‘A. Financial consequences of the early termination of the Assignment Agreement

218. Respondents admit that, in the event of a termination of the Assignment Agreement without cause, Claimant is entitled to compensation for damages. According to Respondents, such compensation is to be assessed as specified in Article 1149 of the French Civil Code, i.e.it is to include damages for the loss Claimant may have suffered and the profit it may have been deprived of by reason of such termination … Respondents further admit that, in such a case, Claimant is in principle entitled to receive payment for the works and services it had actually performed. In this respect, Respondents recognize that they owe an amount of … for part of these works and services, the remainder of the services performed being regarded by them as either worthless or the claims made therefor not supported by sufficient evidence …

219. As regards Claimant, it limited itself to contending that the termination of the Assignment Agreement for breach of contract was improper. It has not elaborated on the financial consequences of such unfounded termination for cause. In essence, Claimant argues that it would never have entered into the Assignment Agreement had it solely provided for the drilling of one well in [Block 1]. Consequently, Respondents should be ordered to indemnify Claimant not only for the services having actually been performed but also for those that were planned to be performed …

220. It appears from the positions set out above that, in principle, the Parties agree that [Claimant] is to be paid for the works and services it performed and that it is also to be indemnified for the loss it may have suffered as a result of the termination of the Assignment Agreement. They disagree, however, with regard to the remuneration of certain services which were performed and in respect of the scope of the indemnification that may be claimed for the services which could not be performed. These questions will be further analysed when examining below the invoices of which payment is claimed by [Claimant].

………

D. … rig standby at [Block 2]

226. [Claimant] claims an amount of … for standby fees at [Block 2] …from the erection of the roadblock by the [X] tribe members until receipt of the termination notice issued by [Respondent].

227. As observed by Respondents, standby fees under the Drilling Contract were owed solely where the performance of the services was interrupted by [Respondent]’s exercise of its right to suspend their performance (Article 7.2.1 of the Drilling Contract) or by reason of the weather conditions (Article 1.2.20 of the Drilling Contract). [Claimant], however, claims standby fees for the interruptions allegedly caused by the roadblock and by the evacuation of [Respondent]’s personnel ...

228. The roadblock set up by the [X] tribesmen, which prevented part of Claimant’s truck convoy from proceeding to the … well-site, might have been regarded as a “civil disturbance” in the sense of Article 1.2.10 (“Force Majeure”) of the Drilling Contract, for which [Claimant] might therefore have been entitled to claim indemnification pursuant to Article 4.3.2.2 of the Drilling Contract (“Force Majeure Rate”). However, no force majeurenotice within the meaning of Article 7.3.2 was ever issued by either Party and, in the letter that it sent to [Respondents] …, Claimant explicitly stated that it did not wish to declare force majeure, although it felt that the force majeure rate provided for in the Drilling Contract would be a fair compensation for the delay it suffered by reason of this roadblock … Ultimately, [Claimant] claimed indemnification at the standby rate, a remedy which, as explained above, however, is solely available in the event of suspension requested by [Respondents] or in the case of an interruption due to bad weather conditions.

229. As regards the delay, if any, that Claimant subsequently suffered by reason of the evacuation of [Respondents’] expatriates from the well-site, it would appear that this delay was largely caused by Claimant's failure to provide Respondents with clear information in respect of whether it would perform the [tool pusher’s] Agreement and, if so, in which manner. Consequently, this delay, if any, may not properly be attributed to acts or omissions on the part of [Respondents] and, therefore, no standby fee may be awarded for this period either. Consequently, [Claimant]’s claim for standby fees is to be denied in its entirety.

………

F. … loss of revenue due to [Respondent] not committing to its obligations

233. [Claimant] claims in total a sum of … as compensation for the revenues lost by reason of Respondents’ failure to honour their obligations under the Assignment Agreement.

234. This sum includes the following amounts:

… for an expected drilling time of 17 days at … location;

… for an expected drilling time of 16 days at … location;

… for an expected drilling time of 21.5 days at … location

… for two infield moves of Rig 3 in [Block 2], i.e. for the move from the … drilling site to the … site and, from there, the move to the … site

235. For the calculation of the amounts claimed in relation to the wells that were planned to be drilled in [Block 2] … Claimant applied a rate of … per day which appears to be the “Operating Rate” for the performance of these drilling services. [Respondent] therefore objects that the amounts claimed are not only for lost profit, as provided for in Article 1149 of the French Civil Code, but for lost revenues, i.e.they reflect what [Claimant] could have claimed had these drilling services been performed.

236. Respondents further object that the recovery of lost profit was expressly excluded in both the Drilling Contract and the Assignment Agreement.

237. Lastly, Respondents argue that, in any event, Claimant chose not to submit such lost profit claim and that, therefore, all amounts claimed in relation to drilling services on [Block 2] should be rejected …

238. The provisions referred to by Respondents which exclude claims for lost profit (Article 5.2.8 of the Drilling Contract; Section 8(e) of the Assignment Agreement) do not refer to the consequences of an early or unjustified termination of the Drilling Contract or of the Assignment Agreement, but to the Parties’ liability if damage is caused through the faulty performance of their obligations or by reason of a breach of these contracts. Whether [Claimant] may claim compensation for work it was prevented from performing is a different issue. In the event of such termination, these provisions do therefore not bar claims for lost profit.

239. As Respondents rightly point out, however, lost revenues are greater than lost profit. Claimant also saved costs and expenses by not performing these drilling services. Presumably, a large part of the Operating Rate based on which [Claimant] calculated this lost revenue claim would have been used to cover these costs and expenses. If, notwithstanding the fact that it did not incur these costs and expenses, Claimant were awarded lost revenues, it would be placed in a better position than the one in which it would have been had the Assignment Agreement not been terminated … Lost revenues may therefore not be awarded to [Claimant].

240. Respondents repeated their objection against this lost revenue claim several times in the course of these arbitration proceedings, pointing out, in particular, that Claimant could, “at best”, claim lost profit … This notwithstanding, Claimant continued to claim lost revenues without providing any element which would have enabled the Arbitral Tribunal to assess the profit, if any, Claimant might have lost by being prevented from drilling wells in [Block 2]. As a result, the Arbitral Tribunal has no proper basis to award, as an alternative to lost revenues, compensation in the form of lost profit … The claim … must therefore be denied in its entirety.

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H. Damage to Claimant’s reputation

248. [Claimant] claims an amount of … to compensate it for the damage caused to its reputation by reason of “the way in which the Assignment Agreement was terminated by Respondents” and, in particular, by the statements contained in [Respondent’s President and General Manager]’s letters sent not only to the [state] authorities, but also to [Company X], “Claimant’s major commercial partner”.

249. Respondents consider this claim to be a new claim within the meaning of Article 19 of the ICC Rules, different from the one that had been made in Claimant’s Reply to the Request for Arbitration, in which reference was made solely to allegations in the Request. Moreover, Respondents contend that the negotiation procedure provided for in Section 10.2 of the Assignment Agreement was not complied with in respect of this claim. Respondents contend that the Arbitral Tribunal therefore has no jurisdiction over it.

250. With respect to the merits, Respondents further argue that this claim has not been substantiated. They note, in particular, that no explanation was given on how Claimant calculated the amount claimed ... Respondents add that, in all likelihood, this claim is not governed by French law.

251. As regards their communications with the [state] authorities, Respondents explain that a detailed account of the reason for the delay of their exploration activities had to be given to the [state] authorities if they wished to obtain an extension of the exploration period under the PSA. By applying for such extension, they were actually mitigating the damage caused by Claimant’s conduct. As regards their communications with [Company X], Respondents point to Section 4.2 of the Assignment Agreement, pursuant to which they were bound to keep [Company X] informed of all breaches of contract and of any occurrence of events, such as force majeure, that could trigger the termination of the Drilling Contract …

252. In view of the arguments put forward by Respondents, the first question to be examined is whether the Arbitral Tribunal has the authority to rule on this reputation claim. The arbitration clause indeed provides that the Parties should negotiate prior to bringing the matter to arbitration. Arbitration could be initiated solely after the expiry of a forty-five day negotiation period.

253. From a legal perspective, the completion of such a pre-arbitral negotiation procedure is to be regarded as a prerequisite for the initiation of arbitration proceedings. The objection based on Section 10.2 of the Assignment Agreement therefore does not raise a jurisdictional issue, but relates to a condition precedent that needs to be met prior to bringing the matter to arbitration. As arbitration requests that have not been preceded by such pre-trial negotiations are to be regarded as premature, the corresponding claims are either to be dismissed without prejudice or, alternatively, the proceedings are to be stayed pending the completion of the pre-arbitral negotiation procedure.1

254. Section 10.2 of the Assignment Agreement requires, in particular, that notice be given to the other party that a dispute exists, followed by negotiations between the parties in relation to such dispute. It does not require, however, that each individual claim arising from such a dispute be identified in the notice. “Dispute” and “claims” are not synonymous expressions. Whilst the claims subsequently brought before the arbitrators must refer to a dispute previously notified, the identification of these claims arising from such dispute is not a prerequisite for the initiation of arbitration proceedings.

255. In the present case, the dispute described in the notice served on [Respondents] … concerned [Respondent]'s failure to pay a certain number of invoices, including invoices for lost revenues as a result of the termination of the Assignment Agreement. The question whether or not the Assignment Agreement was validly terminated was therefore at the heart of the dispute. In the Tribunal's view, the dispute also necessarily embraced the facts and circumstances surrounding such termination, including statements made by the Respondents attributing responsibility to the Claimant for the termination.

256. From the evidence it appears that the Parties subsequently attempted to settle their dispute amicably and … that attempt was considered to have failed. As more than 45 days had run since the notice of dispute, the pre-arbitral negotiation prerequisite was thus satisfied. The first objection of the Respondents is therefore unmeritorious.

257. Respondents' second objection is based on Article 19 of the ICC Rules,2 which provides that no new claims or counterclaims falling outside the limits of the Terms of Reference may be raised without the authorization of the Arbitral Tribunal. In the present case, the Terms of Reference included a claim by Claimant that the Respondents should be ordered to pay the sum of … to compensate Claimant for the damage caused to its reputation by reason of Respondents’ allegations in their Answer to the Request for Arbitration ... Thus, the question of whether Claimant should be paid an amount of … to compensate the commercial and reputation damages possibly caused to Claimant by reason of Respondents’ allegations was included in the list of the issues to be decided by the Arbitral Tribunal in these arbitration proceedings ... The summary of Claimant’s position, moreover, included a passage stating that the manner in which Respondents had behaved when they terminated the Assignment Agreement – making libellous statements in letters sent to the [state] political and administrative authorities as well as Claimant’s commercial partners – was harmful to the image and reputation of [Claimant].

258. The Tribunal therefore does not consider that the Claimant's claim for compensation for damage caused to its reputation can properly be characterized as a new claim, even if different facts were subsequently alleged in support of this claim.3 In any event, the amendment of the factual basis for the claim did not disrupt or complicate the arbitration proceedings in any way, and it would therefore be appropriate for the Arbitral Tribunal to authorize such claim even if characterized as a new claim (see: Article 19 ICC Rules). Thus, the second objection of Respondents is also rejected.

259. This being said, this Arbitral Tribunal has no authority to require the payment of a certain amount of money as a fine for libellous statements. It can only award damages in compensation for the damage that may have been caused by such statements. The existence and the amount of any such damage, however, are to be established by the victim of the libellous statements. In the case at hand, Claimant failed to adduce any such evidence. Consequently, its claim must be denied for this reasons and the question whether the statements made in [Respondents’ President and General Manager]’s letters were excessive under the given circumstances may therefore be left unanswered.’

1
In the same sense, but examined in the context of clause 67.1 of the FIDIC Conditions requiring the prior examination of a dispute by the Engineer, see, in that respect: Wenger, in: Honsell/Vogt/Schnyder, Kommentar zum schweizerischen Privatrecht, Internationales Privatrecht, n. 20e ad art. 186 PIL-Statute); see also ICC cases 6276 and 6277 [1990] where the arbitrators decided that the Employer should first have asked to designate an Engineer to whom to submit the dispute and that, in the absence of a decision by such Engineer, the Request for Arbitration was “premature” (award referred to by Seppälä, “International Construction Contract Disputes – Commentary on ICC Awards Dealing with the FIDIC International Conditions of Contract”, in: The International Construction Law Review 1999, pages 339, 342; see, however, certain other awards, such as the one made in the ICC case no. 6535 [1992] where the absence of a decision by the Engineer appears to have been considered to be a jurisdictional issue without, however, proceeding to any further analysis. Furthermore, see also the judgement given by the Commercial Court of Zurich on 21 March 1994 wherein the absence of an opinion by an expert-arbitrator (“Schiedsgutachter”) was characterized as an absence of supporting evidence for the claim but not as a jurisdictional issue (Blätter für Zürcherische Rechtsprechung 94 (1995), N. 67, pages 208 and 209.

2
Editor's note: This reference is to the ICC Arbitration Rules of 1998.

3
As for the different approaches adopted by arbitral tribunals regarding the question whether a claim is “new”, see, e.g.: Derains/Schwartz, A Guide to the ICC Rules of Arbitration, 2nd ed. (2005), ad Article 19.