26/03/2012
PT Thiess Contractors Indonesia v PT Kaltim Prima Coal
This is an archived article, and some links may not work. Contact us if you have any questions.
PT Kaltim Prima Coal ("KPC") has certain mining rights under contract from the Government of Indonesia. In 2003, it appointed PT Thiess Contractors Indonesia ("Thiess") under an Operating Agreement – Mining Services ("the OAMS") to provide mining services. The OAMS is governed by the laws of Queensland, Australia, with dispute resolution by arbitration in Singapore. KPC, certain Banks and others (not including Thiess) entered into a Cash Distribution Agreement ("the CDA") in 2007, which inter alia provides procedures for administering payment claims by Thiess under the OAMS. Thiess is entitled to enforce provisions of the CDA that are for its benefit under the Contracts (Rights of Third Parties) Act 1999.
Under the OAMS, the rates at which Thiess is paid for its services are subject to five-yearly review, the first Review Date having been 1 July 2009. The parties did not agree revised rates, and a mediation and an "expert determination" left them unresolved, with the result that the question of what the new rates are to be is pending before arbitrators under the OAMS dispute resolution machinery. As and when the new pricing arrangements are resolved by the arbitrators, they will apply as from the Review Date and the OAMS will entitle and requires Thiess to claim in its next monthly payment claim after the pricing arrangements have been resolved a "catch-up" payment as from that Date.
Thiess claimed in this action in the Commercial Court in London that whilst that arbitration was pending, the CDA required KPC to cause certain amounts to be transferred into a designated Dispute Account at Standard Chartered Bank, namely amounts payment of which Thiess has calculated that it will claim in due course if the arbitrators set new pricing arrangements at the rates for which Thiess is contending in the arbitration. KPC challenged jurisdiction, arguing that on analysis the matter referred to the Commercial Court was within the scope of the OAMS arbitration clause, alternatively that the Commercial Court should stay the London action until after certain preliminary issues had been resolved in the arbitration. KPC's challenge and alternative stay application were rejected by Blair J. in July 2011, (see [2011] EWHC 1842 (Comm)). In the event, the arbitrators issued their award on the preliminary issues just before the trial of the London action, which was held on 12/13 March 2012.
In his judgment on the trial, handed down on 26 March 2012, [2012] EWHC 690 (Comm), Teare J. accepted KPC's primary argument, namely that the Principal Contractor Claim process under the CDA, one element of which was the requirement in certain circumstances for amounts to be caused to be transferred to the Dispute Account, applied only to claims for immediate payment being made by Thiess under the OAMS. Thiess was not making any such claim, as regards the amounts it had calculated by reference to the revised pricing rates which it was hoping the arbitrators would adopt. Accordingly, KPC had been entitled to operate the CDA process in such a way that nothing was transferred to the Dispute Account in relation to those amounts. Thiess' claim for declaratory and consequential relief was therefore dismissed. Thiess did not seek permission to appeal to the Court of Appeal.
Andrew Baker QC and Sudhanshu Swaroop, instructed by Holman Fenwick Willan LLP, appeared for KPC.
