RE: GKP and its position right now.7 May 2024 09:08
Art. 43.3.
I’ve looked at this critical clause several times, and it’s problematic on several fronts:-
1) It was badly framed;
2) The main purpose of its inclusion should have been to pre-empt and prevent any external influence or interference in a contract freely negotiated and entered into between the Contractors and the KRG;
3) Clearly it was intended as a defensive mechanism to counter any anticipated legal attack by the ICG/FGI who might wish to challenge its legitimacy;
4) And although it’s very clumsily constructed, I reckon it does provide some ‘cover’ under English law. Certainly it was an attempt to protect the Contractors from any external threats to their investment positions;
5) But one of the key issues wasn’t addressed. Were the KRG acting ‘ultra vires’ when they entered into the contract in the first place?:
‘The Contractor has entered into this Contract on the basis of the legal, fiscal and economic framework prevailing at the Effective date.’
Well that’s all well and good, but if the ICG were to contest the very validity of that framework prevailing in 2007 and therefore its legitimacy, and if they were successful, then where did that leave the Contractors? Where did they go for recompense? And under what terms?. And who did they renegotiate their position as a producer with? And how did they recover their delinquent debt?;
6) That issue could/should have been covered in the Contract (and GKP should have insisted on it to safeguard their position);
7) I think the lawyers anticipated legal challenges as to the efficacy of the Contract. All parties’ were already accepting that it had risks associated with it, risks that the Contractors had agreed to and had embraced. Hence 43.3;
8) But did GKP know of the complexities of the constitutional relationships in place when they signed the contract? Because if they did, there’s an argument that they should have checked out the contractual legitimacy of their arrangements with the KRG before they signed off the agreement by covering their position with the ICG. And that would have involved a more protracted negotiation with the ICG…hindsight’s a wonderful thing…;
9) However, legally it seems to me that GKP may have a winning argument under English law. Unless they acted in bad faith.
But In the end, this won’t be settled in the English courts anyway.
There will be a significant renegotiation of terms with the ICG and JH will have to make serious judgments about what’s in GKP’s best interests.
And if he can’t get a result that works for GKP in the longer term, then he needs a back up plan.
Which he’ll be working on as we speak. At least I hope so…
All IMHO, DYOR.
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