INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. In the arbitration proceedings between NIKO RESOURCES (BANGLADESH) LTD. (Claimant) and PEOPLE’S REPUBLIC OF BANGLADESH (First Respondent) BANGLADESH PETROLEUM EXPLORATION & PRODUCTION COMPANY LIMITED (“BAPEX”) (Second Respondent) BANGLADESH OIL GAS AND MINERAL CORPORATION (“PETROBANGLA”) (Third Respondent) (jointly referred to as Respondents) ICSID Case No. ARB/10/11 and ICSID Case No. ARB/10/18 DECISION ON JURISDICTION Members of the Tribunal Mr Michael E. Schneider, President Professor Campbell McLachlan Professor Jan Paulsson Secretary of the Tribunal Ms Frauke Nitschke Date of decision: 19 August 2013 1 TABLE OF CONTENTS GLOSSARY ............................................................................................................................. 5 1. INTRODUCTION .......................................................................................................... 8 2. THE PARTIES AND THE ARBITRAL TRIBUNAL .............................................. 11 2.1 The Claimant ........................................................................................................ 11 2.2 The Respondents .................................................................................................. 11 2.3 The Arbitral Tribunal ........................................................................................... 12 3. SUMMARY OF THE RELEVANT FACTS .............................................................. 14 3.1 The negotiations leading to the JVA .................................................................... 14 3.2 The JVA and its arbitration clause ....................................................................... 20 3.3 The negotiations of the Gas Purchase and Sale Agreement (GPSA) ................... 24 3.4 The arbitration clause in the GPSA ..................................................................... 33 3.5 The Payment Claims under the GPSA ................................................................. 36 3.6 The blowouts and the Compensation Claim ........................................................ 36 4. THE PROCEDURAL HISTORY ............................................................................... 40 4.1 From Registration to the Constitution of the two Tribunals ................................ 40 4.1.1 ICSID Case No. ARB/10/11 .......................................................................... 40 4.1.2 ICSID Case No. ARB/10/18 .......................................................................... 43 4.2 Following the Constitution of the two Tribunals ................................................. 45 5. THE CLAIMANT – ITS IDENTITY AND ITS NATIONALITY ........................... 51 5.1 The position of the Parties ................................................................................... 51 5.2 The Claimant’s identity........................................................................................ 52 5.3 The Claimant’s nationality ................................................................................... 55 5.3.1 The link with Cyprus ..................................................................................... 55 5.3.2 The link with Canada ..................................................................................... 58 6. THE STATE OF BANGLADESH AS A PARTY TO THE ARBITRATION ........ 61 6.1 The role of the Government of Bangladesh ......................................................... 62 6.2 Petrobangla and BAPEX as agencies or instrumentalities of the Government of Bangladesh ...................................................................................................... 63 6.3 The separate legal identity of Petrobangla and BAPEX ...................................... 66 6.4 Petrobangla and BAPEX as agents for Bangladesh ............................................. 67 6.5 Attribution ............................................................................................................ 68 6.6 Consent ................................................................................................................ 70 2 7. JURISDICTION WITH RESPECT TO BAPEX AND PETROBANGLA – THE ISSUE OF DESIGNATION ............................................................................... 73 7.1 The issue and the Parties’ positions ..................................................................... 73 7.2 The requirement of designation ........................................................................... 75 7.2.1 The term “designation” as distinguished from “notification” ........................ 75 7.2.2 The purposes of designation under Article 25(1) .......................................... 77 7.2.3 Types of designation – General and ad hoc designation ............................... 80 7.2.4 The form of designation and the question of implicit designation ................ 81 7.2.5 Communicating the State’s designation to the Centre ................................... 84 7.2.6 Conclusions concerning the requirement of “designation” under Article 25(1)................................................................................................... 91 7.3 Designation in the present case ............................................................................ 92 8. THE DISPUTE ARISING DIRECTLY OUT OF AN INVESTMENT ................... 97 9. ILLEGAL ACTS, GOOD FAITH AND CLEAN HANDS ..................................... 104 9.1 The Parties’ positions ......................................................................................... 104 9.2 The Canadian conviction of Niko Canada on account of bribes to the Minister of Energy in 2005 ................................................................................................... 107 9.3 Other indications of possible acts of corruption and the Respondents’ disclosure request ............................................................................................... 110 9.3.1 Investigation by the Bangladesh Anticorruption Commission (ACC) ........ 110 9.3.2 The BELA proceedings ............................................................................... 112 9.3.3 The proceedings against Stratum ................................................................. 112 9.3.4 The action of Mr Harb ................................................................................. 113 9.3.5 The Respondents’ request for document production ................................... 114 9.3.6 Conclusion on the Claimant’s acts of corruption ......................................... 116 9.4 Corruption and international public policy ........................................................ 117 9.5 Contracts of corruption ...................................................................................... 118 9.6 Contracts obtained by corruption ....................................................................... 120 9.7 Denial of jurisdiction despite an otherwise binding arbitration agreement ....... 126 9.7.1 Arbitration offer applicable only for good faith investment ........................ 126 9.7.2 Protecting the “integrity of the system” ....................................................... 128 9.7.3 The “clean hands” doctrine .......................................................................... 128 10. JURISDICTION WITH RESPECT TO CLAIMS UNDER THE JVA (THE COMPENSATION DECLARATION AND THE COOPERATION CLAIM) .... 133 10.1 The position of the Parties ................................................................................. 133 10.2 Jurisdiction ratione materiae ............................................................................. 135 10.3 Jurisdiction ratione personae ............................................................................. 138 3 10.4 Impact on legal interests of third parties ............................................................ 140 10.5 BAPEX cooperation with respect to the GPSA claims (the Cooperation Claim) .................................................................................... 142 11. JURISDICTION WITH RESPECT TO CLAIM UNDER THE GPSA (THE PAYMENT CLAIM) ....................................................................................... 144 11.1 The Position of the Parties ................................................................................. 144 11.2 Has Petrobangla agreed to arbitrate with Niko? ................................................ 145 11.3 Is Niko precluded as a matter of principle to claim for both Joint Venture Partners? ............................................................................................................. 146 11.4 The position under the agreements .................................................................... 148 12. DECISION................................................................................................................... 155 4 GLOSSARY ACC Bangladesh Anti-Corruption Commission BAPEX Bangladesh Petroleum Exploration & Production Company Limited, the Second Respondent BELA Proceedings Proceedings brought by the Bangladesh Environmental Lawyers Association (BELA) and others in the Supreme Court of Bangladesh, High Court Division against the Government of Bangladesh, Petrobangla, BAPEX, Niko and others BGSL Bakhrabad Gas System Ltd. C-MJ.1 Claimant’s Memorial on Jurisdiction, 1 April 2011 C-MJ.2 Claimant’s Second Memorial on Jurisdiction, described as Claimant’s Response to the Respondents’ First Counter- Memorial on Jurisdiction