Petrovietnam press release: International arbitral tribunal sides with Petrovietnam in Production-Sharing Contract tax incentive dispute

In an award issued on 22 May 2015, an international Arbitral Tribunal constituted under the Arbitration Rules of the International Chamber of Commerce (ICC) and comprised of leading international arbitrators Gary Born (Chairman), David A. R. Williams QC and Yves Derains has unanimously agreed with PetroVietnam’s position in a major tax incentive dispute under a production sharing contract for a Vietnamese offshore oil concession. All claims against PetroVietnam were rejected and the claimants were ordered to reimburse PetroVietnam’s costs of arbitration in full.

 

The dispute concerned the claimants’ assertion that they were impliedly entitled to benefit from certain tax incentives, which had not been the subject of negotiations and were not stated in the relevant PSC or investment licence.  In reaching its decision, the Tribunal upheld PetroVietnam’s position that Vietnamese law provided for a “flexible and nuanced approach consistent with the Vietnamese Government’s, and international oil companies’ reasonable commercial interests”.  The Tribunal found that, in the present case, the claimants could not benefit from the tax incentives since they had not been negotiated for and had not been specifically approved by the competent Vietnamese authorities.  The Tribunal expressly noted that the contractor had been “treated consistently throughout the relevant time period” and in a manner that reflected the expectations of the original contracting parties.

Mr. Nguyen Xuan Son, Chairman of the Members’ Council of PetroVietnam stated:  “We are very pleased with the Tribunal’s decision. It recognizes PetroVietnam’s longstanding openness to negotiation with partners and PetroVietnam’s willingness to support foreign contractors in their dealings with the competent Vietnamese authorities.  The decision also confirms that Vietnamese PSCs should be applied as agreed and in accordance with their terms.

Through this case, PetroVietnam has proven to its partners and the oil and gas investor community that PetroVietnam always honors the commitments that it has made to partners and investors, and PetroVietnam in addition always respects and observes Vietnamese law and international law in its business operations.”

PetroVietnam was represented in the arbitration by Shearman & Sterling LLP (Paris office partners:   Prof. Emmanuel Gaillard and Dr. Yas Banifatemi) and YKVN (Singapore office partner:  K. Minh Dang and Singapore office counsel: Do Khoi Nguyen).