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Int'l arbitration over Dead Sea oil to begin

AMMAN - The dispute over an oil concession in the Dead Sea area will officially move on to arbitration after the International Centre for Settlement of Investment Disputes (ICSID) declined the government's request to dismiss all of a US company's claims.

With ICSID arbitration to commence, World Bank arbitrators will consider whether the Natural Resources Authority 's ( NRA ) actions and treatment of Trans-Global's oil concession violated the US-Jordan Bilateral Investment Treaty.

According to NRA Director Maher Hijazin, the government was informed of the decision on Tuesday.

"We asked the ICSID to reject all claims on the grounds they are without substance. They only passed three of the claims," but they were enough to proceed with arbitration, Hijazin told The Jordan Times on Wednesday.

The government requested to have all of Trans-Global's claims made in an April hearing considered "manifestly without legal merit", under Rule 41 of ICSID Arbitration Rules, according to the NRA .

According to Trans-Global's legal representatives, two claims concerning discrimination and unfair treatment were considered legally sufficient by the ICSID to go forward.

The third claim upheld by ICSID, concerning the right to consultation among parties to the Bilateral Investment Treaty, was later withdrawn by the oil firm.

"We are extremely pleased with the decision, but we are aware that we still have a long way to go," Trans-Global General Manager Nazeeh Abraham said yesterday.

According to a legal source inside the ICSID, both sides will now submit briefs and statements, which most probably will occur between now and sometime next year.

"When there are a lot of facts to be determined, these cases are often extended. The length of time also depends on whether or not the parties have agreed to long periods of submissions," the source told The Jordan Times from Washington, DC.

Abraham had previously told The Jordan Times that the company will place its claims at $700 million, pointing out that the firm had already invested $29 million in the area.

MP Yousef Qarneh (Amman, 2nd District) voiced his concern over the arbitration proceedings, a process which, he said, concerns all citizens.

"This is a big issue. It can negatively affect the Jordanian people. However, it is not the end; we are still at the beginning," Qarneh said, calling on the government to consult Parliament in order to take a unified response on the recent developments.

The deputy, who has experience as an arbitrator, said he believes the dispute between the oil firm and the NRA should be settled outside ICSID.

"I think that they should go down another, more constructive route," he added.

Abraham insists that his company is not out to hurt the Kingdom, but rather has the best interests of the oil concession, and the country, at heart.

"Our main purpose is not to receive damage claims from the government. We are after preserving our rights, which were trampled and we were prevented from developing the oil potential in the Dead Sea properly and efficiently," he said.

Should the arbitration court determine a breach in the Bilateral Investment Treaty had occurred, damages will then be determined from both parties' merit claims, and assessed by experts, the ICSID source said.

As a member state of the ICSID convention, Jordan has an international obligation to comply with the court's decision, the legal source added.

The dispute dates back to the 1996 Production Sharing Agreement (PSA) signed between the NRA and Trans-Global to explore for oil in the Dead Sea area.

The agreement, which was ratified by Parliament in 1997, gave the company the concession to explore the area in three phases over several years.

Trans-Global claims that in 2005, the firm informed the NRA of a technical oil discovery and that the authority declined to act. The NRA , in turn, has since dismissed the oil company's findings as they did not meet the PSA's definition of an oil discovery.

In order to expand its activities to further exploration and large-scale drilling, Trans-Global sought to bring an investor on board, and alleged that it was pressured into selecting Porosity Ltd., an oil firm backed by Lebanese billionaire Ayman Hariri.

In late 2006, Porosity signed a deal with the NRA and Trans-Global, giving it 80 per cent of the oil concession in the Dead Sea area.

Porosity was tasked with expanding exploration wells in the area and building on Trans-Global's previous work under a farm-out agreement, but the two firms soon had a falling out over the management of the site and the existence of oil in the vicinity.

As per the PSA, if an oil discovery is made, the concession holder has the right to develop the area for 25 years, according to the NRA .

If no further exploration commences by the end of the year, however, the oil concession is considered null and void and is then open to new investors, the authority said.

Porosity's CEO Moiffak Hassan, meanwhile, stressed that the arbitration process will not affect his firm's operations in the Kingdom.

"The dispute is only between Trans-Global and the government. We are concentrating on our work and are continuing according to schedule," Hassan told The Jordan Times, adding that the company's oil rig in Isaal is now fully assembled and operating.

By Taylor Luck

© Jordan Times 2008