Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I thought it may be helpful to provide some guidance about timings for the making of an award by the arbitrators as it is being discussed this morning.
The only information we have is the press reports so this analysis is based with that caveat. It appears the Arbitration took place in the middle of December. The arbitrators have asked the parties to submit final written submissions and responses with that process due to complete mid February. Written submissions in this manner is usual and entirely consistent in both arbitral and court proceedings. The arbitrators will not deliver an award until those submissions have been sent. Then it is up to the arbitrators to arrive at their decision. This is the unknown element in terms of timing and will depend on the number of issues to be determined, the complexity of the dispute and the volume of documents etc..As a rough guess I'd say we are looking at the middle of the year. I have been involved in one complex arbitration where one of the arbitrators was a leading QC and it took him over a year to deliver his award! The big question is will the parties be able to resolve the matter before the middle of the year. The GOGC have spent over £6 million allegedly and with only the award pending and given the way the arbitration went (FRR having to instruct a new legal team and the arbitrators refusing to take on FRRs procedural challenges) I think they will fancy their chances. The recent increased pressure from the US has , however, set the cat amongst the pigeons somewhat. Will it be enough to stop the arbitration in its tracks at the last minute? For those old enough to remember, reminds me of Penolope Pitstop tied to the railway track with an express train approaching only to be rescued at the last minute.
Article today - expect our friend AGR to be posting later
Frontera employees demand to pay salary arrears
Employees of the Georgian representative office of the American company Frontera demand to pay off wage arrears. They gathered today in the center of Dedoplistskaro, after which they continued the campaign at the tank farm owned by the company.
Protesters say they have not received a salary for 11 months. They also commented on a letter from US Congressman Markwein Mullin, which refers to the situation around the company. Employees say that the information, supposedly the Georgian government is interfering with the activities of the American company, is not true.
In an address to the Prime Minister of Georgia, George Gaharia, the US Congressman wrote that American and European business interests in Georgia have become targets of harassment and expropriation. “An excellent example of this is the Texas-based oil and gas company Frontera Resources,” said Mullin.
https://translate.google.co.uk/translate?hl=en&sl=ru&u=https://www.ekhokavkaza.com/a/30395271.html&prev=search
Without knowing the structure of the “transfer/farm out” it is impossible to determine whether it is a breach of the contractual documentation. It is entirely conceivable that the manner in which the “transfer” has been structured (with the assistance of legal advice) is designed to deliberately circumvent the prohibition on a transfer of the asset. The reality is we don’t know. There are some things we do know.
1. It is difficult to act legally once the horse has bolted. Hope would have been in a better position had he had a whiff of the “transfer” before it completed. He could have sought injunctive relief.
2. If the contractual documentation is clear cut in its prohibition on a transfer of the asset then it is strange that it has been over 12 months and the liquidator has not taken any formal legal action to declare the transfer void. Strange. Instead what we have is the liquidator scrambling around in the US. I suspect what they are looking for is for some additional evidence to demonstrate that the intention behind the transfer was to deliberately circumvent Outriders rights rather than a commercial transfer/farm out.
3. Even if the liquidator is successful, its difficult to see how it could be anything more than a pyrrhic victory. If the court in Cayman were to declare the transfer void, so what? I can’t see how the declaration could be enforced without involvement from the courts in Georgia to reverse the transfer. That is a long drawn out process and I can’t imagine it will fill the liquidator with joy to go down this route. An adverse finding from the Cayman court may cause reputational damage to FRR and potentially act as a negative in any third party due diligence.
4. FRR raised no objections in the US to recognition of the Cayman liquidation proceedings.
It seems perverse to say it but the liquidation proceedings are not the biggest challenge facing us presently. The arbitration is. I’ve already said I don’t hold out much hope of success here – just a gut reaction. The arbitrators will provide there award on or around the middle of this year. I hope for our sake that we can do a deal before then.
I know there has been some discussion on here and over on iii on the prospects of appealing on arbitral award which I thought it may be helpful to clarify. The starting point is that it depends on the governing law of the contract. I am not aware of what that is on our case. If the governing law clause is English, then the Arbitration Act provides very limited grounds for appeal (jurisdiction, procedural irregularity). Grounds for appealing an arbitral award are far more limited than a normal appeal. Other governing laws may also provide for a similar limited appeals process.
Its also worth bearing in mind that arbitral awards can be in parts - so they can be broken down into the various issues before the arbitral tribunal and decisions made on each of those issues. In effect there could be an overall winner/loser or an award that finds in favour of both parties across the various issues. For what its worth, if Frontera are successful, I don't think the GOGC will appeal. If FRR are unsuccessful, I suspect there will be an appeal (and they have probably already been advised on possible grounds). Why do I say this? Well FRR have already raised issues with the way the arbitration has progressed and the proper parties to the arbitration.
I am not hopeful of a positive outcome out of the arbitration. I become extremely nervous when parties do not participate in preliminary hearings, change lawyers and raise procedural issues which the tribunal effectively ignore. For me, everything is riding on an equitable resolution of the dispute. This will need compromise from both sides (the Georgian government don't want to alienate the US and FRR need traction to raise much needed finance). Let's hope the recent letter is a catalyst for the parties to thrash something out that works for all.
I should have added that although the amount is small this is money given by Steve/Zaza personally to Mullin it appears in 2020
NOTE: The organization itself did not donate, rather the money came from the organization's individual members or employees or owners, and those individuals' immediate family members. Organizations themselves cannot contribute to candidates and party committees. Totals include subsidiaries and affiliates.
https://www.opensecrets.org/orgs/summary.php?id=D000071040&cycle=2020
https://www.opensecrets.org/orgs/summary.php?id=D000071040&cycle=2020
This part of the article caught my attention:
"In addition, a corporation spokesman said the corporation had offered Frontera a "settlement," but the company rejected the proposal.". This is probably the extension to 2027 which was rejected. It does show that there can be movement.
https://translate.google.co.uk/translate?hl=en&sl=ka&u=https://bm.ge/ka/article/frontera-saqartvelosgan--35-mlrd-is-kompensacias-itxovs---yvelaferi-davis-shesaxeb/47269&prev=search
On the two links I posted earlier, I managed to go into the two new entities and look at the docs in the first two sections. However, I was unable to open the scanned doc in the third section for both new companies and still can't. If anyone can, it might give us some more information.
In terms of insolvency law, assets transferred to a family member (or controlled by a family member) can be voided if the necessary legal tests are met. Doesn't therefore make much sense to transfer the assets to an entity controlled by a family member if this can be challenged. This is the English law position - no idea about the US or Georgia.
For what it’s worth, Regdiks post earlier is spot on in terms of trying to analyse the complete legal position. With only ad hoc pieces of documentation, trying to make sense of it all is nigh on impossible.
When the previous litigation between the parties ended and Outrider negotiated “bullet proof” provisions into the contractual documentation, I don’t think Hope ever envisaged this would become such a legal mess with complex contractual and conflict of laws questions requiring lawyers in multiple jurisdictions. This is not a straightforward matter where Hope could have seized assets in previous matters he has been involved in. He will know that any action needed in Georgia will be a monumental headache (and will no doubt be advised as such). He has the personal guarantees in Texas and that looks like the best bet at the moment. I wouldn’t discount an action by Hope against his lawyers for negligent drafting if it turns out that the transfer was “technically” permissible or for advice given regarding enforcement of the contractual arrangements.
As many have said before, FRR may be in the mire but so is Hope. The reversion of the asset to the liquidators is years away, the chances slim, and slim has just left town. Those with full sight of the papers, including Kawaley and Seeborg see it and hence the suggestion for a negotiated settlement.
Levan spotted but no sign of the deadly duo.
AmCham Business Roundtable
Friday, January 10, 2020
AmCham Georgia organized a Business Roundtable with General Wesley Clark - former NATO Supreme Allied Commander of Europe, Commander of Operation Allied Force in the Kosovo War and regular commentator and an expert on geopolitics and security matters. General Clark was presenting about the Geopolitics, US politics and the state of the world today. Members had an opportunity of Q&A.
[photos of the event (71)]
http://www.amcham.ge/
The below article on the cancellation of a major project by the Georgian Govt is very relevant and bears many similarities to our situation (US involvement, funding issues, politics involving the Dream Party etc). It does lead me back to Regdik's very informed views about why they haven't adopted a similar position with FRR.
https://agenda.ge/en/news/2020/70
MadP
Yes, based on the information that we have read. It is perfectly open to the parties to still resolve the matter between themselves BEFORE the arbitral tribunal delivers an award. Arbitration is essentially a contractual process.
Earsbern
Thank you very much for posting this. It is very much appreciated. Without your time and commitment (especially as you are unable to copy and paste many of the recent documents) we would not be furnished with key information and developments, so thank you.
The amended case management order is interesting. Case management hearings are a mechanism (in England & Wales at least) introduced so judges could actively manage cases, hold parties to account and for judges to take hold of a dispute to ensure the proper administration of justice. Two points. Firstly, from recollection, I seem to recall that the previous agreed joint case management order did not make provision for mediation as OMF (for obvious reasons) opposed it. Note that Judge Seeborg has now ordered this and uses the word “will” – that is mandatory (albeit only to seek to engage). That is a step forward. Reading between the lines, I think the Judge (similar to Kawaley) has taken the view that this matter is capable of resolution and it is best for all concerned that this matter is resolved away from the court process. Whether OMF take that view is an entirely different story. Secondly, there is now a direction for the parties to amend the pleadings. This could be because FRR want to make a new claim/retract a claim/amend an existing claim. With new Counsel on board, they may have a different approach, see things in a different light and ned to make sure the pleadings reflect this. Amendments may impact on the tactical approach taken by FRR and designed to add pressure to OMF.
As others have mentioned, this and the Texas dispute are unlikely to have a material impact on the immediate investment required by FRR. The Californian dispute is being driven by us and can be dropped. The Texas case involves individuals and not the company. The Arbitral dispute is, however, critical. If FRR are successful, that deals with that particular legal issue. If unsuccessful, I can see the matter dragging on unfortunately. Frontera have already raised an objection to the arbitration in terms of the correct parties to the dispute and the arbitral tribunal have chosen to split the issues, dealing with the main legal issue of breach first. If the Georgian Government are successful, expect a further arbitration issue on the secondary point or Frontera to appeal/prevent enforcement. The preferred alternative is for a resolution.
Recognition hearing in the claim by the liquidators listed for Wed 15 Jan.
http://www.nysb.uscourts.gov/calendars/mew.html
Thanks Bezzy. The text also uses the word "adjudicated" implying that it has happened. One of the recent articles over the xmas period about workers being laid off also referenced the arbitration having taken place in December, so further confirmation I think.
Has Levan's CV has been updated? - last time I can only recall him mentioning two arbitrations. He now references a third which is the current dispute. It confirms that the arbitration has happened.
Third case involved complex dispute between investor and host state government arising out of energy-related host government agreement, adjudicated by an ad-hoc tribunal of three arbitrators, under the United Nations Commission on International Trade Law (UNCITRAL) rules, venue - Stockholm, Sweden
giac.ge/wp-content/uploads/2019/10/Levan-Bakhutashvili-Esq.-MCIArb-GIAC.pdf
Hi Arsenal. I think the arbitration proceedings started before the transfer of the asset
Spot on Coggy - tinged with a bit of acid reflux
The transfer of the asset to a different entity - the argument would follow that if the transfer was valid then the arbitral proceedings haven’t been brought against the correct entity.
The article certainly makes interesting reading. The first point is that arbitration proceedings are supposed to be confidential. There is enough information in the article to suggest that someone from the State has leaked this information.
I found the comment that this dispute relates to 100% of the contracted area outside the acquisition area very interesting. I don’t know what the acquisition area is but it does confirm that the dispute is about everything but that area. I would assume therefore that that area will remain in Frontera’s hands.
The other interesting point is that the arbitration hearing appears to have recently happened and the parties have been given the opportunity for final writer submissions before the arbitrators will make a final decision, probably in the first half of next year. The fact that we struggled with legal representation and appear to have disputed the hearing right until the end doesn’t bode well for a favourable outcome. That being said the article is clearly biased so who knows what the position is. There is also the separation of the issues between the legal claim and the validity of the transfer.
Looks like a New article appeared directly talking about frontera, the ongoing worker dispute and talk of a £70 m investment. not sure how much is lost is translation. I can’t post a translation but if anyone can, that would be https://netgazeti.ge/news/417177/