurisdiction of 19 August 2013:

(1) [The Tribunals have] jurisdiction under the JVA and between the Claimant and BAPEX to decide: (a) the Claimant's request for a Compensation Declaration and (b) the Claimant's Cooperation Claim;

(2) [The Tribunals have] jurisdiction to decide the Claimant's claim against Petrobangla for payment under the GPSA and reserves the questions related to the necessary role (or otherwise) of BAPEX in relation thereto;

(3) [The Tribunals have] no jurisdiction over Bangladesh, which therefore will no longer be a Respondent in this arbitration [recte: these arbitrations]

776 In the reasons to this decision, the Tribunals explained that the State of Bangladesh, acting through the Government, had chosen to implement the project by the means of agreements which it did not conclude directly. Instead, it delegated the necessary powers to Petrobangla and BAPEX. The Tribunals concluded that they did not have jurisdiction over the State of Bangladesh and released the State from the two Arbitrations.

777 Concerning the Respondents' objection with respect to the requirement of designation set out in Article 25(1) of the ICSID Convention, the Tribunals examined the provision and the conduct of the Government and were satisfied that, by authorising BAPEX and Petrobangla to conclude the Agreements containing the ICSID arbitration clauses, in terms previously proposed by the Bangladesh agencies, the State of Bangladesh not only approved consent to ICSID arbitration by these two agencies in terms of Article 25(3) of the Convention but also designated, implicitly but necessarily, BAPEX and Petrobangla as agencies in the sense of Article 25(1), if such designation had

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not occurred earlier. The designation was communicated to the Centre by the Claimant's Request for Arbitration. On these grounds the Tribunals dismissed the Respondents' objection relying on an alleged failure of Bangladesh to designate BAPEX and Petrobangla.¹⁷¹

778 With respect to Petrobangla in connection with claims brought by Niko under the JVA, i.e. in the Compensation Declaration proceedings, the Tribunals held

515. The Tribunal concludes that it has not seen any argument to justify treating Petrobangla with respect to the JVA any different than it treated Bangladesh with respect to both agreements. Petrobangla is not party to the JVA and therefore the Tribunal has no jurisdiction over Petrobangla with respect to claims based on the JVA.

5.2 The Decision pertaining to the Exclusivity of the Tribunals’ Jurisdiction

779 Addressing difficulties that had arisen in the context of the implementation of their Decision on the Payment Claim, the Tribunals issued on 19 July 2016 in relation to both Arbitrations the following Decision pertaining to the Exclusivity the Tribunals' Jurisdiction in which the Tribunals:

1. Declare that the Tribunals have sole and exclusive subject matter jurisdiction with respect to all matters which have validly been brought before it, notably

(a) The validity of the JVA and the GSPA, including all questions relating to the avoidance of these agreements on grounds of corruption;

(b) The liability of Niko under the JVA for the blow-outs that occurred in the course of its activity in the Chattak field and the quantum of the damage for which it may be responsible in case such liability were found to exist;

(c) The payment obligations of Petrobangla towards Niko under the GSPA for gas delivered, the jurisdiction for injunctions seeking to prevent such payments and to retract such injunctions;

2. Order BAPEX and Petrobangla

(a) to intervene with all courts and other authorities in Bangladesh that are or may be concerned with issues identified above under (1) to bring to their attention the exclusive jurisdiction of the Tribunals in respect of

¹⁷¹ Decision on Jurisdiction, Section 7.2 and paragraph 345. ↩

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these issues and the international obligations of the State of Bangladesh resulting therefrom under the ICSID Convention; and

(b) to take all steps necessary to terminate any proceedings and orders by the courts in Bangladesh which are in conflict with this order.

780 The Decision and its context are discussed above in Section 4.4.2.

5.3 The Decision on the Corruption Claim

781 On 25 February 2019, the Tribunals issued their Decision on the Corruption Claim, deciding as follows:

(i) The declarations sought by the Respondents concerning the establishment of Niko's investment in Bangladesh and the Government's approval of the Agreements are denied;

(ii) The Respondents' objections to the Tribunals' jurisdiction are rejected;

(iii) The JVA between BAPEX and Niko Resources Bangladesh was not procured by corruption and remains valid and binding;

(iv) The GPSA between Petrobangla and Niko Resources Bangladesh was not procured by corruption; there is no basis for revising the Tribunals’ decisions on the Payment Claim;

782 The Decision and the procedure leading to it are discussed above in Section 4.3.

5.4 The Decision on Liability

783 On 20 February 2020, the Tribunals issued their Decision on Liability. They concluded and decided as follows:

(i) Niko's liability as Operator for the 2005 blowouts in the Chattak field must be determined exclusively under the JVA between Niko and BAPEX by the present Tribunal;

(ii) The Tribunal's decision on Niko's liability for the two 2005 blowouts in the Chattak field is binding on the Government and Petrobangla as the assignors to BAPEX;

(iii) No standards under the law of Bangladesh relevant to Niko's liability for the two blowouts have been identified that are more stringent for the conduct of the Operator than those in the JVA;

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(iv) The first blowout at Chattak 2 was caused by Niko's breaches of its obligations as Operator under the JVA;

(υ) The second blowout at Chattak 2A was not caused by any breach of obligation on the part of Niko;

(vi) Niko must compensate BAPEX for direct loss and damage caused by the first blowout;

(vii) The compensation owed by Niko to BAPEX includes the gas that escaped from the Chattak 2 Well as part of the first blowout; the identification of other loss and damage that Niko must compensate and the quantum of such compensation are reserved for the next phase of these proceedings; so are the decisions on the claims for interest and for the costs of the proceedings.

784 The Decision and the procedure leading to it are discussed above in Section 4.2.

5.5 The Decision on Heads of Recoverable Loss

785 The Decision on the Heads of Recoverable Loss was issued by the Tribunals on 18 May 2021 with the following substantive provisions:

13.1 Concerning the First Head of Loss

773. BAPEX is entitled to compensation for its share under the JVA of the value of the gas that escaped from Sands 1 and 2 in the Chattak field (the Reservoir) at a price to be determined (the JV price). This compensation must be paid

(i) for the gas that escaped from the first blowout on 7 January 2005 to the second blowout on 24 June 2005; and

(ii) for the gas that escaped after the second blowout on 24 June 2005 unless it is established (i) that the bridging of the Chattak 2 wellbore, assumed to have taken place on 9 January 2005, obstructed the wellbore at the Regional Shale and reduced the flow of gas from the Reservoir and (ii) that the second blowout removed the obstruction and reactivated the flow of gas; and

if the Tribunal determines that gas losses after 24 June 2005 are recoverable,

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(iii) for gas that escaped after the completion of the Chattak 2B relief well on 9 October 2005, unless it is established that the relief operation completely sealed the Chattak 2 opening in the Regional Shale; and

if the Tribunal determines that gas losses after 9 October 2005 are recoverable,

(iv) only for gas that would have escaped the Reservoir despite a production well, provided it is established that BAPEX failed without justification to approve that Niko drill such a production well.

774. BAPEX is entitled to recover on behalf of the Government of Bangladesh any difference between the JVA price, as determined according to paragraph 773 above, and the price the Government or Petrobangla paid to comparable gas producers in Bangladesh for the quantities of gas lost for which the Claimant must compensate BAPEX according to paragraph 773 above.

13.2 Concerning the Second Head of Loss

775. The alleged loss of production due to the impossibility of producing gas from the Reservoir as a result of the first blowout, is not recoverable.

13.3 Concerning the Third Head of Loss

776. BAPEX is entitled to claim on behalf of the Government for the loss and damage caused by the first blowout to the environment and the local population (Environmental Losses) to the extent Niko has not already compensated such loss and damage, subject to the following determinations:

(i) any loss that the first blowout may have caused by increasing the level of arsenic in the Tengratila drinking water is not recoverable;

(ii) compensation for any Environmental Losses attributed to continuing seepages of gas from the Reservoir must take into account the decision concerning Niko's liability for loss of gas according to paragraphs 773 (b) to (d) above;

(iii) any costs of Mr Wilson's project to avoid or reduce the explosion risk caused by the use of the gas collected from seepages for cooking purposes are not recoverable;

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(iv) the decision on the claim for the costs of Mr Wilson's project for the soil vacuum extraction is reserved; and

(υ) the decision on other issues concerning the recoverability of Environmental Losses claimed by BAPEX on behalf of the Government is reserved.

777. The Respondents' request to suspend the procedure on the claims for Environmental Losses is denied.

778. The claim for advance payment on account of BAPEX's monitoring, surveying and abatement programme is denied.

13.4 Pre-Award Interest

779. The decision on the Respondents' claim for pre-award interest is reserved.

13.5 The Claimant's Set-Off Claim

780. The Claimant's request for set-off based on its claims for breaches by BAPEX of the JVA allegedly committed at various dates between November 2005 and May 2015 is admitted in the arbitration.

789. These claims are time-barred.

790. The Claimant's set-off relying on these claims is denied.

786 The Decision and the procedure leading to it are discussed above in Sections 4.5 and 4.6.

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6 RELIEF REQUESTED

787 The relief requested by the Parties varied over time. During the course of the proceedings, the Tribunal had to address different versions of the requested relief. The Tribunal reproduces therefore the various versions of these requests as they were presented during the course of the proceedings. This presentation starts with the final version of the requested relief which the Tribunal addresses in this Award.

6.1 The Claimant

6.1.1 The final version

788 In its last submission on the merits the Claimant made the following submission:

The record and the law do not support the updated lost gas calculations and claims for damages of BAPEX. Niko incorporates by reference its submissions at paragraphs 112 and 113 of Niko's Reply on Quantum for Lost Gas.¹⁷²

789 At the indicated location in the Claimant's Reply on Quantum for Updated Lost Gas Calculations of 1 October 2021 the Claimant states:

112. Niko incorporates by reference its submissions at paragraphs 451 to 470 of its Counter-Memorial on Damages. Niko nonetheless recognizes that the Decision on Heads of Recoverable Loss has disposed of the requests for relief stated at the following paragraphs, which therefore do not fall to be decided in this phase of the proceedings:

a. paragraph 452 (request for declaration that the JVA does not permit BAPEX to recover losses alleged to be suffered by the Government);

b. paragraphs 454 and 461 (request for declaration that BAPEX has failed to prove any loss directly resulting from the first blowout and is entitled to no compensation);

c. and paragraphs 458-460 (requests concerning set-off claim).

113. In addition, Niko revises its request for relief stated at paragraph 457 to refer to BDT 80 million rather than USD 2.2 million.

¹⁷² C-PHB 2, paragraph 58. ↩

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790 The indicated paragraphs of the Claimant's Counter-Memorial on Damages of 7 September 2020 are reproduced below; the passages that remain unchanged and thus represent the Claimant's latest request are set in bold characters:

451. For all of the foregoing reasons, Niko respectfully requests that the Tribunal:

452. Declare that BAPEX may not recover the losses alleged to have been suffered by the Government of Bangladesh as these losses are excluded from recovery by the Joint Venture Agreement;

453. Dismiss the claims asserted by BAPEX for the recovery of such losses;

454. Declare that BAPEX has failed to prove any loss directly resulting from the first blowout at Chattak West field;

455. Declare that BAPEX is not entitled to pre-award interest;

456. Dismiss BAPEX's claims for failure to establish them;

457. In the alternative, should the Tribunal find that BAPEX has proven a loss directly resulting from the first blowout at Chattak West field, fix the amount of that loss in an amount to be proven at the hearing but which Niko contends to be USD 2.2 million [replaced by BDT 80 million] or less;

458. Declare that BAPEX is liable to Niko for damages suffered as a result of BAPEX's breaches of the JVA and wrongful deprivation of Niko's right to produce gas from Chattak West;

459. Fix the amount of Niko's losses in an amount to be proven at the hearing, but which Niko contends to be at least USD 114.1 million, and set this amount off against any amount for which Niko is determined to be liable to BAPEX;

460. In the alternative, declare that the Tribunal and the Centre have jurisdiction over Niko's claim in set-off, that BAPEX is liable to Niko for damages suffered as a result of BAPEX's breaches of the JVA and wrongful deprivation of Niko's right to produce gas from Chattak West, fix the amount of Niko's losses in an amount to be proven at the hearing, but which Niko contends to be at least USD 114.1 million, and set this amount off against any amount for which Niko is determined to be liable to BAPEX;

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461. Declare that Niko owes no compensation to BAPEX;

462. Declare that the Tribunal's determination of Niko's liability and determination concerning compensation due are final and binding on BAPEX and all of its predecessors, assignors, successors and assigns, including the Government of Bangladesh and Petrobangla;

463. Declare that BAPEX breached its warranties and misrepresented in the JVA that it had been vested with and assigned all relevant rights, obligations and responsibilities of the Government of Bangladesh and Petrobangla;

464. Declare that Niko is entitled to be made whole for any and all damages resulting from the pursuit of the Money Suit by the Government of Bangladesh and Petrobangla in Dhaka court as a consequence of the above-mentioned breach of warranty and misrepresentation;

465. Order BAPEX to pay to Niko as compensation for said breach and misrepresentation the amount corresponding to all attorneys' fees, expert fees and other costs incurred by Niko in defending itself and its officers in the Money Suit;

466. Order BAPEX to pay on Niko's behalf the full amount of any damages assessed against Niko by a final judgment or decree in the Money Suit;

467. Order BAPEX to pay to Niko the costs of this arbitration, including professional disbursements;

468. Order BAPEX to pay to Niko interest on all sums awarded to Niko;

469. Order that all sums awarded to Niko be in freely transferable and exchangeable funds, in accordance with the requirements of Article 26.1.6 of the JVA; and

470. Order such other and further relief as the Tribunal may deem appropriate in the circumstances.

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6.1.2 Earlier versions

791 In its Notice to Arbitrate of 8 January 2010,¹⁷³ Niko announced its intention to commence arbitration proceedings against BAPEX, Petrobangla and Bangladesh in respect to a dispute defined as follows:

(a) All claims held jointly or severally by any of Bapex, Petrobangla and Bangladesh to damages or losses alleged to arise from the blow outs of two wells which were then being drilled by Niko under the JVA in the gas field in Bangladesh known as the Chattak gas field (the “Compensation Claims”), including those arising from the matters alleged in either the Legal Notice dated May 27, 2005 issued on behalf of Petrobangla to Niko (a copy of which is attached) and/or in the pleadings filed on behalf of Petrobangla in the suit filed June, 2008 by Petrobangla and the Government of Bangladesh against Niko and others in the Court of District Judge, Dhaka, Bangladesh, no. 224 of 2008;

(b) Whether Niko is liable for any of the Compensation Claims in whole or in part, and if it is liable, determination of the amount of liability;

(c) [description relating to the Payment Claim].

792 In the RfA I, dated 1 April 2010, Niko referred to the Notice to Arbitrate and quoted the quoted definition of the Compensation Declaration claim contained in the Notice, stating its intent to have that Claim resolved by ICSID arbitration.

793 At the Preliminary Procedural Consultation and First Session on 14 February 2011, the Claimant's request for relief was defined as

... a declaration that it has no liability for any damage that may have arisen from the two well blow-outs which occurred on the Chattak wells and that it owes no compensation for such damage.¹⁷⁴

794 The Claimant specified its requested relief in its Memorial concerning the Compensation Declaration of 27 September 2013,¹⁷⁵ seeking an award by the Tribunal

a. Declaring that Niko breached no obligation or law as concerns the two blowouts in 2005 at Chattak field and is not liable to BAPEX, its predecessors, assignors, successors or assigns;

¹⁷³ RFA I, Attachment D I. ↩
¹⁷⁴ Procedural Order No 1, second paragraph. ↩
¹⁷⁵ C-CD.1, paragraph 23. ↩

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b. In the alternative, and in the event that the Tribunals find liability on the part of Niko, fixing the amount of any compensation due for any damages to BAPEX, its predecessors, assignors, successors or assigns;

c. Declaring, for the purposes of the preceding declarations, that BAPEX is in all relevant respects the successor and assignee of the Government of Bangladesh and Petrobangla;

d. In the event that BAPEX is not in all relevant respects the successor and assignee of the Government of Bangladesh and Petrobangla, declaring that BAPEX breached its warranty in the JVA that it had been assigned all relevant obligations and responsibilities of the Government of Bangladesh and Petrobangla;

e. Declaring that Niko is entitled to any and all damages resulting from the continued pursuit of the Money Suit by the Government of Bangladesh and Petrobangla in Dhaka court as a consequence of the breach of the arbitration clause of the JVA and/or the warranty that BAPEX had been assigned all relevant obligations and responsibilities of the Government of Bangladesh and Petrobangla in the JVA;

f. Ordering BAPEX to pay to Niko as compensation for said breach the amount corresponding to (i) all attorneys' fees, expert fees and other costs incurred by Niko in defending itself and its officers in the Money Suit; and (ii) any pecuniary difference between the findings of these Tribunal as to the extent of Niko's liability for the 2005 blowouts and the findings of any final judgment in the Money Suit;

g. Ordering that all sums awarded be in freely transferable and exchangeable funds, in accordance with the requirements of Article 26.1.6 of the JVA;

h. Ordering BAPEX to pay to Niko the costs of this arbitration, including professional disbursements;

i. Ordering BAPEX to pay to Niko interest on all sums awarded; and

j. Ordering such other and further relief as the Tribunals deem appropriate in the circumstances.

795 In its Reply concerning the Compensation Declaration of 29 May 2014,¹⁷⁶ Niko presented a slightly modified request for relief as follows:

¹⁷⁶ C-CD.2, paragraph 315. ↩

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Niko respectfully submits that the Tribunals should issue an award in its favor and against BAPEX:

(a) Declaring that Niko breached no obligation or law as concerns the two blowouts in 2005 at Chattak field and is not liable to BAPEX, its predecessors, assignors, successors or assigns;

(b) In the alternative, and in the event that the Tribunals find liability on the part of Niko, fixing the amount of any compensation due for any damages to BAPEX, its predecessors, assignors, successors or assigns;

(c) Declaring that BAPEX breached its warranties and misrepresented in the JVA that it had been vested with and assigned all relevant rights, obligations and responsibilities of the Government of Bangladesh and Petrobangla;

(d) Declaring that Niko is entitled to any and all damages resulting from the pursuit of the Money Suit by the Government of Bangladesh and Petrobangla in Dhaka court as a consequence of the abovementioned breach of warranty and misrepresentation;

(e) Ordering BAPEX to pay to Niko as compensation for said breach and misrepresentation the amount corresponding to (i) all attorneys' fees, expert fees and other costs incurred by Niko in defending itself and its officers in the Money Suit; and (ii) any pecuniary difference between the findings of these Tribunals as to the extent of Niko's liability for the 2005 blowouts and the findings of any final judgment in the Money Suit;

(f) Ordering that all sums awarded be in freely transferable and exchangeable funds, in accordance with the requirements of Article 26.1.6 of the JVA;

(g) Ordering BAPEX to pay to Niko the costs of this arbitration, including professional disbursements;

(h) Ordering BAPEX to pay to Niko interest on all sums awarded; and

(i) Ordering such other and further relief as the Tribunals deem appropriate in the circumstances.

796 In the Post-Hearing Brief of 22 January 2016,¹⁷⁷ Niko spelled out the decision in requested in an award against BAPEX in the following terms:

¹⁷⁷ C-PHB, paragraph 431. ↩

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(a) Declaring that Niko breached no obligation or law as concerns the two blowouts in 2005 at the Chattak field and is not liable concerning the blowouts to BAPEX, its predecessors, assignors, successors or assigns;

(b) In the alternative, and in the event that the Tribunals find liability on the part of Niko, fixing in the hearing on quantum scheduled for August 2016 the amount of any compensation due for any damages to BAPEX, its predecessors, assignors, successors or assigns;

(c) Declaring that the Tribunals' determination of Niko's liability concerning the blowouts and any damages resulting therefrom is final and binding upon BAPEX and all of its predecessors, assignors, successors and assigns;

(d) Declaring that BAPEX breached its warranties and misrepresented in the JVA that it had been vested with and assigned all relevant rights, obligations and responsibilities of the Government of Bangladesh and Petrobangla;

(e) Declaring that Niko is entitled to be made whole for any and all damages resulting from the pursuit of the Money Suit by the Government of Bangladesh and Petrobangla in Dhaka court as a consequence of the above-mentioned breach of warranty and misrepresentation;

(f) Ordering BAPEX to pay to Niko as compensation for said breach and misrepresentation the amount corresponding to all attorneys' fees, expert fees and other costs incurred by Niko in defending itself and its officers in the Money Suit;

(g) Ordering BAPEX to pay on Niko's behalf the full amount of any damages assessed against Niko by a final judgment or decree in the Money Suit;

(h) Ordering BAPEX to pay to Niko the costs of this arbitration, including professional disbursements;

(i) Ordering BAPEX to pay to Niko interest on all sums awarded to Niko;

(j) Ordering that all sums awarded to Niko be in freely transferable and exchangeable funds, in accordance with the requirements of Article 26.1.6 of the JVA; and

(k) Ordering such other and further relief as the Tribunals deem appropriate in the circumstances.

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The relief requested in the Post-Hearing Brief was confirmed and clarified at the February 2016 Hearing.¹⁷⁸ In particular the Claimant confirmed that the “predecessors, assignors, successors and assignees” include Petrobangla and the Government.¹⁷⁹

6.2 The Respondents/BAPEX

6.2.1 The final version

797 In its final submission on the merits, the Reply to Niko's Post-Hearing Brief of 9 May 2022,¹⁸⁰ BAPEX requested the following relief:

It is BAPEX's position that none of the claims and arguments presented by Niko in its Post-Hearing Brief alter any of BAPEX's contentions. Therefore, BAPEX hereafter reaffirms the submissions it filed in its Post-Hearing Brief, and respectfully requests that the Tribunal:

a. Declare that BAPEX is entitled to compensation for all losses resulting from the Chattak 2 blowout that occurred at the Chattak Field (periods (i) to (iii), inclusive);

b. Order Claimant to pay damages, including pre-award interest, of US$120 million for BAPEX's losses;

c. Order Claimant to pay damages, including pre-award interest, of US$162 million to BAPEX for the Government's gas loss of gas production;

d. Order Claimant, with respect to losses due to atmospheric pollution, to pay damages to BAPEX for the Government (1) in the amount of US$123,379,376 in the event that the Tribunal finds that Brattle Scenario Case 1 is applicable, (2) in the amount of US$ 201,216,815 in the event that the Tribunal finds that Brattle Scenario Case 2 is applicable, (3) in the amount of US$438,819,099 in the event that the Tribunal finds that Brattle Scenario Case 3 is applicable, or (4) in the amount of US$386,381,204 in the event that the Tribunal finds that Brattle Scenario Case 4 is applicable;

¹⁷⁸ HT 2016 Day 1, pages 142 et seq. ↩
¹⁷⁹ HT 2016 Day 1, page 145. ↩
¹⁸⁰ B-PHB 2, paragraph 146. ↩

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e. Order Claimant to pay additional damages to BAPEX for the Government in the amount of US$12,458,984, representing all other environmental losses;

f. Order pre-award and post-award interest on all sums awarded;

g. Award all costs and fees incurred by BAPEX in this proceeding, including attorneys' and expert witnesses' fees and expenses, ICSID and the members of the Tribunal fees and costs, and the charges for the use of hearing facilities;

h. Grant BAPEX any other remedy that the Tribunal considers appropriate.

6.2.2 Earlier versions

798 In response to the Requests for Arbitration and during the initial phase of the Arbitrations, the Respondents denied the Tribunal's jurisdiction with respect to all claims and requested their dismissal.

799 Following the Tribunal's Decision on Jurisdiction, BAPEX requested in its Counter-Memorial concerning the Compensation Declaration of 30 January 2014, at paragraph 89 that the Tribunal:

a. Declare that there is no legal dispute between BAPEX and Niko under the JVA;

b. In the alternative, declare that BAPEX is not obligated to indemnify Niko for any damage resulting from the pursuit of the Money Suit by the Government of Bangladesh and Petrobangla in the Bangladesh courts;

c. Dismiss all of Niko's claims against BAPEX;

d. Award all costs, including legal representation, incurred by BAPEX in this proceeding.

800 In its Rejoinder concerning the Compensation Declaration of 25 September 2014, BAPEX continued to argue that Niko's real claim was against acts of third parties and that there was no claim for BAPEX to answer. It concluded:

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... the Tribunals should dismiss the claim in its entirety and award costs in [BAPEX's] favour.¹⁸¹

801 In its Post-Hearing Brief of 22 January 2016, BAPEX concluded:

The evidence on the record and testimony at the hearing demonstrate that Niko has not met its burden to prove that it is entitled to the relief it seeks. This Tribunal should reject Niko's request for a declaration on non- liability and its request for a finding of breach of warranty.¹⁸²

802 In its Memorial on Damages of 25 March 2016,¹⁸³ the relevant parts of BAPEX's request stated the following relief:

BAPEX requests that the Tribunal: [...]

a. Declare that Niko procured the Joint Venture Agreement between BAPEX and Niko Resources (Bangladesh) Ltd of 16 October 2003 through corruption;

b. Declare that Claimant is not entitled to use the international arbitration system to pursue claims related to the JVA;

c. Declare that the JVA is voidable, recognize BAPEX's invocation of its right to void the JVA, and treat the JVA as void;

d. Dismiss all of Claimant's claims asserted in this arbitration;

e. Declare that BAPEX is entitled to compensation for all of its losses arising from Niko's corrupt procurement of the JVA, including all losses resulting from the two blowouts that occurred at the Chattak Field;

f. In the alternative, should the Tribunal determine that the JVA is not voidable or voided, declare that Niko must compensate BAPEX for the harms arising from Niko's breaches of the JVA, including all losses resulting from the two blowouts that occurred at the Chattak Field;

g. Order Claimant to pay damages of $118 million for BAPEX's losses;

h. Should the Tribunal make a determination of the Government's losses, order Claimant to pay damages of $896 million for the Government's gas losses and between US$ 8,461,463 and $8,642,493 to cover the expenses of monitoring, surveying and abatement and to hold this

¹⁸¹ B-CD.2, paragraph 103. ↩
¹⁸² R-PHB, paragraph 308. ↩
¹⁸³ BMD, paragraph 400. ↩

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proceeding open until such time as a complete survey and monitoring of the Tengratila area can be conducted and BAPEX can provide the fullest possible accounting of environmental and health related losses;

i. Order prejudgment and post-award interest on all sums awarded;

j. Order Claimant to pay all the expenses and costs associated with defending against these proceedings, including BAPEX's attorneys' and expert witnesses' fees and expenses, the fees and expenses of ICSID and the members of the Tribunal, and the charges for the use of hearing facilities;

k. Grant BAPEX any other remedy that the Tribunal considers appropriate.

803 By correspondence of 29 April 2016 BAPEX modified its requests, making items (c) and (f) the changes marked in red and leaving all other items unaltered:

c. Declare that the JVA is void or, in the alternative, declare that the JVA is voidable, recognise BAPEX's invocation of its right to void the JVA, and treat the JVA as void;

[...]

f. In the alternative, should the Tribunal determine that the JVA is not voidable or voided and proceed to adjudicate Niko's claims, declare that Niko must compensate BAPEX for the harms arising from amount it determines is owed by Niko for Niko's breaches of the JVA, including all losses resulting from the two blowouts that occurred at the Chattak Field.

804 In its Amendment to Memorial on Damages of 7 September 2020,¹⁸⁴ BAPEX presented the request for relief in the following terms:

a. Declare that BAPEX is entitled to full compensation for all direct losses resulting from the Chattak 2 blowout that occurred at the Chattak Field and that all the losses claimed by BAPEX in its Memorial on Damages and this Amendment are direct losses;

b. Order Claimant to pay damages of $118 million for BAPEX's losses;

c. Order Claimant to pay damages of $857 million for the Government's loss of gas production and between US$ 8,461,463 and $8,642,493 to

¹⁸⁴ Amendment, paragraph 99. ↩

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cover the expenses of monitoring, surveying and abatement and to hold this proceeding open until such time as a complete survey and monitoring of the Tengratila area can be conducted and BAPEX can provide the fullest possible accounting of environmental and health related losses;

d. Order prejudgment and post-award interest on all sums awarded;

e. Order Claimant to pay all the expenses and costs associated with defending against these proceedings, including BAPEX's attorneys' and expert witnesses' fees and expenses, the fees and expenses of ICSID and the members of the Tribunal, and the charges for the use of hearing facilities;

f. Grant BAPEX any other remedy that the Tribunal considers appropriate.

805 Following the November 2020 Hearing, the Respondents clarified on 5 December 2020, with respect to the Government's claim for lost gas:

In light of Respondents' more complete understanding of the Tribunals’ question, Respondents consider that the loss to the Government could be determined in relation to alternative gas supplies. The valuation of the loss on this basis would require further analysis, with input from valuation experts. Respondents respectfully inform the Tribunals that they are prepared to provide such analysis now or in the subsequent quantification phase.¹⁸⁵

¹⁸⁵ BAPEX's Letter on Issues Arising from November 2020 Hearing, page 2. ↩

[Page 244]

7 QUANTITY OF THE GAS LOST

7.1 Overview of the issues

806 In the Decision on Liability the Tribunal decided that Niko owes compensation for direct loss and damage caused by the first blowout but not for the loss caused by the second blowout.¹⁸⁶ In the Heads of Recoverable Loss Decision, the Tribunal decided that BAPEX is entitled to compensation for the loss caused to itself and to the Government by the loss of the gas that escaped from Reservoir (Sands 1 and 2) during the time from the first blowout on 7 January 2005 to the second blowout on 24 June 2005; the Tribunal defined the circumstances under which Niko's liability extended to gas that escaped after the second blowout and after the completion of the Chattak 2B relief operation on 9 October 2005.¹⁸⁷

807 In this Section of the Award the Tribunal determines first in Section 7.5.6 Niko's liability for the gas that escaped after the Chattak 2A blowout and in Section 7.6.6 the liability for the gas that escaped after the completion of the Chattak 2B relief operation. It then determines the quantity of lost gas to which this liability applies. The monetary value of these quantities is determined in Section 8.

7.2 The assessment in the Government's Gas Loss Reports and the claim in the Money Suit

808 The Government's investigations after each of the two blowouts, included setting up a committee to estimate the quantity of gas lost after the first and the second blowout, respectively. These Committees included high-ranking members of Petrobangla and, in the Second Committee, members of the Energy and Mineral Resources Division of the Government and a representative of BAPEX. Niko was represented on both Committees.

809 Each of the Committees prepared a report, assessing the losses caused by the relevant blowout. The report of the Second Committee built on the analysis and results of the First Committee and took a position on one of the assessments where the First Committee had made an alternative assessment.

810 With one exception, Niko agreed with the result of the first report; it did not object to the result of the second report. No objection by BAPEX to either report was recorded at the time.

¹⁸⁶ Decision on Liability, paragraph 1159(vi). ↩
¹⁸⁷ Heads of Recoverable Loss Decision, paragraph 773. ↩

[Page 245]

7.2.1 The First Gas Loss Report

811 The "First Committee for Estimating Gas Losses caused by Blowout in Chattak-2" (First Gas Loss Committee), produced its report on 4 June 2005 (First Gas Loss Report).¹⁸⁸ The report states that the Committee “has learned that [Energy and Mineral Resources Division] previously formed another committee on 09.01.2005 to investigate the Chattak-2 blowout” with “exactly the same" terms of reference as those for its own work.¹⁸⁹ The Parties in the Arbitrations have not discussed the work of this other committee and no report by it has been produced; it is therefore not considered any further.

812 The First Gas Loss Committee was formed on 2 March 2005 by the Energy and Mineral Resources Division (EMRD); it was composed of:

• Mr Quazi Shadidur Rahman, Senior GM, Petrobangla, Convener;
• Mr Rahman Murahed, MD, SGFL;
• Mr Md. Akkas Ali, DGM, Petrobangla; and
• Mr Brian Adolph, Vice-President/Country Manager, Niko.¹⁹⁰

813 The Committee visited the site on 23 March 2005 “to observe the status of blow-out effect”; in addition to its visual observations at that occasion, the Committee relied on pictures and a number of documents concerning the geology, drilling of the well, reserve estimates and other documents annexed to the Report or listed in it.

814 The First Gas Loss Report is signed by all members of the Committee, except Mr Adolph who explained in a letter of 1 June 2005¹⁹¹ that he found the estimates of Q1 and Q2 “reasonable and in the realm of possibility" but disagreed with the range adopted for Q3.¹⁹²

815 The gas loss estimate of the Committee covered the period from the start of the Chattak 2 blowout until early June 2005. It reported that the Chattak 2A relief well had been spud-in on 1 June and that capping of the blowout well had been targeted for 15 July 2005, counting for the loss estimate flow from the Reservoir during 187 days from the blow-out of Chattak 2 until its capping.

¹⁸⁸ First Gas Loss Report, Exhibit R-2. ↩
¹⁸⁹ First Gas Loss Report, Exhibit R-2, paragraph 1.4. ↩
¹⁹⁰ First Gas Loss Report, Exhibit R-2, paragraphs 1.1 and 1.2 and Annexes 1 and 2. ↩
¹⁹¹ Attached to the Report as Annex 20. ↩
¹⁹² For the definition and use of the categories Q1, Q2 and Q3, see below. ↩

[Page 246]

816 For estimating the gas loss during this period, the First Gas Loss Report distinguishes three components as follows:

Q1 Loss during to the main flare due to blow-out;

Q2 Subsequent surface losses until the Relief Well contains them;

Q3 Subsurface losses due to charging of sands above the Upper Marine Shale until the Relief Well successfully plugs the blow-out zone.¹⁹³

7.2.1.1 Q1: The first Component: the “main flare”

817 The First Gas Loss Committee defined this component as “the initial blow-out period of about 40hrs”. It represented the flow during this initial period in the following drawing:¹⁹⁴

¹⁹³ First Gas Loss Report, Exhibit R-2, page 4. ↩
¹⁹⁴ First Gas Loss Report, Exhibit R-2, Annex 16. ↩

[Page 247]

Well:Chattak-2

[Transcription of diagram content]

• Component-1
  Massive flaring of gas
• Depth (m)
• 0
• 100
• -200
• -300
• 400
• -500
• -600
• -700
• 800
• Dihing & Dupitila sandstone (massive)
• 13 3/8" @ 303m
• Claystone (stringers)
• Tipam sandstone
• 485-560m Seal UMS
• Sands 1&2
• 8 1/2" hole

Schematic of Blow-out effect during the massive flaring of gas (Jan 7-9,2005)
Ref: Niko, Wellbore Diagram, Chattak-2 Relief Well for Lithology & Depths

818 The Committee started its explanations by determining the reservoir pressure by reference to the “mud condition” recorded in the Chattak 2 drilling report. It stated:

... at mid-point of reservoir Sands 1 & 2 @ 1879 ft (573m) assuming a balanced mud condition with 9.1 ppg mud just prior to the blowout as per Drilling Report, 903.62 psia.¹⁹⁵

819 Considering a number of other factors, including in particular the diameter of the wellbore below the casing shoe, which represents also the diameter of the hole in the Regional Seal through which the gas escaped from the Reservoir, the Committee estimated a “maximum flow rate of 271.7 MMcfd” per day. As the main flare lasted for 40 hours, the First Gas Loss Committee estimated the loss attributed to this component at 453 MMcf or 0.453 Bcf.

¹⁹⁵ First Gas Loss Report, Exhibit R-2, page 5. ↩

[Page 248]

820 For this calculation, the Committee considered several formulae. It dismissed the first of these formulae since it was “significantly dependant on the unknown quantity k”, representing the “formation permeability". It then considered a formula that relied inter alia on the wellbore diameter:

Gas had to flow out of the 8 ½” x 13 3/8” wellbore to atmosphere, the capacity of the minimum wellbore section of 8 ½” dia. from reservoir Sands 1&2 to 13 3/8” casing shoe was expected to have controlled the outflow potential of the well. To determine the flow potential on a conservative basis the following equation of turbulent flow of gas through vertical pipes was employed (Ref. Katz et al, 1959, p 306) assuming 8 ½” all the way to the surface.¹⁹⁶

821 The First Gas Loss Report indicated the values assumed for each of the nine factors in the formula, including the reservoir pressure of 903.62 psia, taken from the drilling report. The result is verified against data from a recent geological report.¹⁹⁷ The Committee also considered a Rate Sensitivity Analysis, presented by Niko and using “Fekete's software FAST VirtuWell”. The analysis showed “very high” gas release rates; the Committee concluded from this analysis that the estimated flow rate of 271.70 MMcfd “may be considered at best conservative".¹⁹⁸

822 The First Gas Loss Committee nevertheless confirmed its estimate based on this rate and the estimate of 0.453 Bcf for the first Component, i.e. Q1, loss due to the main flare of the blow-out.

7.2.1.2 Q2: Second Component: the “gas losses to the surface after extinction of main flare”

823 The First Gas Loss Committee noted that on 9 January 2005 at 4 am, “there was a big jerk like an earthquake in and around several kilometres of the blow-out well, following which the main flare size got reduced. After the sinking of the rig and nearby equipment the size of the flare reduced to some 3-10m, for several days”.¹⁹⁹ After the end of the initial 40 hours of the main flare, the Committee described the situation from 10 January 2005 to the time of its report as follows:

Big bubbles can be seen in the main crater (similar to will Haripur-1 which blew-out in 1955), gas escaping along a 1 km surface fault line as

¹⁹⁶ First Gas Loss Report, Exhibit R-2, page 5. ↩
¹⁹⁷ The Surma Basin Generalised Stratigraphic Column, from the Jalalabad Field Reserves Report, of 1 January 2000, Occidental of Bangladesh, UNOCAL (First Gas Loss Report, page 8 and Annex 18). ↩
¹⁹⁸ First Gas Loss Report, Exhibit R-2, page 6 and Annex 19. ↩
¹⁹⁹ First Gas Loss Report, Exhibit R-2, page 3. ↩

[Page 249]

well as to all adjacent area,²⁰⁰ a small fire continues to burn in a fracture near pit (Ref. Picture at Annex 14).

824 The First Gas Loss Committee also noted that

... there has been gas escapes in progressively smaller flames and gas still continues to bubble out from around crater created by the blow-out. This will continue until the gas passage from the reservoir Sands 1&2 is totally blocked by drilling successful Relief Well.

It is impossible to accurately calculate the amount of gas loss daily in these processes, but going by the surface indications the average escaping rate is estimated at about 2.0 mmcfd.

825 As it had assumed that the relief well 2A, spud on 1 June 2005, would succeed in capping the well on 1 July 2005,²⁰¹ the Committee calculated that gas would flow to the surface at this rate for 187 days and concluded that the Q2 loss was 374MMcf or 0.374Bcf.²⁰²

826 The report of the Second Gas Loss Committee also commented on that flow after the first blowout:

Since [9 January 2005] the high-pressure gas had been leaking through the ground via different fissures, fractures and holes in and around the blowout crater. The extent of this seepage has been observed at hundreds of meters away from the blowout crater.²⁰³

7.2.1.3 Q3. the sub-surface losses

827 The First Gas Loss Committee made the following assumption, using a wellbore model shown in a drawing produced as annex to its report and reproduced below. It explained:

... the main surface escaping of gas due to blow-out most probably stopped with the collapsing of overburden earth into the case that was created around the 13 3/8” casing shoe [the bridging of the well]. The bulk of the gas then started flowing into the alternate routes available, into the massive Tipam, Dupitila and other sands.²⁰⁴

²⁰⁰ First Gas Loss Report, Exhibit R-2, page 3. ↩
²⁰¹ First Gas Loss Report, Exhibit R-2, page 3, Section 3.3. ↩
²⁰² First Gas Loss Report, Exhibit R-2, page 3, Section 5.2. ↩
²⁰³ Second Gas Loss Report, Exhibit Annex R-4, paragraph 4.2. ↩
²⁰⁴ First Gas Loss Report, Exhibit R-2, page 7. ↩

[Page 250]

828 For its analysis the First Gas Loss Committee created two scenarios, differing with respect to a number of assumptions, including the location of the bridging of the well, the “pressure in Tipam” and the permeability of the Tipam sand.

829 The First Scenario assumed bridging at the casing shoe at 303m, which it considered as the weakest area in a well. It represented this scenario in the following drawing:²⁰⁵

²⁰⁵ First Gas Loss Report, Exhibit R-2, Annex 17. ↩

[Page 251]

Well: Chattak-2

[Transcription of diagram content]

• Depth (m)
• 0
• 100
• 200
• 300
• 400
• 500
• 600
• 700
• 800
• Component 2 Gas seepage
• Dihing & Dupitila sandstone (massive)
• 13 3/8" @ 303m
• Bridging due to caving/gas flow
• Claystone (stringers)
• Component 3 Charging into Tipam sandstone
• Tipam sandstone
• 485-560m Seal UMS
• Sands 1&2
• 8 1/2" hole

Schematic of Blow-out Effect: Surface & Subsurface loss of gas (since Jan 10,2005 to date)
Ref: Niko, Wellbore Diagram, Chattak-2 Relief Well for Lithology & Depths

830 The Committee explained the reasons for situating the bridging at the casing shoe at 303m as follows:

It is known that the weakest area in a well is around the casing shoe, since the formation above the shoe is comparatively strong being cased and cemented and the strength of the formation below it also increases with depth. In well Chattak-2, during the blowout, huge volume of sand, debris, clays, chips were blown out. These sands and debris most probably came out from the weak areas of the well, around the 13 3/8” shoe, thereby creating a cave. After the uncontrolled flow for about 40 hrs a sudden jerk was observed in the nearby area of well Chattak-2, following which the main flow of gas was stopped. This could have happened due to collapsing of surrounding earth into the cave below the

[Page 252]

shoe at 303 m. Simultaneously, with the sinking of rig, rig materials, etc. and collapsing of upper parts of the drillhole & casing helped to create further restriction for gas to escape to the surface in bulk volumes. Gas then found the next courses of least restriction to flow out from the 8 ½” drillhole was the adjacent massive sand layers of Tipam, Dupitila, etc.²⁰⁶

831 The First Gas Loss Committee considered it “quite possible” that the drill bit had remained at the location it had reached during the wiper trip at 466m and continued:

As the drill string and drill bit got stuck onto one side of the wellbore gas flowing at the initial high rates (and velocity) must have cut the wall opposite the drill bit enough to maintain the flowrate at around AOF of the well. Thus it is quite possible that following stoppage of gas exit to the surface by restrictions created around the 13 3/8” shoe and above the 8 ½” drillhole gas can now flow past the drill bit unabated to other sands at rates similar to the initial conditions of minimal restrictions in the wellbore (i.e. @ AOF).²⁰⁷

832 Among other assumptions made by the Committee in this scenario was a formation pressure of 903.62psia and a pressure at wellbore of 862.68psia. Concerning the “adjacent porous and permeable sandstone layers" and specifically the Tipam layer, the Committee assumed a gross thickness of 115m (the height of the open Tipam layer), a depth to mid-point of 417m, a “pressure in Tipam (assuming hydrostatic) [at] 607psia”, and permeability “assumed similar to the gas sand” of 313mD.²⁰⁸

833 With these and other assumptions, the Committee considered it “most likely” that the gas from the Reservoir was “charging into the adjacent porous and permeable sandstone layers” at very high volumes in view of “their vast lateral extent in the Suma basin until equilibrium is reached with the gas reservoir”. Using “parameters for Tipam in Chattak-2” and “the reservoir flow equation (2)", the Committee concluded that “the maximum possible charging rate into the Tipam Sand alone is estimated at around 558mmcfd. The gas injection would be even higher if the other sandstones layer as Dupitila, etc. are taken into account".

834 The flow rate of 558MMcfd produced by this calculation was substantially above the rate of 271.7MMcfd of the unobstructed outflow of the main flare in Q1. The First Gas Loss Committee considered this result as inacceptable since

²⁰⁶ First Gas Loss Report, Exhibit R-2, page 7. ↩
²⁰⁷ First Gas Loss Report, Exhibit R-2, page 8. ↩
²⁰⁸ First Gas Loss Report, Exhibit R-2, page 8. ↩

[Page 253]

the "total gas charging rate into the upper formations however cannot be greater than the AOF of the gas reservoir Sands 1&2”. Despite having noted this impossibility of the result reached by the formula adopted, the Second Gas Loss Committee did not modify the formula or the assumptions; instead, it replaced the calculated value of 558MMscfd by the rate it had adopted for the Q1 flow, i.e. 271.7MMcfd.²⁰⁹

835 Assuming a flow at this rate of 271.7MMcfd for 187 days until successful capping of the well, the Committee reached for the first scenario a total quantity of lost gas of 50.808Bcf.²¹⁰

836 In the Second Scenario, the First Gas Loss Committee assumed that the bridging of the well occurred at a lower level, at 466m, i.e. 19m above the top of the Upper Marine Shale. In this scenario, the Report assumed:

... sealing in and around the 8 ½” drill bit after it got stuck in its original location at 466m. The annulus between drill string and 8 ½” drill hole above the bit is assumed to have been filled up with rocks, debris, thus gradually stopping the bulk flow of gas up the hole. Gas would then flow only into the lower part of Tipam sands from the gas sands through the 8½” hole created in the Upper Marine Shale [...]. Gas entering the Tipam sands through the 19m window, however, can flow both laterally and vertically in unlimited quantity until equilibrium is reached with the gas reservoirs.

837 The Report specifies among the assumptions: “pressure in the Tipam sand @ 495m = 717.72psia”, pressure of gas above the Regional Seal at an estimated 883.15psia, the thickness of the “window across Tipam sands” at 19m and the permeability of the Tipam sands estimated at 152mD; other gas related properties are assumed unchanged compared to the First Scenario.

838 On this basis, the First Gas Loss Committee reached a flow rate of 31.47MMscfd, leading for the 187 days to a total loss in the second scenario of 5885 MMcf or 5.885 Bcf.²¹¹

839 The First Gas Loss Committee concluded its Report by summarising that the loss of recoverable gas was estimated as between 51.63 Bcf and 6.71 Bcf, of which 0.453 Bcf were loss during the main flare, 0.374 loss to the surface

²⁰⁹ First Gas Loss Report, Exhibit R-2, page 8. ↩
²¹⁰ First Gas Loss Report, Exhibit R-2, page 9. ↩
²¹¹ First Gas Loss Report, Exhibit R-2, page 9. ↩

[Page 254]

after the extinction of the main flare and “a range of 50.81Bcf to 5.88 Bcf" subsurface loss.²¹²

7.2.2 Comments about the Q3 estimate by Niko's Representative on the Committee and the Second Committee

840 Mr Adolf, Niko's representative on the First Gas Loss Committee, did not sign the First Gas Loss Report. In a letter of 4 June 2005, attached the Committee's Report, Niko accepted that the “values for Q1 and Q2 and that have been estimated by the Committee are reasonable and within the realm of possibility". With respect to the value for Q3, Niko expressed the view that it was “not reasonable and more data and observations are required to be able to determine a reasonable value (if any) on the gas that may have been lost in this manner”. The letter added:

... if the theory is correct that the upper sands have been charged with significant quantities of gas, then when these upper sands are being drilled as part of the relief well activities, we should see indications of significant gas ‘pockets’ present as drilling proceeds through these sands.²¹³

841 In his first Witness Statement Mr Adolf stated that he “did not regard the discussion and conclusions around Q1 and Q2 losses as unreasonable”. He continued by stating:

However, the third category of subsurface loss, the Q3 losses, was introduced by the chair (or “Convener”) of the Committee, Mr Shahidur Rahman, at the very last meeting of the First Lost Gas Committee. The notion of Q3 losses had not been part of the deliberations of the Committee to that point and Niko had been given no prior opportunity to provide input.

842 The Second Gas Loss Committee, while being set up to estimate the gas loss due to the blowout of the Chattak 2A relief well,²¹⁴ also considered the work of the First Gas Loss Committee and made some observations in this respect. With one exception, the Second Gas Loss Committee confirmed the quantification of the First Committee, concluding that the losses of its own

²¹² First Gas Loss Report, Exhibit R-2, page 10. ↩
²¹³ Produced as Annex 2 to First Gas Loss Report, Exhibit R-2, page 32 of the Report, Section 9; also Exhibit C-37. ↩
²¹⁴ Second Gas Loss Report, Exhibit Annex R-4, paragraph 1.1. ↩

[Page 255]

quantification of the second blowout “are in addition to the losses calculated in the 1^st blowout gas loss estimation report for similar components”.²¹⁵

843 The exception concerned the Q3 component estimates of the First Gas Loss Committee. In this respect, the Second Gas Loss Committee relied on the drilling records of the Chattak 2A relief well and made the following comments:

The First report assumed two scenarios for the calculation of the third component of the gas loss. Scenario-1 assumed the bridging of the well beneath the casing shoe (303m) and Scenario-2 assumed the bridging at the drill bit position (466m). From the log data of Chattak 2A well, it can be observed that no gas accumulation was encountered in the upper Tipam/Dupitila sand layers. As a result, the possibility of Scenario-1 for the higher estimate of the third loss component (Q3) as described in the first reports seems unlikely.²¹⁶

844 In its conclusions, the Second Gas Loss Committee confirmed that it considered the quantification in the first scenario as “unlikely”, limiting the Q3 quantity to the that of the second scenario:

The gas loss process due to charging, which was the third component in the previous blowout report, has not changed except for the duration involved due to the relief well blowout although the higher loss estimate figure mentioned in the Chattak 2 report seems unlikely. The Government may decide in the light of the 1^st blowout (Chattak 2) gas loss estimate report.²¹⁷

7.2.3 The Second Gas Loss Report

845 The “Committee for Estimating Gas Losses Caused by Chattak 2A Relief Well Blowout" produced its report on 27 August 2005 (Second Gas Loss Report).²¹⁸

846 This Second Gas Loss Committee was formed by an order of 29 June 2005 also of the EMRD. Apart from the representative of Petrobangla, its members differed from those of the first Committee:

• Dr Mohammad Tamim, Professor, PMRED, BUED, Convener;

²¹⁵ Second Gas Loss Report, Exhibit Annex R-4, paragraph 6a. ↩
²¹⁶ Second Gas Loss Report, Exhibit Annex R-4, paragraph 4.3, item 4. ↩
²¹⁷ Second Gas Loss Report, Exhibit Annex R-4, page 9, Section 6b. ↩
²¹⁸ Second Gas Loss Report, Exhibit Annex R-4. ↩

[Page 256]

• Mr Quazi Shahidur Rahman, Senior General Manager, Petrobangla;
• Mr Khandaker Nuruzzaman, Deputy Chief, EMRD;
• Mr Md. Shahabuddin, Deputy General Manager (Drilling Division) BAPEX;
• Dr Rudi Stocker, Senior Reservoir Specialist and, in his absence, Mr Brian Adolph, Vice President/Country Manager, Niko.²¹⁹

847 All of the members, including Mr Stocker for Niko, signed the Report.

848 The Committee members, except for Dr Stocker who had not been advised of the visit,²²⁰ visited the site between 30 June and 2 July 2005 “to have a clear understanding of the nature of the blowout”. The documentary and other information on which the Committee relied is identified in the report and in annexes to it.

849 The Second Gas Loss Report provides some background information, including the Committee's position concerning the GIIP or OGIP: the Report referred to the Marginal Field Evaluation, attached to the JVA,²²¹ which had mentioned the “proved and probable (2P) reserve” of Sands 1 & 2 as 115Bcf as “risked mean” and 191Bcf as “unrisked mean”. It explained:

After the drilling of Chattak 2, it can be safely upgraded to its unrisked mean reserve of 191 Bcf. This report will consider the GIIP in Chattak Sands 1 & 2 as 191 Bcf, as was done in the similar report on the blowout of Chattak 2 Well.²²²

850 The Report also summarises the events around the first and the second blowout, including the assessment of the First Gas Loss Committee and discusses in particular the loss due to “charging into the upper sands over the cap-rock from the blowout well”. It concludes

As no new hole has been drilled into the cap rock, gas loss estimation due to charging will remain unchanged. However, any such loss will continue until a successful kill of the 1^st blowout well.²²³

²¹⁹ Second Gas Loss Report, Exhibit Annex R-4, paragraphs 1.1 – 1.3. ↩
²²⁰ WS Adolph, paragraph 140: "Dr Stocker was not advised of the visit and so was not present”. ↩
²²¹ Exhibit C-1. ↩
²²² Second Gas Loss Report, Exhibit Annex R-4, page 2. ↩
²²³ Second Gas Loss Report, Exhibit Annex R-4, page 3. ↩

[Page 257]

851 When estimating the gas loss due to the Chattak 2A blowout, the Second Gas Loss Committee adopted the same division as the First Committee had done.

7.2.3.1 Q1: First Component: the main flare

852 With respect to the “Gas loss (flared) through the blowout relief well until well bridging”, identified as Q2A1, corresponding to the Q1 component in the First Gas Loss Report, the Committee first considered the cause of the blowout, discussing two alternative models:

The first [model] assumes that the Relief well hit an accumulated gas close to the 1^st blowout well and only accumulated gas has been burning without communication with the main reservoir. The second assumes that after initial burning of some accumulated gas the Relief well had direct communication with the first blowout well and since the gas had been flowing from the main reservoir (Sands 1 & 2 of Chattak West). From the intensity of the flame, water and sand that came out of the well it was concluded that the second scenario is the most likely model.²²⁴

853 Adopting the second scenario, assuming that the second blowout established a connection with the Chattak 2 well and the Reservoir, the Committee considered that, during this phase of the blowout, the flow of gas was subject to atmospheric pressure and escaped at Absolute Open Flow (AOF). The Committee calculated this flow by the following formula:²²⁵

²²⁴ Second Gas Loss Report, Exhibit Annex R-4, page 4, paragraph 4.1. ↩
²²⁵ Second Gas Loss Report, Exhibit Annex R-4, page 4, paragraph 4.1. ↩

[Page 258]

q_AOF = k_g h p / (141.2μ_g B_g [ln(r_e/r_w) - 3/4 + S'])

where,

p = Average reservoir pressure at datum ≈ 875 psia

(Due to the blowout, initial reservoir pressure of Sands 1&2 could not be determined. So the pressure was determined at mid point of reservoir Sands 1& 2 @ 1990 ft (606.75m). The normal pressures for sand 1 and 2 are 835 psia and 915 psia respectively. An average of these two pressures was used for the calculation)

μ_g = Average gas viscosity, 0.015 cp.

B_g= Gas formation volume factor, 0.8693 vol/vol

k = permeability, 313 md (as estimated in the first blowout gas loss report).

h = pay thickness, 34 m (mean value as reported in Niko-Bapex joint study).

Drainage area = Infinite acting (750 hector ≈ 1850 acres)

r_w = Wellbore radius

r_e = Drainage radius

854 The Committee found that the AOF was in the range of 500MMscfd. It “reduces with time and stabilizes after a certain period”. Considering the information about the drilling, it modelled the flow path through an 8 ½” casing. It added a list of additional data, including those of porosity of 35% “(highly unconsolidated sand stone)” and initial water saturation of 30%.²²⁶

855 On the basis of these and other identified data, the Committee calculated the flow rate from the time of the Chattak 2A blowout “until the main flame in the Relief well choked off on July 7, 2005”. The table representing this flow showed over this period a decreasing AOF from 505psia to 349psia and a wellhead flow rate decreasing form 159 MMscfd to 146 MMscfd and an average rate of 148.2 MMscfd.²²⁷

²²⁶ Second Gas Loss Report, Exhibit Annex R-4, page 5, Section 4.1. ↩
²²⁷ Second Gas Loss Report, Exhibit Annex R-4, pages 5 – 6. ↩

[Page 259]

856 On this basis, the Committee estimated the cumulative gas loss from 24 June to 7 July 2005 through the burning of the main flame (Q2A1) at 1.8 Bcf.

7.2.3.2 Q2: Second Component – gas loss to the surface

857 With respect to component Q2, described as “Gas losses (Q2A2) to the surface through observed and undetected seepages in the ground after the extinction of main flare in the Relief well (Chattak 2A)”, the Second Gas Loss Committee considered first the seepages after the first blowout. The data it recorded for its analysis included porosity of 35% “(highly unconsolidated sand stone)” and initial water saturation of 30%.²²⁸

858 Relying on information from Niko about the flame height, as it had been collected by the monitoring team,²²⁹ the Committee concluded:

It can be reasonably assumed that 2 MMscfd gas is still leaking through these old locations due to the 1^st blowout.²³⁰

859 Considering the effect of the second blowout, the Report states:

Before and after the extinction of the main flame in Relief well (2A) on July 7, 2005 gas started leaking through the ground on several new locations. Assuming pressure release due to the burning of the main flame, ground leakage due to the 2^nd blowout is ignored prior to July 2005. According to the documents supplied by Niko, it is seen that no new location was added for monitoring gas emission after the 2^nd blowout. It measured gas emission near crater of Chattak-2 blowout site in terms of percentage of lower explosive limit (%LEL). A number of locations around the old blowout were added progressively showing increasing gas emission. After the 2^nd blowout on June 24, 2005 all those old locations around the first blowout site shows further increase in gas emission. Out of 55 measuring points, 21 of the show 100% LEL on June 23, 2005 and 36 locations show 100% LEL on July 14, 2005.²³¹

860 The Report continued by stating:

The second blowout created numerous new locations of gas leakage. Members of this committee observed gas coming out at different locations 4/5 hundred meters away from the blowout site in the water-submerged

²²⁸ Second Gas Loss Report, Exhibit Annex R-4, page 5, Section 4.1. ↩
²²⁹ See below Section 7.6.2. ↩
²³⁰ Second Gas Loss Report, Exhibit Annex R-4, page 7, Section 4.2. ↩
²³¹ Second Gas Loss Report, Exhibit Annex R-4, p. 7. ↩

[Page 260]

low land as well. This was observed while the main flame was still burning. Ground cracking, gas leakage, and water coming out of tubewells have been reported from locations as far as a kilometre from the blowout site. Apart from the observable places, it can be concluded that gas is leaking from a number of undetected places.²³²

861 On the basis of these considerations, the Second Gas Loss Committee observed, as the First Committee had done, that it is “impossible to accurately quantify the leakage gas”; it concluded nevertheless that the additional leakage, after 7 July 2007, “can be securely estimated at 2 MMscfd”. In other words, the Committee concluded that the Chattak 2A blowout doubled the leakage to the surface.

862 Relying on a letter by Niko attached to the Report, the Committee assumed that the original blowout well would most likely be killed by 15 October 2005 and counted 99 days for the gas escaping through the ground from 7 July 2005.

863 The additional gas lost to the surface thus was 198 MMcf. Consequently, the Committee quantified the “total surface loss”, composed of the gas losses for Q1 and Q2, at 1803 + 198 = 2001MMcf, corresponding to 2 Bcf.²³³

7.2.3.3 Q3: Third Component – Subsurface losses by charging into the Overburden

864 With respect to the third category, the “Sub-Surface gas loss”, the Second Committee explained:

When a blowout well gets bridged, pressure starts building up under the bridging point. The pressured gas that is connected to the reservoir can migrate to structurally damaged fractured zone or it can also charge the sands it is exposed to.

865 The Report continued by observing that “the Relief well did not create a new hole in the cap rock for further gas loss through charging” which led to the conclusion that “the 2^nd blowout of the Relief well (Chattak 2A) did not change the process suggested in the first blowout gas loss report”.

866 The Report also considered the causes for the Chattak 2A blowout, noting two scenarios, similar to those which were discussed during the course of the Arbitration:

²³² Second Gas Loss Report, Exhibit Annex R-4, page 7, Section 4.2. ↩
²³³ Second Gas Loss Report, Exhibit Annex R-4, page 7, Section 4.2. ↩

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(i) “the relief well first penetrated into an area of accumulated gas around the 1^st blowout well”, or

(ii) “a direct interception of the 1^st blowout well occurred”.

867 As to the quantification of the subsurface gas, the Second Committee examined the two scenarios which the First Gas Loss Committee had described and concluded that the first of these scenarios “seems unlikely”. It compared the drilling records of Chattak 2 and Chattak 2A and observed that the Chattak 2A relief well had not shown any gas return up to a depth of 380m, while the Chattak 2A relief well showed gas returns of 1% to 3% gas despite the heavier mud used in the drilling (10ppg compared to 8.6ppg); in other words, the Chattak 2A drilling records showed only insignificant gas accumulations in the Overburden after the blowouts. The Second Gas Loss Committee explained its position on the two scenarios of the First Committee:

The first report assumed two scenarios for the calculation of the third component of the gas loss. Scenario-1 assumed the bridging of the well beneath the casing shoe (303m) and Scenario-2 assumed the bridging at the drill bit position (466m). From the log data of Chattak 2A well, it can be observed that no gas accumulation was encountered in the upper Tipam/Dupitila sand layers. As a result, the possibility of Scenario-1 for the higher estimate of the third loss component (Q₃) as described in the first report seems unlikely.²³⁴

868 With respect to the methodology for assessing the quantum of the gas lost to the sub-surface, the Committee pointed to the usefulness of the material balance method but noted the difficulty resulting from the absence of data for the original reservoir pressure:

The gas loss amount due to charging can be validated by properly determining the initial reservoir pressure and maintaining appropriate pressure production data history in future. This will enable to perform an accurate material balance calculation and may allow estimating the loss. Unfortunately, no initial pressure measurement of Sand 1&2 of Chattak West was possible due to the 1^st blowout that may make the estimation difficult.²³⁵

²³⁴ Second Gas Loss Report, Exhibit Annex R-4, page 8. ↩
²³⁵ Second Gas Loss Report, Exhibit Annex R-4, page 8. ↩

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7.2.4 The position of Niko's Representative on the Second Gas Loss Committee

869 Dr Stocker, Niko's representative on the Second Gas Loss Committee, received a draft of the Second Gas Loss Report and commented on it in a note, dated 14 August 2005, which was sent to the Convener of the Committee under cover of Niko's letter of the same date.²³⁶ In that report, Dr Stocker commented on the draft and objected to a number of observations in the draft report.

870 The note commenced by comments on the reservoir pressure which shall be discussed in further detail below in Section 7.5.2.

871 Other comments concerned the “reserve risk” in the prior appraisal of the Reservoir, the loss “through crossflow to and charging up of shallower formations", the distance from the blowout wells at which significant seepages have been observed and some of the conclusions reached. He commented on possible effects of the kill operation and emphasised the desirability of further production and the usefulness of a material balance study once the Reservoir “has been placed on production”. He stated that some of the findings in the Report went beyond the mandate of the Committee and complained that some points of agreement at the deliberations on 12 July 2005 had not been included, in particular the recommendations concerning a material balance study and the strategy of planning for “production at the highest possible rate".

872 Dr Stocker also disagreed with the assessment of the flow of gas, as presented in the draft and stated that some of the conclusions in the draft, did not correspond to the conclusions reached in the debates of the Committee.

873 With respect to the assessment of the flare during the initial phase of the blowout (component Q2A1), Dr Stocker had concluded in his explanations on the reservoir pressure that the average pressure was most likely in the order of 820psia, and not 875psia as assumed in the draft report. On this basis, Dr Stocker reached a lower value for the quantity of this loss and quantified at a total of 1156.1 MMscf and an average of 87.8 MMscfd. He presented his calculation in the following table, which adopted the same format as that in the daft and in the final version, shown above:²³⁷

²³⁶ Exhibit C-49. ↩
²³⁷ Exhibit C-49, pages 1 – 3. ↩

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874 Concerning the second component of the loss during this period (component Q2A2), described in the Report as losses “to the surface observed and undetected seepages in the ground after the extinction of the main flare in the Relief well (Chattak 2A)”, Dr Stocker agreed with the statement: “It is impossible to accurately quantify the leakage of gas”, but pointed out that the following assertion in the draft was in contradiction with this statement. It appears that in the draft available to Dr Stocker it was asserted that the rate in this phase “can be securely estimated at 5 MMscfd”. Dr Stocker objected:

... this conclusion is at variance with my own notes from and recollections of our deliberations on July 12, 2005, during which it was generally agreed among the members of the committee that the seepage rate from the Chattak 2A well was certainly less than that from the original Chattak 2 accident. As the Gas Losses Assessment Committee for Chattak 2 fixed the seepage rate from that well at 2 MMscfd, the seepage losses from the Chattak 2A well ought accordingly be something less than this amount

Given the foregoing discussion, the total amount of gas lost due to the seepage from around the Chattak 2A site – and assuming that kill

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operations will be concluded by September 30, 2005 at the latest – should be a maximum of 168MMscf.²³⁸

875 Dr Stocker's observation concerning what was “generally agreed among the members" of the Committee seems to have been correct, as can be seen from the final version of the Second Gas Loss Report. In the final Report, the additional loss for Q2A2 for the period until 15 October 2005 is assessed at 198MMscf, which is exactly the amount stated by Dr Stocker, extended for the additional 15 days assumed by the Committee.

876 The adjustment following Dr Stocker's note appear to be even more important with respect to the third component of gas lost during this period (component Q2A3), described in the Report as “Sub-surface loss”. Concluding from the reference to the text in the note, the draft seems to have included an estimate of this component based on the mud log. Dr Stocker objected:

I reiterate that there is no substantive evidence to date for any subsurface “charging”, mud log record notwithstanding. In particular, the statement which begins “2, Using 10 ppg mud ...” concludes that charging must be occurring due to gas returns which were logged to a maximum of 9.6% at a depth of 300 - 340 m TVD. To me, this indicates exactly the opposite. Gas originating in the reservoir sands below and in pressure communication with those sands, assuming a reservoir pressure of 820 psia, would be at a pressure of 805 psia. The pressure exerted by a column of 10 ppg mud of 340 m vertical height is only 575 psia. Gas returns from a porous sand with an underbalance of 230 psi are likely to be substantially higher than 9.6%. There are alternate explanations which fit the known facts equally well.

Niko Resources (Bangladesh) Ltd restates its disagreement with any suggestion that such subsurface losses have taken place or are taking place. In the absence of any substantive evidence to the contrary, such a suggestion can only be speculative.²³⁹

877 The Claimant asserted that very few of Dr Stocker's comments had been addressed in the final report”.²⁴⁰ As the Claimant did not introduce into the record the draft on which Dr Stocker commented, this assertion cannot be verified. A comparison of Dr Stocker's comments with the final version of the Report seems to indicate, however, that the Committee took account of Dr Stocker's observations on some important points. In any event, contrary to

²³⁸ Exhibit C-49. ↩
²³⁹ Exhibit C-49, pages 4 and 5, Section 4.3(i) and (ii). ↩
²⁴⁰ C-CD.2, paragraph 174. ↩

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the First Gas Loss Report, the Second Gas Loss Report was signed by Dr Stocker, the representative of Niko, without any reservations.

878 Mr Adolf, then Niko's Country Manager Bangladesh, recalled “that Dr Stocker advised that he was reasonably satisfied with how deliberations of the Second Gas Loss Committee were proceeding”. Considering the Report that was issued by the Committee, Mr Adolf observed:

The Conclusions of the Second Lost Gas Committee regarding the volume of gas lost during and after the blowout were higher than Dr Stocker believed appropriate. However, the difference was not large and could be accounted for by a divergence of opinion regarding particular factual assumptions which underpinned the conclusions.²⁴¹

879 The Claimant does not allege that, upon receipt of the Second Gas Loss Report, Niko objected and wrote in protest as it had done when it received the First Report.

7.2.5 The Claim in the Money Suit

880 In the Money Suit, the Government and Petrobangla based their claim for lost gas

(i) with respect to the “Gas burnt at Chattak field” on 3 Bcf;

(ii) with respect to “Sub-surface loss at Chattak field on the second scenario (5.89Bcf) of the First Gas Loss Report; they added, however,

(iii) 45 Bcf, as "additional sub-surface loss at Chattak field”.

881 This brought the total “sub-surface loss” to 50.89 Bcf, practically identical with the value which the First Gas Loss Committee had estimated under the first scenario.

882 No allowance was made in the Money Suit for the gas losses to the surface.²⁴²

7.3 Methodologies

883 The Parties and their experts rely on two different methods for the assessment of the loss of gas and disagree on the preference that should be given to one or the other.

²⁴¹ WS Adoloph, paragraphs 141 and 142. ↩
²⁴² Money Suit Complaint, Exhibit C-6, page 76, Schedules A, B and C. ↩

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(i) The Flow Rate Methodology seeks to determine the gas that escaped from the Reservoir as a result of each of the two blowouts. As the flow of the gas was not measured when it escaped the Reservoir, the quantity of gas that escaped must be estimated. In the present case this was done by determining a flow rate, the quantity of gas that escaped the Reservoir during a given time period (primarily hour or day). The rate was established by various methods, including visual observations and observation on the surface, considerations related to the geological formations through which the gas moved to the surface or was retained in the Overburden, the size of the wellbore and available data about the Reservoir. The Claimant assumes that "all of the gas that escaped as a result of the blowouts would otherwise have been recoverable"²⁴³ and thus must be considered as “lost” for the purpose of the loss assessment in the present case, it being understood that Niko is not liable for gas “lost” due to the Chattak 2A blowout. This seems uncontroversial and is not contested by BAPEX.

(ii) The Material Balance Analysis compares the volume of gas in the Reservoir before a specific date with that thereafter. In the present case, the comparison is between the volume before the volume and that at the later date when information about the depleted Reservoir became available on 4 September 2005 through the Chattak 2C well. For the assessment of lost gas, the Original Gas in Place (OGIP) or Gas Initially In Place (GIIP) and the Estimated Ultimate Recovery (EUR) must be determined. If no precise information is available for OGIP and EUR, their values must be established by various methods, depending on the information available. Only the recoverable gas has a value that must be considered in the present damage calculation.²⁴⁴ The Parties agree in their replies to the Tribunal's Question No 22²⁴⁵ that the determination of the EUR is an issue that arises only in case of a valuation on the basis of the Material Balance Method.

884 In the present case, the two Gas Loss Committees applied the Flow Rate method. They presented findings about the “Initial Recoverable Gas

²⁴³ C-PHB1, paragraph 100. ↩
²⁴⁴ The Claimant points out at C-PHB1, paragraph 5 that "the methodology is agnostic as to what caused the estimated reduction of pressure/gas volume and when it escaped”, an issue that is relevant for distinguishing for the loss for which Niko is liable from that attributable to the Chattak 2A blowout. ↩
²⁴⁵ C-PHB1, paragraph 99 and B-PHB1, paragraph 94. ↩

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Reserves"²⁴⁶ and the GIIP in Sands 1 and 2;²⁴⁷ but a Material Balance analysis was not possible, or at least not sensible, as the flow from the Reservoir continued at the time when their reports were prepared. The Second Gas Loss Committee recommended that “a meaningful material balance analysis after the commencement of production” be conducted.²⁴⁸ No such analysis was conducted before the Government and Petrobangla initiated court proceedings in the Money Suit in June 2008; the claims in this suit are based on the assessment of the Second Gas Loss Committee, with some variations, as noted above in Section 7.2.5.²⁴⁹

885 In the Arbitration, a material balance analysis was first discussed in the first GCA Report of 21 May 2014, presented with the Claimant's Reply.²⁵⁰ Thereafter the experts of both sides presented and refined their respective Material Balance analyses; their approach to the Flow Rate method differed, as shall be described.

886 The Claimant takes the assessment in the Committee's Gas Loss Reports as starting point and accepts them in part. It develops and modifies this assessment by further analysis, in particular in the Gaffney Cline reports.

887 The Claimant does not contest that the Material Balance Method is well established in the industry. It presented a First Report of Gaffney Cline which applied both the Flow Rate and the Material Balance Method. The Claimant and Gaffney Cline discuss the latter method and its application to the present case;²⁵¹ but the Claimant insists that “the material balance methodology alone cannot provide an estimate of the gas lost due to the Chattak 2 blowout to the date of the Chattak 2B sealing operation (or thereafter)”, adding that, in the present case, “a material balance analysis cannot provide an estimate of the volume” of the gas lost during and following the Chattak 2A blowout for which the Claimant is not responsible. The Claimant also points out that the Material Balance Method “involves the estimation of OGIP, EUR and the gas remaining in place” after the pressure measurement taken in the Chattak 2C well on 4 September 2005. Therefore it “does not provide an indication of what volume of gas was lost due to the Chattak blowout, or “after 4 September (if any), or at what rate(s)”.²⁵²

²⁴⁶ First Gas Loss Report, Exhibit R-2, Section 4. ↩
²⁴⁷ Second Gas Loss Report, Exhibit Annex R-4, paragraph 2.4. ↩
²⁴⁸ Second Gas Loss Report, Exhibit Annex R-4, paragraph 6(c). ↩
²⁴⁹ Complaint in the Money Suit, Exhibit C-6. ↩
²⁵⁰ C-CD.2. ↩
²⁵¹ BAPEX lists reference to this discussion in B-PHB 1, FN 12. ↩
²⁵² C-PHB 1, paragraphs 4 and 5. ↩

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888 While accepting that, as pointed out by the Tribunal in Question 8, volume estimates in the estimated flow of escaping gas “cannot be determined with precision", the Claimant “submits that the totality of the analyses and opinions of [Gaffney Cline] are the best supported and most reasonable estimates available upon which the Tribunal can make its determination of damages".²⁵³

889 The Claimant also points out that Gaffney Cline employed additional analyses “to model and estimate flow rate, the volume of gas that could be trapped in the pore spaces in the sands above the Marine Shale, or trapped below a shale stringer"; these are “additional methodologies available in the overall estimation of lost gas that supplement the flow rate and material balance analyses”.²⁵⁴ The Claimant concludes:

... given there can be no scientific certainty with respect to any of the estimates of the volume of gas lost due to the Chattak 2 blowout, Niko submits the Tribunal must consider all of the available methodologies, evidence, and opinions in order to reach conclusions as to the most probable scenarios and most reasonable estimates of lost gas. While each methodology has its frailties and shortcomings, GCA is the only expert that employed all of the methodologies.²⁵⁵

890 BAPEX also accepts that “the exact quantification of the volume of gas lost due to Chattak 2 is not possible” and that all that could be done was to “provide an estimate of the volume of gas lost”. Supported by its experts Ryder Scott, BAPEX contests the validity of the Flow Rate Method in its submissions and at the Hearing. It criticised elements of the Flow Rate calculations presented by the Claimant but, until after the November 2021 Hearing, did not produce its own calculations. At that Hearing, BAPEX asserted:

In sum, the only reliable gas loss calculation that you have are those by Ryder Scott using the material balance method.²⁵⁶

891 In its first Post-Hearing Brief, BAPEX confirms this position, stating:

Material balance is the only scientifically justified method to estimate gas losses when flow rates cannot be measured because it is based on

²⁵³ C-PHB 1, paragraph 7. ↩
²⁵⁴ C-PHB 1, paragraph 6. ↩
²⁵⁵ C-PHB 1, paragraph 28. ↩
²⁵⁶ HT 2021 Day 4, page 140. ↩

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significant known data rather than anecdotal observation and unsupported assumptions.²⁵⁷

892 BAPEX asserts that, despite deficiencies in the data set available to estimate the inputs to the calculation”, “key inputs, such as the reservoir pressure on 4 September 2005, are known and there is information to estimate the other material balance inputs, if the proper analysis is performed using the appropriate data, which Ryder Scott did”.²⁵⁸

893 Responding to the Tribunal's question about flow rates, BAPEX stated that the daily flow of gas after the blowouts is not identical each day. Quoting its experts Ryder Scott, it added that the rate of gas escaping from the Reservoir due to the first blowout “probably varied over time”; and that it “is impossible to estimate the rate gas was escaping at any point in time with any degree of accuracy”.²⁵⁹ For determining a daily rate it adopts the calculation of Mr Hughes, in which the total loss, calculated by the Material Balance Method, is spread over the period from 7 January to 31 December 2005, starting with 141 MMcfd on 7 January 2005 and declining at 0.10% per day to 99 MMcfd on 31 December 2005.²⁶⁰

894 In addition, BAPEX presents in its First Post-Hearing Brief on Quantum, in response to the Tribunal's Question No 2, an estimate of the flow rates and the resulting gas loss.²⁶¹ In response to the Tribunal's Question No 6, BAPEX considers that, immediately after the bridging of the Chattak 2 well, the flow rate was 123MMcfd, declining steadily at a rate of 1.5% per month.²⁶²

895 The Tribunal has considered both methods used by the Parties, including the “additional methodologies” highlighted by the Claimant. It has carefully examined the argument and evidence presented for and against each of the methods and the resulting gas losses at which the Parties arrived on the basis of one and the other method.

896 Considering the argument of BAPEX and Ryder Scott that the Material Balance method is “the only reliable gas loss calculation” and “the only scientifically justified method” in the circumstances of the present case, the Tribunal notes that, for critically important factors in the application of that method, direct measurements are not available and the indirect

²⁵⁷ B-PHB 1, paragraphs 14 and 15. ↩
²⁵⁸ B-PHB 1, paragraph 15. ↩
²⁵⁹ B-PHB 1, paragraph 16. ↩
²⁶⁰ B-PHB 1, paragraph 16, referring to Hughes III, figures 9 – 16. ↩
²⁶¹ B-PHB 1, pages 8-23; for details see below Section 7.6.1. ↩
²⁶² B-PHB1, paragraph 33. ↩

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determinations are subject to controversies between the experts.²⁶³ It also noted that Ryder Scott's estimation of the OGIP, which is the starting point for applying the Material Balance Method, has a range from 45.811 Bcf as the low estimate to 240.112 Bcf as the high estimate,²⁶⁴ a range that indicates the scope of disagreement and potential error in the loss estimation.

897 The Tribunal concludes that the Material Balance method cannot be the only method applied by the Tribunal in a situation where another method has been presented and applied by the Gas Loss Committees.

898 Since the available data are incomplete for the application of both methods, and their interpretation is controversial, the reliability of the results produced by each of them is limited. The Tribunal therefore will consider both methods, their application and results.

899 The Tribunal will start with the Flow Rate Method, on the basis of which the Gas Loss Committees based their assessments and on which the Government and Petrobangla made their claim against Niko. The Tribunal attributes particular weight to this method and its result, considering:

(i) the qualification of the members forming these the Committees;

(ii) the fact that the first of these reports was accepted in part also by Niko's representative;

(iii) that the Second Gas Loss Report was signed by the representatives of Petrobangla, BAPEX and Niko;

(iv) the fact that the Government and Petrobangla based the gas loss claim in the Money Suit on the second of these reports;

(v) that, in this arbitration, the Claimant took the assessment in these reports as the basis for its claim; and

(vi) that until its Memorial on Damages, presented on 25 March 2016 BAPEX did not present an approach to the quantification of the claim for gas losses that differed from that in the Gas Loss Reports, as it was pursued by the Government and Petrobangla in the Money Suit.

900 Following the examination of the Flow Rate Method and the conclusions about the gas losses, the Tribunal will examine the results that is produced, in the

²⁶³ See below Section 7.7. ↩
²⁶⁴ Ryder Scott I, Table at page 6. ↩

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circumstances of the present case, by the Material Balance Method. This latter method thus will serve as a “cross check"²⁶⁵ of the results reached according to the former method. The Tribunal noted the recommendation expressed in the Second Gas Loss Report calling for the “conduct of a meaningful material balance analysis”. The Report recommended that such an analysis be performed “after the commencement of production” from the Chattak field.²⁶⁶ As will be discussed below, to the knowledge of the Tribunal such production has not commenced; the gas loss assessment is thus deprived of the information that according to the Second Gas Loss Committee had to be made available. Nevertheless, given the uncertainties resulting from the limits in the data available in the Arbitration, the Tribunal considers the Material Balance analysis as an essential complement to the Gas Flow Method.

901 Both Parties also have addressed the consequences of difficulties of proving in the present case the quantum of the lost gas, as they arise in both methods. They addressed the burden of proof and the standard of proof for quantification. BAPEX explained:

As both parties' experts have explained, the key events affecting the volume and rate of gas flow in this case occurred underground, where observation and measurement is difficult, and sometimes impossible. This is true of the most important event affecting the rate of gas loss at any given moment: the uncontrolled flow of gas from the Chattak Sand 1/2 reservoir through the Chattak 2 wellbore in the marine shale. The fact that these events took place underground hinders the marshalling of certain kinds of direct proof.²⁶⁷

902 Concerning the burden of proof, BAPEX referred to the standard of preponderance of the evidence and argued that the responsibility for the damage had to be considered. It identified critical issues for the Tribunal's decision, and expressed confidence that the evidence in the record supported its position. Relying on Niko's liability for the Chattak 2 blowout, BAPEX added:

However, to the extent the Tribunal finds that the available evidence does not allow for proof by preponderance of the evidence on any of these

²⁶⁵ See Gaffney Cline III, paragraph 30. ↩
²⁶⁶ Second Gas Loss Report, Exhibit Annex R-4, paragraph 6(c). ↩
²⁶⁷ HT 2021 Day 1, page 14. ↩

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issues, Niko would fail to meet its burden and the issue should be decided in BAPEX's favour.²⁶⁸

903 The Claimant addressed the issue from the perspective of uncertainty and the party having caused the uncertainty. It contested the assertion that any uncertainty as to the fact of the loss and the uncertainty over quantum was attributable to Niko's breach of the JVA. It did not dispute that “the actions of a wrongdoer in contributing to uncertainty may be relevant to the question of quite how exacting the standard of proof may be”. It submitted that

... the question does not turn on who committed an act or breach that set in chain the motion of the chain of events that led to the loss. Otherwise, in any case where there's uncertainty, that burden would always be on the defendant, which is of course contrary to the normal rule that the claimant has the burden of proving loss and proving amount of loss.

The Tribunal certainly has the flexibility to assess if there is uncertainty [...] it must still have the reasonable confidence in terms of the quantum of loss. So it must be certain as to the fact of the loss and it must have reasonable confidence in the amount of loss.

In terms of any uncertainty creating difficulties for the Tribunal, the Tribunal certainly has flexibility in considering who is responsible for that loss.

904 In this context the Claimant referred to Niko's proposals after the blowouts for drilling production wells and the “considerable technical data that would have been available had drilling been allowed to proceed post-blowout”.²⁶⁹

905 The Parties agreed that when quantifying the quantum of loss, the standard of proof may be less stringent than that applicable for establishing liability. BAPEX stated:

... once the fact of damage has been established, a claimant should not be required to prove its exact quantification with the same degree of certainty. This is because any future damage is inherently difficult to prove.²⁷⁰

906 BAPEX quoted from CMD:

²⁶⁸ HT 2021 Day 1, pages 17 – 18. ↩
²⁶⁹ HT 2021 Day 1, pages 65 - 66. ↩
²⁷⁰ HT 2021 Day 1, page 10 and RH-1, page 10. ↩

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Niko recognises that the law does not always require absolute certainty or precision in quantification of damages, especially where the circumstances make exact quantification impossible.²⁷¹

907 The Claimant confirmed:

There appears to be no dispute there is sometimes a lesser burden or standard expected with regard to proof of quantum of the loss. But the fact of the loss, the Tribunal must be certain that the loss has in fact occurred, and in turn may have some more flexibility in addressing due to uncertainties the quantum of loss claimed.²⁷²

908 The Tribunal will consider these positions where they become relevant due to uncertainties in the evidence.

7.4 The evidence

909 In support of their positions concerning the Gas Loss, the Parties produced a large number of expert report.²⁷³

910 The Claimant produced:

(i) Four expert reports by Gaffney Cline & Associates (GCA):

• First Expert Report, dated 29 May 2014 (Gaffney Cline I);
• Second Expert Report, dated 20 August 2020 (Gaffney Cline II);
• Third Expert Report, dated 30 September 2021 (Gaffney Cline III);
• Fourth Expert Report, dated 5 November 2021 (Gaffney Cline IV).

At the Hearing, Mr William Cline, Mr Joshua Oletu and Mr Rawdon Seager testified and were examined; they also produced PowerPoint presentations, recorded as Hearing Exhibits (CH).

²⁷¹ HT 2021 Day 1, page 11, RH-1, slide 4, quoting from C-CMD, paragraph 129. ↩
²⁷² HT 2021 Day 1, page 65. ↩
²⁷³ The Parties also produced expert reports for the Environmental Losses; for these see below Section 9.2.3. ↩

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(ii) Five expert reports by Mr John Wright, PE:

• First Expert Report, dated 29 May 2014 (Wright I);
• Observations on Reports prepared by Dr Neil Adams and Mr Bill Abel, dated 23 October 2015, (Wright II);
• Expert Witness Report, dated 27 August 2020 (Wright III);
• Opinion and Observations on Second Supplemental Expert Report prepared by Mr Jeffrey Hughes, dated 30 September 2021 (Wright IV);
• Fourth Expert Report (Observations on and Reply to Third Supplemental Expert Report prepared by Ryder Scott, dated 29 October 2021), dated 5 November 2021 (Wright V).

Mr Wright testified and was questioned at the Hearing and presented demonstrative exhibits (CH).

911 The Respondents produced:

(i) One Expert Report of Mr Neil Adams, dated 31 August 2015;

(ii) One report presenting Observations on the Expert Report of Keith Masters by Mr Parthasarathi Bandyopadhyay, dated 30 August 2015;

(iii) Four Expert Reports of Ryder Scott Company:

• Expert Report, dated 21 March 2016 (Ryder Scott I);
• Supplemental Expert Report, dated 7 September 2020 (Ryder Scott II);
• Second Supplemental Expert Report, dated 20 August 2021 (Ryder Scott III);
• Third Supplemental Expert Report, dated 29 October 2021 (Ryder Scott IV).

At the Hearing, Mr James F. Latham, PE and Mr Michael J. Nowicki testified and were examined; they also produced PowerPoint presentations, recorded as Hearing Exhibits (RH).

(iv) Two reports by GeoMechanics Technologies:

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• First Report entitled “Geologic, Geomechanics, and Gas Flow Model for the Chattak Gas Field, Bangladesh”, dated 22 March 2016;
• Supplemental Report, dated 7 September 2020.

At the Hearing, Dr Michael S. Bruno testified and was examined; he also produced PowerPoint presentations, recorded as Hearing Exhibits (RH).

(v) Three reports by Mr Jeffrey Hughes, PE:

• Expert Report on Field Development Costs for the Chattak West Gas Field, dated 23 March 2016 (Hughes I);
• Supplemental Expert Report on Field Development Costs for the Chattak West Gas Field, dated 19 August 2020 (Hughes II);
• Second Supplemental Expert Report, dated 20 August 2021 (Hughes III).

At the Hearing, Mr Hughes testified and was examined; he also produced PowerPoint presentations, recorded as Hearing Exhibits (RH).

(vi) Three reports by Mr Steven A. Wilson:

• Expert Report, dated 23 March 2016 (Wilson I);
• Supplemental Expert Report, dated 3 September 2020 (Wilson II);
• Second Supplemental Expert Report, dated 20 August 2021 (Wilson III).

At the Hearing, Mr Wilson testified and was examined; he also produced PowerPoint presentations, recorded as Hearing Exhibits (RH).

(vii) Three reports by The Brattle Group:

• Quantum of Damages Expert Report, dated 24 March 2016 (Brattle I);

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• Updated Quantum of Damages Report, dated 7 September 2020 (Brattle II);
• Second Supplemental Damages Report, dated 20 August 2021 (Brattle III).

912 The Tribunal's experts produced the following reports:

(i) Mr L. William (Bill) Abel, PE, Expert Report, dated 8 June 2015, (Well Control);

(ii) Mr Keith B. Masters, PE, Expert Report, dated 8 June 2015, (Gas Loss);

(iii) Mr Ian Wallis, M.Eng, Expert Report, dated 8 June 2015 (Safety Engineering).

913 The experts relied on drilling and monitoring reports and many other documents that are referenced below where they are relied upon.

7.5 Parameters and remaining issues of liability

914 In its Decision on Liability and in the Heads of Recoverable Loss Decision, the Tribunal determined Niko's liability for the blowouts and the types of losses to which this liability applied. Two liability issues required further evidence and arguments and the decision on those issues was deferred. They will now be addressed in Sections 7.5.5 and 7.5.6 below, together with some other matters which are of general importance and relevant to both methods of quantification.

7.5.1 Graphical Representation

915 At the October 2021 Pre-Hearing Conference, the Tribunal had pointed out to the Parties that it would be assisted in understanding the technical issues by graphical representations of the Chattak 2 well showing the different stages as the events evolved, reflecting each Party's position. The Tribunal recalled that Mr Wright had presented drawings with such representations and the Tribunal suggested to use these graphics as a baseline to which add the positions of both Parties could be added. The Parties were however unable to present such joint drawing, and each Party subsequently presented its own set of drawings reflecting the events as they evolved.²⁷⁴

²⁷⁴ See above Sections 4.7.4 and 4.7.5. ↩

[Page 277]

916 The Tribunal produces here two examples each of the set of drawings submitted by the Claimant and of those submitted by the Respondents, followed by other illustrations relevant for the assessment.

917 The Claimant produced a set of 19 drawings, which included the following two, representing Mr Wright's view of the initial blowout and the last drawing showing a final stage of the Chattak 2B relief well operation.

[Image of two diagrams side-by-side]

Figure 1: Initial Blowout Conditions on Chattak 2

Figure 19: Pumping 1500 bbls of 9.2 ppg Mud, 1000 bbls 19.2 ppg Mud, 750 bbls 15.8 ppg Cement in Borehole with Volume Greater than 3250 bbl

[Page 278]

918 BAPEX provided a set of 21 slides²⁷⁵ which also presented successive stages of events, including the status after the Chattak 2 well bridged over on 9 January 2005:

[Image of a diagram]

Chattak 2 Well Bridges
January 9, 2005

And the final stage, representing the current status of the wells:

[Image of a diagram]

Current Status of Chattak Wells 2, 2A & 2B

²⁷⁵ Exhibit RH-8. ↩

[Page 279]

919 The following cross section of the trajectory of the wells drilled in the Chattak West field has been presented by Gaffney Cline:²⁷⁶

Figure 4: Cross-Section Showing Well Trajectories

[Image of a chart]

Chattak Wells' Trajectory relative to Chattak-2

[Transcription of chart legend]

• Chattak-2
• Chattak-2A
• Chattak-2B
• Chattak-2C
• Chattak-1
• Top of Girujan Clay

²⁷⁶ Gaffney Cline III, Figure 4 at page 16. ↩

[Page 280]

920 The picture below, provided by Niko, shows the BAPEX/Niko compound and the location of the wells on the surface, and the craters produced by the two blowouts:²⁷⁷

[Image of an aerial photograph with labels 2, 2A, 2B, 2C, 1]

921 Other representations of the Chattak site and the wells are shown elsewhere in the Award in the context where they are discussed.

7.5.2 Reservoir Pressure

922 The Reservoir Pressure is of critical importance in this case, both for the quantification of the uncontrolled flow out of the Reservoir and for determining the Original Gas in Place (OGIP) as the basis for the Material Balance method.

923 As Ryder Scott explained, “There is no actual measurement of the initial pressure in the Sand1/2 reservoir”.²⁷⁸ The only direct pressure data was provided after the two blowouts by the Data Acquisition Well Chattak 2C on 4 September 2005. The determination of the initial reservoir pressure therefore had to be derived otherwise.

7.5.2.1 The Parties' positions

924 The Claimant and Gaffney Cline, like the First Gas Loss Committee, determined the pressure of the Reservoir on the basis of the weight or density of the drilling mud used during the drilling of Chattak 2. Relying on Gaffney

²⁷⁷ Extract from Exhibit C-90 (undated). ↩
²⁷⁸ Ryder Scott IV, paragraph 20(b). ↩

[Page 281]

Cline, the Claimant states that pressure at the top of Sand 1 is 883 psia, based on a mud weight of 9.1 ppg.²⁷⁹

925 On BAPEX's side, Ryder Scott accept as reasonable the determination of the Reservoir pressure by reference to the mud weight; in the present case, however, because of the blowout of the Chattak 2 well, the reservoir pressure may not be determined on this basis.²⁸⁰ Ryder Scott base their calculations “on actual pressure measurement for other reservoirs within the Chattak West Field", specifically on measurement of the pressure in Sands 3 to 6, as recorded in a 1978 report about Chattak 1. They estimate the pressure at mid-point at 957psia²⁸¹ and at the top of the Reservoir at 954 psia.²⁸²

926 The Tribunal notes that these conflicting values for the Reservoir Pressure mark one of the three “principal drivers” of the difference between the two teams of experts on the quantification of the lost gas. The Tribunal examines first whether the Reservoir pressure may be determined by reference to the Chattak 2 Drilling Records and specifically the mud weight of Chattak 2.

7.5.2.2 The Chattak 2 mud weight or density as reference for
determining the Reservoir Pressure

927 There is general agreement between the Parties that relying on the mud weight is a suitable method for determining the pressure in a reservoir. Mr Wright explained at the Hearing the rationale for determining reservoir or formation pressure by reference to the mud weight:

The mud weight will tell you that the pressure in the borehole -- if you have not taken a kick, if you do not have a gas influx -- is greater than the pressure in the reservoir. It's not going to tell you exactly what it is, but it's going to tell you that it's less than that.²⁸³

928 Ryder Scott expressed their understanding that

Fekete and GCA assume because the Chattak 2 did not blow out as soon as it contacted the top of the Sand 1/2 reservoir, the reservoir pressure must be at or less than the pressure that would be exerted by a column of mud at the reported static mud weight. This would be a reasonable assumption for a well that drilled safely through a reservoir to

²⁷⁹ C-PHB1, paragraph 32. ↩
²⁸⁰ Already in Ryder Scott I, paragraph 62. ↩
²⁸¹ Ryder Scott IV, paragraphs 20 and 21 and Exhibit RH-4, slide 33, relying on Reserves Study Chattak Gas Pool, October 1978, Exhibit R-66. ↩
²⁸² Exhibit RH-4, slide 33. ↩
²⁸³ HT 2021 Day 3, page 120. ↩

[Page 282]

its intended objective. It is a very poor assumption for a well that blew out prior to reaching its intended objective.²⁸⁴

929 Ryder Scott contested the reliance on the weight of the Chattak 2 drilling mud in their first report, asserting that the Chattak 2 blowout provided “strong evidence that Chattak-2 was underbalanced (the weight of the mud column was less than the formation pressure) when drilling through Sands 1/2".²⁸⁵

930 In its Decision on Liability of 28 February 2020, the Tribunal had examined the Drilling Records and all other available evidence about the drilling of the Chattak 2 well and the blowout. It concluded that “while drilling through Sands 1 and 2, Niko seems to have kept overbalance in the well and thus to have avoided a kick”. The Tribunal also noted that the blowout occurred during the wiper trip, after the drilling had reached the depth of 807m, below Sand 2; “swabbing” was indicated as one of the likely causes”.²⁸⁶

931 Gaffney Cline responded to Ryder Scott on 20 August 2020 that the blowout did not occur “when drilling through Sand 1/2":

Chattak 2 did not blow out while drilling through Sands 1 and 2. On the contrary, there was no recorded flow from the well while it was drilled to a depth of 807m, below the base of Sand 2. At that depth, drilling was paused and the drill pipe was pulled out of the hole for a wiper trip. It was not until the bit had been pulled up to a depth of about 466m (i.e. above Sand 1) that gas flow started, most likely due to the “swabbing” or “suction” effect of pulling up the drill pipes. It is therefore clear that the pressure exerted on the formation by the drilling fluid in the well (mud weight) was adequate to control the reservoir pressure while the well was drilling and while several flow checks were made.²⁸⁷

932 Ryder Scott nevertheless relied in its report of 29 October 2021, on the blowout to question the reliance on the mud weight, as quoted above. And, after having noted that Niko “drilled through the Upper Marine Shale with a static mud weight of 9.1 ppg”, they asserted that:

... Niko was not anticipating a pressure increase after drilling through the Upper Marine Shale. The Chattak-2 suffered a blowout of gas from the Sand 1/2 reservoir and a primary cause of this blowout appears to be

²⁸⁴ Ryder Scott IV, paragraph 20b(ii), at page 8; emphasis in the original. ↩
²⁸⁵ Ryder Scott I, paragraph 62. ↩
²⁸⁶ Decision on Liability, Sections 8.2 and 8.3, and specifically paragraph 561. ↩
²⁸⁷ Gaffney Cline II, paragraph 56 (footnote omitted). ↩

[Page 283]

Niko's failure to recognize the pressure increase they would encounter after drilling through the Upper Marine Shale.²⁸⁸

933 Mr Wright responded on 5 November 2021 to these statements, with references to the Drilling Records: he pointed out that, after having reached the depth of 485m “approximate top of the regional seal” (i.e. the Upper Marine Shale), Niko increased the mud weight from 8.9 ppg to 9.1 ppg. He reproduced an extract from the Drilling Records, showing the increase of recorded “gas shows” when the drilling passed through Sands 1 and 2; he referred to several flow checks recorded and the “well was not observed to flow". ²⁸⁹

934 At the Hearing, Ryder Scott repeated the earlier assertions: “Niko drilled through the Upper Marine Shale with a static mud weight of 9.1 ppg” and concluded that “Niko was not anticipating a pressure increase after drilling through the Upper Marine Shale”. And they added:

And we all know that the Chattak 2 suffered a blowout of gas from the Sand 1/2 reservoir, and a primary cause of this blowout appears to be Niko's failure to recognise the pressure increase they would encounter after drilling through the upper marine shale.²⁹⁰

935 The Tribunal notes that, as Gaffney Cline and Mr Wright had pointed out, these statements are incorrect; they are contrary to the evidence in the record and the Tribunals' findings in the Decision on Liability. The record shows that the Chattak 2 blowout did not occur when the drilling through the Upper Marine Shale encountered the pressure from the Reservoir but only many hours later, after the drilling had traversed the Reservoir and had reached a depth of 807m and the drill assembly was being pulled out during a Wiper Trip. The Drilling Report of that day shows that in the early hours of that day the drilling passed through Sands 1 and Sands 2 and by 8:00h in the morning had reached 625m without any gas inflow or kick being recorded. During the following 10 hours, drilling continued to a level of 807m, again without any inflow of gas being recorded. In the evening of that day, at 19:00h the crew started the Wiper Trip which led to the blowout at 19:50h.²⁹¹

936 The Tribunal concludes that the evidence contradicts Ryder Scott's assertion that the Chattak 2 well was underbalanced when drilling through Sands 1 and 2. The mud weight in the wellbore when the Chattak 2 drilling passed through the Reservoir may serve as basis for determining the formation

²⁸⁸ Ryder Scott IV, paragraph 20(b)(iv)(6). ↩
²⁸⁹ Wright V, page 6. ↩
²⁹⁰ HT 2021 Day 1, page 147 and Ryder Scott presentation, Exhibit RH-4, slide 31. ↩
²⁹¹ Exhibit C-20. ↩

[Page 284]

pressure of the Reservoir. Since the pressure of the Reservoir can be determined by a reasonable method, the Tribunal sees no justification to rely on a higher pressure measured in other reservoirs of the Chattak West Field, as Ryder Scott did.

7.5.2.3 Determining the relevant mud weight and the effective
mud weight

937 The Chattak 2 mud weight when drilling through the Reservoir is recorded in the Drilling Reports. These reports show the mud weight for each day of drilling, except for Day 8, the last day, when the drilling passed through the Reservoir in the morning and the blow out occurred in the evening. The reports show that the mud weight was increased as the drilling advanced into deeper formations: Drilling Report No 6, at a depth of 306m, recorded 8.7ppg mud weight. Drilling Report No 7, shows drilling from 430m to 485m, reaching on top of the Upper Marine Shale, and an increase of the mud weight to 8.9 ppg.

938 The report for the drilling on the following day (Day 8), is incomplete; it does not have the second page which, in previous reports, recorded details such as the drilling fluids, including the mud weight. The weight of the drilling mud on that day is indicated in the Sequence of Events document. That document states that “Sands 1&2 were expected at 550m” and “While drilling between 560 – 590 m we observed gas peak three times and gas increased to maximum 17.73% from background gas of 0.8-1%” and “Flow check was OK (static)”. This was followed by a new paragraph with the following text:

Drilled ahead to 807 m, gas dropped to 1% while drilling below 750 m (approx). The average ROP was 22 m/hr. MW was 9.1 ppg ...²⁹²

939 The passage shows that, by the time the depth of 807m was reached, the mud weight had been increased from 8.9 ppg to 9.1 ppg. The record does not show when exactly this increase of the mud weight occurred.

940 Ryder Scott show drilling with 9.1 ppg mud weight at a level below 300m and assert that the choice of the mud weight indicated “that Niko was not anticipating a pressure increase after drilling through the Upper Marine Shale". ²⁹³ This does not correspond to the record which shows that the increase of the mud weight to 9.1 ppg occurred at a lower level, after drilling had reached the depth of 485m, close to, at or below the Upper Marine Shale.

²⁹² Sequence of Events: Well Control Chattak 2, Exhibit C-19. ↩
²⁹³ Ryder Scott presentation, Exhibit RH-4, slides 31 and 32. ↩

[Page 285]

941 Mr Wright recognises that the “exact depth the mud density was increased is not recorded” and suggests that “it likely would have been started when the first gas shows were observed at 562m”.²⁹⁴ He also opines that, when a flow check was made at 567m, it was likely that the mud weight was “still 8.9 ppg or possibly approaching 9.0 ppg".²⁹⁵

942 BAPEX points out in its Reply PHB: “according to the Niko Recommended Mud Program from Mi-Swaco, the mud weight was planned to be at least 9.0 ppg".²⁹⁶ The Chattak 2 Well Proposal, to which BAPEX referred, does indeed contain a page presenting a Drilling Fluid Proposal by Mi Swaco which includes information about the drilling mud and indicates 9.0 ppg for the mud weight. Another page of this proposal is entitled “Drilling Program” and includes a column for the Drilling Fluid. This column shows for the upper wellbore with a 17 ½” Hole “Mud Density 8.6 – 9.2 ppf” and for the lower wellbore, starting at the casing shoe at depth of about 300m, a 8 ½” Hole (which continues to and through the Reservoir) “Mud density – as hole conditions dictate”.²⁹⁷ The Tribunal concludes that the Drilling Programme does not provide much assistance in determining the weight of the drilling mud used for drilling through the Reservoir.

943 The Tribunal notes that the Sequence of Events recorded that the mud weight “was 9.1 ppg”; and it did so in the passage quoted above that described the drilling below 590m. This might suggest that the weight of 9.1ppg occurred only during that phase of the drilling. That is, however, not certain. The Tribunal concludes from the explanations of Mr Wright that the increase of the mud from 8.9 ppg to 9.1 ppg does not occur instantaneously but occurs over time. It considers the facts that the drill team had increased the mud weight during the previous days as the drilling progressed and that the Sequence of Events document notes that the top of Sands 1 and 2 was expected at 550m.

944 This makes it more likely that the increase started before that depth had been reached. While the evidence shows only that 9.1 ppg had been reached at the depth of 807m, the Tribunal assumes that this weight was reached progressively and that, by the time the top of Sand 1 had been reached, it may have been at least at 9.0 ppg and possibly 9.1 ppg. The Well Proposal provided that the mud weight be determined “as hole conditions dictate”. When the drilling team increased the mud weight to 9.1 ppg on Day 8, the dictate of the well must have been the expected drilling through Sands 1 and 2, for which

²⁹⁴ Wright V page 6, lines 16-17. ↩
²⁹⁵ Wright V page 6, lines 23 – 24; Sequence of Events: Well Control Chattak 2, Exhibit C-19. ↩
²⁹⁶ B-PHB2, paragraph 56, referring to the Chattak 2 Well Proposal, Exhibit C-15, page 16. ↩
²⁹⁷ Exhibit C-15, page 15. ↩

[Page 286]

the Well Proposal had indicated an “Initial Pressure” of 852.8 psia.²⁹⁸ No other circumstances have been indicated that would justify this increase. The most likely time for the increase of the mud weight to 9.1 ppg on Day 8 therefore would be before entering the Reservoir. The Tribunal assumes that when the drilling reached the top of Sand 1 the mud weight was 9.1 ppg.

7.5.2.4 The effective mud weight

945 Ryder Scott point out that the mud weight recorded in the Drilling reports “is the mud weight as it sits stationary in the mud pits (static mud weight)”. They explain that the pressure exerted on the formation, the effective mud weight, is higher than the static mud weight recorded in the mud pit. The argument was first presented in a general manner, Ryder Scott referring in their first report to

... several factors that would allow formation pressure in excess of mud weight pressure to be controlled as long as drilling is moving forward.²⁹⁹

946 In a later report Ryder Scott developed the argument and presented the "additional factors” that increase the back pressure exerted by the mud against the formation pressure. Ryder Scott listed the following three factors:

1. As the well is being drilled the mud is being circulated and there is a resulting increase in the pressure exerted on the formation as a result of the mud being pumped down the wellbore. The increased effective mud weight is referred to as the Equivalent Circulating Density (ECD).

2. The effective mud weight is further increased by the weight of cuttings that are displaced from the formations that are being drilled through as the drilling progresses to deeper depth and are suspended in the mud column.

3. In addition to the two factors which result in a significant increase in effective mud weight over the static mud weight, a mud cake forms across the wall of permeable formations which further helps to control the formation pressures.

947 Ryder Scott concluded:

It is not until drilling is stopped and the drill assembly is pulled out of the hole that these additional factors cease to be operative and it becomes

²⁹⁸ Exhibit C-15, page 11. ↩
²⁹⁹ Ryder Scott I, paragraph 62. ↩

[Page 287]

obvious that the static mud weight is not sufficient to hold back the formation pressure. This is exactly what seems to have happened when the Chattak-2 blew out. ³⁰⁰

948 Gaffney Cline addressed the ECD and the cuttings argument. They responded to the argument when it was first made, pointing out that the Ryder Scott qualification applied “as long as drilling is moving forward”. They explained:

This can be safely discounted because, as stated above, the well was regularly flow checked and was under complete control while drilling was paused and remained under control while conducting a wiper trip up to the depth of 466m.³⁰¹

949 Mr Wright responded to the subsequent more developed comments of Ryder Scott, pointing out that, while the drilling traversed the Reservoir, “Flow checks were conducted throughout this section but particularly at: 559m, 567m, 592m”. He described the flow checks:

These typically last for 15 to 30 minutes each where drilling is stopped, and pumps turned off and well is monitored for flow. It is also common to circulate the volume of the hole to remove cuttings when taking multiple flow checks. The effect of circulating while drilling referred to by Ryder Scott would not have been present during these periods.³⁰²

950 The flow checks and their result are reported also in the “Sequence of Events” report: “they did flow checks three times. Flow check was OK (static)”.³⁰³

951 The Drilling Report records a cleaning operation after the drilling had reached the level of 807m at 18:00h. This operation was performed during a pause before the Wiper Trip started one hour and 50 minutes later, at 19:50. During this period, the report records, during the first 50 minutes: “circulate the hole clean", followed by another 50 minutes: “Take single shot survey”. ³⁰⁴

952 Mr Wright describes this action:

This first involves, circulating the entire volume of mud in the hole (down the drillstring and back through the annulus to surface), typical one or two times. This removes all cuttings from the borehole. The pipe is moved

³⁰⁰ Ryder Scott IV, paragraph 20(b) at page 8, emphasis added. ↩
³⁰¹ Gaffney Cline II, paragraph 57. ↩
³⁰² Wright V, page 6; The location of the flow checks were recorded in "Chattak 2 Well Control Incident and Blowout – Draft Report, Exhibit C-21. ↩
³⁰³ Sequence of Events: Well Control Chattak 2, Exhibit C-19. ↩
³⁰⁴ Exhibit C-20, page 26. ↩

[Page 288]

up and down during the circulation by one stand of drillpipe approximately 30m. When that is complete the pumps are stopped, and pipe disconnected at the rig floor and a survey tool (to measure the inclination at the bottom of the hole) is run on a wireline through the drillstring to the bit. The survey is taken, and the tool retrieved.

953 Mr Wright points out that during this operation the pumps are turned off. He concludes that the mud was static and free from cuttings:

This is another period that the effect of circulating while drilling referred to by Ryder Scott would not have been present (along with the absence of any cuttings).³⁰⁵

954 At the Hearing, Mr Wright confirmed:

So now there is no cuttings in the mud. So you've got 9.1 ppg clean mud to the top of the S1 sand. That's 870psi.³⁰⁶

955 Mr Wright also considered the adjustments that would have to be made to the calculation of the reservoir pressure as a result of these factors in Ryder Scott's list. He considered the “shallower flow checks”, while the drill traversed Sands 1 and 2: accounting for the cuttings in the mud and assuming that the wellbore was not circulated when taking the flow checks,³⁰⁷ he would “add approximately 0.1 ppg to the clean mud density”. When the hole was circulated clean before the wiper trip, that removed all cuttings. This meant that no adjustment had to be made; the weight of the static mud was effective; nevertheless: “No mud gain was observed”,³⁰⁸ i.e. no influx of gas from the Reservoir. Mr Wright confirmed this at the Hearing: at the flow check at 807m: "you've got 9.1ppg clean mud to the top of S1". ³⁰⁹

956 Concerning the third additional factor mentioned by Ryder Scott, the mud cake, Mr Wright simply states: “Any addition to the mud density by filter cake would be much smaller". ³¹⁰

957 At the Hearing, Ryder Scott referred to the additional factors at two occasions. In his presentation on Day 1, Mr Nowicki stated that Ryder Scott did not agree with Gaffney Cline and Mr Wright in his recent report “that these are minor factors". He mentioned the cuttings and the difference between stationary

³⁰⁵ Wright V, page 7. ↩
³⁰⁶ HT 2021 Day 2, page 146 and Exhibit CH-2, slide 6. ↩
³⁰⁷ At the Hearing, Mr Wright accepted that there was "no indication in the reports that they circulated the well when they took the flow checks", HT 2021 Day 3, page 121. ↩
³⁰⁸ Wright V, page 6, line 22. ↩
³⁰⁹ HT 2021 Day 2, page 146. ↩
³¹⁰ Wright V, page 6, lines 31 -32. ↩

[Page 289]

mud and the mud that is “actually circulated”; he added that “perhaps the most important item is going to be the mud cake”. He was asked by the Tribunal about his comments to the explanations of Mr Wright that the additional factors had been removed. He explained that his experience was not that of a drilling engineer and added “I don't have any reason to believe that Mr Wright is incorrect on that, but I also don't believe I can verify it. So he might be right and he might be wrong. But we will still have the issue of the mud cake [...] assistance in controlling the mud cake”. He confirmed that he could not comment on the question whether the cuttings were removed; but "I don't [...] think the cake is not properly explained”, adding “I believe that is going to be factor number one in controlling ...”³¹¹

958 When he continued his explanations, he referred again to the “two factors that are actually going to increase the effective mud weight – that being equivalent circulating density and the cuttings” and presented a slide in which the assertions were repeated that Ryder Scott had made prior to Mr Wright's explanations just referred to.³¹² He asserted that all of these factors “are in play as long as a well is actively being drilled. They are not negated during temporary drilling pauses.” He did not provide any explanations for these assertions but said that the Tribunal had to look at Mr Wright's explanations "and see if you believe what he's saying or not”. And he added: “I have no opinion on it. I'm not qualified to make an opinion on it".³¹³

959 Another reference to the additional factors and Mr Wright's comments on them was made in another slide of Ryder Scott's opening presentation: “Without any supporting calculations, the Wright Report of November 5, 2021 expresses the opinion that these additional factors are minor. Ryder Scott disagrees. Collectively these factors are more than sufficient to account for the +- 90 psia difference between Ryder Scott estimated reservoir pressure and that of GCA”.³¹⁴ No support for this assertion was provided and in Mr Nowicki's oral presentation the slide with this assertion was skipped over. Since Mr Novicki had said on the previous day that he was not qualified to render an opinion on Mr Wright's explanations, it is not clear how Ryder Scott arrived at this assertion.³¹⁵

960 Mr Nowicki placed particular emphasis on the third factor, the mud cake, also referred to as filter cake. When he confirmed Ryder Scott's earlier position on the additional factors, he addressed specifically “the mud cake that forms

³¹¹ HT 2021 Day 1, pages 130 - 140. ↩
³¹² HT 2021 Day 1, page 142, referring to Ryder Scott presentation, Exhibit RH-4, slides 28 and 29. ↩
³¹³ HT 2021 Day 1, pages 144 - 145. ↩
³¹⁴ Ryder Scott presentation, Exhibit RH-4, slide 54. ↩
³¹⁵ HT 2021 Day 2 page 25 (slide 53) and page 29 (slide 56). ↩

[Page 290]

across the walls of permeable formations” stating that “this further helps to control the formation pressure”. In support, he relied on an exhibit that had been attached to Ryder Scott I. That exhibit is a “Modified Schlumberger Well Services diagram of the environment close to ta wellbore during drilling and logging”. The diagram shows how the “liquid from [the drilling] mud or mud filtrate passes into permeable formations as the well drills through those formations"; and it states: “During this process, a residue or mudcake is deposited on the walls of the wellbore across the permeable formations”.³¹⁶ Mr Novicki confirmed that the mud cake protected the wellbore against incoming gas; but he did not explain how such protection operates and how it affects the calculation of the reservoir pressure.

961 Gaffney Cline's experts confirmed that mud cake forms during the drilling process. Mr Seager referred to “little platelets of elements that stick to the wall. And the purpose of the mud cake is to stop the leaking into the formation. It will always leak a little bit, but we don't want to lose mud into the formation”. He also pointed out that there “would be no mud cake as the well first drilled into the top of Sand 1. It takes a while to build up and form”; and “when you first drill into the sand, the sand is virgin, it's open, there is no mud cake build-up”. Mr Seager concluded that, at the depth of 567m, when the second flow check in the Reservoir was performed, “there would be no mud cake, no”.³¹⁷

962 During the discussion on that subject, the Tribunal referred to earlier explanations of Mr Abel who considered a possible relationship between mud cake and the blowout. ³¹⁸ Indeed, in the Decision on Liability, the Tribunals recorded explanations by Mr Abel and Mr Wright about removal of filter cake during the wiper trip. Mr Abel mentioned “to wipe the hole and get rid of the filter cake which you do not want”. The Tribunals concluded in that decision that they had not seen in the record any indication that the removal of the filter cake was the reason for the wiper trip. ³¹⁹

963 While both Mr Seager and Mr Wright had confirmed the build-up of mud cake and its usefulness in limiting the flow of drilling mud into the formation, they also questioned the relevance of mud cake in controlling the reservoir pressure. Mr Seager stated that mud cake was “not, in my view at least, a major factor in controlling pressure from the formation into the wellbore"³²⁰. Mr Wright was categoric. He referred to the discussion

³¹⁶ Ryder Scott I, Exhibit 1. ↩
³¹⁷ HT 2021 Day 2, page 120. ↩
³¹⁸ HT 2021 Day 2, pages 119 and146. ↩
³¹⁹ Decision on Liability, paragraphs 600 to 604. ↩
³²⁰ HT 2021 Day 2, page 120. ↩

[Page 291]

... about possible mud cake causing a back pressure. I've been taking well control schools for 40 years and I've never, ever seen one comment about mud cake holding gas pressure in.³²¹

964 Two of the Questions which the Tribunals invited the Parties to address in the Post-Hearing Briefs concerned these additional factors, viz. the factors that add weight and their importance for determining the reservoir pressure.

965 BAPEX mentioned specifically Equivalent Circulating Density (ECD) and cuttings. Mud cake was not included in the list of adjustments that have to be made to the recorded mud density.

966 With respect to ECD, BAPEX referred to testimony of Mr Wright about a situation where the ECD increased the mud weight by 0.8 ppg. This situation related to events during drilling of Chattak 2A when the drilling crew was circulating the hole clean. ³²² The Claimant pointed out that drilling was stopped during the flow checks at 567m, very near the top of Sand 1, at 592m, 633m and 807m; no adjustments were needed as “there would be no mud circulating during each survey". ³²³

967 The Claimant accepted that “the only adjustment that might be made would be for the potential presence of cuttings in the mud when the flow checks were taken, if it is assumed that the well bore was not circulated out before taking the flow check”. The Claimant accepted that taking the presence of cuttings into account would increase the mud weight of 8.9 ppg by 0.1 ppg, corresponding to adding ~10 psi to 850 psi. ³²⁴

968 BAPEX explained that drilled cuttings, “if not circulated out properly, can result in an increase in mud density up to 1.5 ppg"; ³²⁵ the Claimant objected, pointing out that no supporting evidence was cited by BAPEX.³²⁶ In its Reply PHB, BAPEX agreed that Niko was correct in stating that the only adjustment to mud weight at the time of the flow checks would be the presence of cuttings. It also agreed “with the formula that Mr Wright used to calculate the mud weight increase due to the presence of cuttings", increasing the mud weight at the flow check at 567m by 0.1ppg. BAPEX contested, however, Mr Wright's

³²¹ HT 2021 Day 2, page146. ↩
³²² HT 2021 Day 4, pages 95 - 98. ↩
³²³ C-PHB 1, paragraph 74. ↩
³²⁴ C-PHB 1, paragraph 75. ↩
³²⁵ B-PHB 1, paragraph 64. ↩
³²⁶ C-PHB 2, paragraph 22. ↩

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calculation of the effective mud weight and the value of the static mud weight to which the 0.1ppg have to be added.³²⁷

969 The Tribunal notes that the final submissions seem to have clarified that during the flow checks there was no circulation in the well. The ECD effect therefore does not apply during these periods. The incidents during which the ECD increases the effective mud weight, as relied upon by BAPEX, do not affect the determination of the Reservoir pressure by reference to the mud weight. What matters is an increase of the effective mud weight throughout the period during which the Reservoir pressure had to be contained by the drilling mud.

970 Concerning the cuttings, BAPEX states that the increase of the effective mud weight occurs “if not circulated out properly”. That is also the position of the Claimant. There is no evidence that, during the flow checks in the Reservoir, the well was circulated out. However, when the drilling reached 807m the hole was circulated clean. It has not been alleged that this operation was unsuccessful, and that cuttings remained in the mud.

971 Concerning the mud cake, it is undisputed that, as drilling progresses, mud cake forms in the wellbore. This mud cake reduces the flow of drilling mud into the formation. Ryder Scott have asserted that such mud cake also has the reverse effect of preventing formation gas to enter the wellbore, an assertion that has been contested by Mr Seager and Mr Wright.

972 The Schlumberger diagram to which Ryder Scott referred does not provide any support for their assertion. It states that mud cake forms on the walls of the wellbore, but it says nothing about the effect on the pressure in the wellbore. Moreover, there are no explanations how the mud particles that settle on the walls of the wellbore increase the strength of resisting the pressure of the gas in the formation or increase the back pressure exercised by the mud itself. Ryder Scott also have not explained or even asserted that, on 7 January 2005 by 19:30 h, drilling mud had accumulated on the walls of the wellbore freshly drilled and that the mud cake so formed increased the weight of the drilling mud from which it was formed. The Tribunal is not persuaded that, at the time when the Chattak 2 well was cleaned from cuttings and the flow was stopped, mud cake increased the mud weight beyond the static mud weight as measured in the mud pits.

973 The Tribunal concludes that none of the additional factors described by Ryder Scott were operative: the static mud weight, as it was used on 7 January 2007, when the drilling of Chattak 2 passed through Sand 1 and

³²⁷ B-PHB 2, paragraphs 54 – 56. ↩

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Sand 2, may be used for determining the formation pressure of these two sands; no increase must be made to reflect any additional factors in a higher effective mud weight.

974 The Tribunal has no basis to doubt that on Day 8, by 19:50, the mud was clean of cutting and the well was not circulated; and it does not believe that any mud cake that may have formed increased the static mud weight. By that time and until the wiper trip had reached 466 m there is no evidence for gas flow into the well. The static mud weight resisted the pressure from the Reservoir. The Tribunal concludes that the Reservoir pressure must have been below the back pressure exercised by the drilling mud of 9.1 ppg static weight with no increase for effective mud weight.

7.5.2.5 Converting mud weight into Reservoir Pressure

975 The Claimant converts the 9.1 ppg mud weight into 883 psia Reservoir Pressure at the top of Sand 1.³²⁸ Ryder Scott estimated pressure at the top of the Reservoir is 954 psia but did so not based on the mud weight of Chattak 2 but, as explained above, by reference to pressure measurements of other reservoirs.³²⁹

976 The First Gas Loss Committee considered 9.1 ppg mud weight and determined the pressure in the Reservoir at 903.62 psia and explained:

Reservoir pressure at mid-point of reservoir Sands 1 & 2 @1879 ft (573m) assuming a balanced mud condition with 9.1 ppg mud just prior to the blowout as per Drilling Report, 903.62 psia.³³⁰

977 The Claimant explains the difference between 903.62 psia Reservoir pressure of the Committee with that of Gaffney Cline by referring to “the Committee's deeper reference point”.³³¹ The Committee explained that pressure value it adopted was based on the mid-point of the Reservoir, assumed to be at 573m, while the reference point of Gaffney Cline is at the top of the Reservoir. At the Hearing, Mr Seager of Gaffney Cline responded to the Tribunal's questions³³² by stating that the First Gas Loss Committee “used the same methodology that we used [...] they assumed that the maximum pressure in the reservoir was equivalent to 9.1 ppg mud, and they took that down to the depth which

³²⁸ C-PHB 1, paragraph 32, relying on Gaffney Cline II, paragraph 54. Gaffney Cline I, page 14, states 886 psia as the equivalent to 9.1 ppg. ↩
³²⁹ Exhibit RH-4, slide 33. ↩
³³⁰ First Gas Loss Report, Exhibit R-2, page 5. ↩
³³¹ C-PHB 1, paragraph 32. ↩
³³² HT 2021 Day 2, pages 73 and 78. ↩

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you've just mentioned. So if you do that, that's what you get.”³³³ In its Post-Hearing Brief, the Claimant sought to demonstrate the correspondence of the two values by a graphic representation of the pressure gradients of the mud and the aquifer. And it referred to the testimony of Mr Wright, who had insisted that “you need to calculate the pressure at the top and work your way down ...”³³⁴

978 BAPEX responded by pointing out that “the reference depth is a key difference between Ryder Scott's pressure calculation and that of Gaffney Cline. The Committee, like Ryder Scott, used the reservoir mid-point pressure, which is the appropriate pressure to use for volumetric calculations.”³³⁵ BAPEX does not provide support for the mid-point as the appropriate reference. The Committee, too, does not explain why it chose the mid-point as reference.

979 BAPEX further pointed out that Mr Seager, at the Hearing, and Gaffney Cline in their second report, asserted that 9.1 ppg mud-weight corresponds to 883 psia equivalent pressure at the top of Sand 1 and stated that “the reservoir pressure in Sand 1 cannot exceed that number. It is physically impossible: otherwise the well would have suffered influx and possibly a blowout, and it did not.”³³⁶ BAPEX referred to Gaffney Cline's gas gradient pressure estimate to show that a calculation on that gradient would lead to a result that also was above the 883 psia as the highest possible pressure at the top of Sand 1.

980 The Tribunal notes the difference between the Parties concerning the depth at which the Reservoir Pressure must be calculated. The difference was demonstrated at the Hearing during the cross examination of Mr Wright. BAPEX's Counsel invited him to calculate the reservoir pressure assuming the 9.1 ppg mud weight by reference to the mid-point of the Reservoir at 605.5m. Mr Wright responded that this did not make sense but performed the calculation nevertheless.

981 BAPEX's Counsel and Mr Wright agreed that the formula for the calculation was as follows: the depth in feet (divided by 0.3048) multiplied by the ppg value, multiplied by 0.052 as “a constant that converts pounds per gallon into feet to psi", plus 14.7 to bring psi to psia. The formula produced 957 or 955 psia: (605.5 ./. 0.3048 x 9.1 x 0.052) +14.7 = 955 psia, as calculated by Mr Wright.³³⁷

³³³ HT 2021 Day 2, page 78. ↩
³³⁴ HT 2021 Day 3, page 123. ↩
³³⁵ B-PHB 2, paragraph 21 at page 13. ↩
³³⁶ HT 2021 Day 2, page 64, the Transcript uses psi, but the CH-1, slide 4 shows that this is a typographical error and psia is meant; the Gaffney Cline reference is Gaffney Cline II, paragraphs 53 and 54. ↩
³³⁷ HT 2021 Day 3, pages 123 - 125. ↩

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982 When Mr Wright was asked in re-direct whether the calculation he was asked to perform by reference to the mid-point of the Reservoir was “an appropriate calculation for determining the pressure of the reservoir” he responded:

Not for using the mud weight to determine the pressure, no. If you're going to use mud weight, you need to take it at the top.

[...]

If you're going to use mud weight to determine the pressure in the reservoir, you need to do it at the top, because that's going to be the smallest pressure differential. As you go deeper into the reservoir, you're just getting more and more overbalance with the depth of the bit.

983 Mr Wright also was asked in re-direct to invert the operation, to take the mid-point (605m) pressure of 957 psia to the top at 560m; he made a rough estimate and concluded that the corresponding mud weight would be “9.55 [...] around 10 ppg".³³⁸

984 Mr Wright explained at the Hearing “from a drilling point of view, the highest mud gradient that you need to deal with is the top of the reservoir”.

As you drill down the wellbore, if you drill into the top of the sand, the pressure is going to increase as you go to the middle of the sand because of the mud gradient. But the pressure at the top of the sand is very nearly the pressure at the bottom of the sand. But the mud weight at the bottom of the sand is much higher than it is at the top of the sand. So you get a bigger pressure differential between the mud at the bottom than you have with the mud at the top. And that's a point you're concerned about with well control, which is what I'm thinking of.

[...]

So that's why I was saying earlier that you need to calculate the pressure at the top and work your way down; or you need to calculate the pressure at the gas-water contact, based on the salinity of the water, and work your way up. So using mud density to go to the middle doesn't make sense from either direction.³³⁹

985 Mr Wright illustrated the pressure differential, the difference between the pressure gradient of the mud and that of the gas by the following slide, which shows the difference in slope of the mud gradient (green) and the gas gradient

³³⁸ HT 2021 Day 3, pages 127 - 129. ↩
³³⁹ HT 2021 Day 3, pages 120 - 121 and 123 - 124. ↩

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(red). As a result of the difference in gradient, the gas pressure of the Reservoir “at the top of the sand is very nearly the pressure at the bottom of the sand” but “the mud weight at the bottom of the sand is much higher than it is at the top of the sand”.