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Niko Finds Tribunal Ruling on Chattak Blow-Out Positive for Company

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Canada's Niko Resources Ltd. reported Wednesday that an international Tribunal constituted under the Rules of the International Center for Settlement of Investment Disputes (ICSID) issued a decision Aug. 19 respecting its jurisdiction to decide two arbitration claims initiated by Niko Resources (Bangladesh) Ltd. (NRBL) against the Government of Bangladesh and two of its crown corporations, Bangladesh Oil Gas & Mineral Corporation (Petrobangla) and Bangladesh Petroleum Exploration & Production Company Limited (Bapex).

In the arbitration respecting responsibility for and damages arising from the Chattak well blow-outs in 2005, the relief sought by NRBL includes a declaration that NRBL has no liability for any damages arising from the blow-outs and that it owes no compensation for such damage. The Tribunal stated that there can be “no doubt” that it has jurisdiction to determine whether NRBL has any liability for the two blow-outs under the Joint Venture Agreement between it and Bapex and to make the requested declaration if it is well founded. The Tribunal rejected Bapex’s arguments that ICSID did not have jurisdiction to decide the issues. The Tribunal, however, did not find jurisdiction respecting Petrobangla or the Government, noting that they were not parties to the Joint Venture Agreement and that the Joint Venture Agreement expressly stated that the responsibilities and obligations of Petrobangla and the Government “in all relevant Articles, Annexes and Amendments under this JVA” have been assigned to Bapex.

The second arbitration initiated with respect to NRBL’s claim for payments owing to it, and in part to Bapex, by Petrobangla for gas deliveries made under the Gas Purchase and Sale Agreement between those parties since 2004 will also proceed. The ICSID Tribunal rejected Petrobangla’s arguments contesting jurisdiction and confirmed ICSID’s jurisdiction to determine NRBL’s claim against Petrobangla for payments owing to NRBL for delivered gas.

It is expected that the Tribunal will shortly give further directions respecting the process for the hearings on the merits in the two arbitrations. Niko is encouraged that the ICSID Tribunal will finally be able to determine the merits of these claims.

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