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 South Sudan hit with ICSID claim from the North
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GAR News - Monday, 3rd September 2012 (14 hours ago)
Sudapet's headquarters in Khartoum, the Sudanese capital
South Sudan has been an independent state for little more than a year and only signed the ICSID Convention in April – but it is already facing a claim from the national oil company of its northern neighbour, Sudan.
ICSID registered the claim by Sudan’s Sudapet on 29 August. The company has instructed Abdelrahman Elnafie, a disputes lawyer at S&A Law Firm in Oman – an associated firm of SNR Denton – and barrister James Crawford QC of Matrix Chambers in London.
South Sudan appears to be relying on its ministry of foreign affairs and international cooperation for its defence at this stage.
Contacted by GAR, counsel declined to reveal any details of the dispute, including whether the claim has been brought under an investment treaty or a commercial contract.
It is likely, however, that the claim relates to South Sudan’s seizure in November of Sudapet’s shares in various joint ventures with international oil companies, which fell within the borders of the new state after its secession from the north on 9 July 2011. The joint venture partners included China National Petroleum Corporation and India’s Oil and Natural Gas Corp.
South Sudan announced the transfer of the shares to its own state-owned oil company, Nilepet, in a presidential decree on 8 November.
A Sudan foreign ministry spokesperson, Al-Obaid Marawih, told a local newspaper soon after the seizure that the shares were worth around US$2 billion.
Markus Burgstaller, of counsel at Hogan Lovells in London, suggests the claim could have been brought under an investment treaty if Sudapet or one of its subsidiaries was incorporated in one of the 12 countries with which Sudan has a BIT – and if that BIT includes an ICSID arbitration clause. The 12 countries that have entered into a BIT with Sudan include Oman (the BIT is available on the UNCTAD website, in Arabic).
He notes that any tribunal examining such a claim will have to determine whether the investment treaties signed by Sudan are applicable to South Sudan as a “successor state” under public international law.
"Alternatively, the claim could be based on a national investment law of South Sudan or it could well be contractual," he says.
South Sudan’s share seizure is just one of a multitude of disputes that have arisen between the two countries over oil sharing and border demarcation since last year's secession, which left most of the oil reserves in South Sudan but kept the north in control of the transport infrastructure required to export the oil to international buyers.
In January, the south shut down oil production after reports Sudan was siphoning off oil from a pipeline that runs through the country to the north eastern city of Port Sudan on the Red Sea, as compensation for unpaid “transit fees”.
After eight months of stalled oil production, the two states came to an interim agreement over the payment of fees for the next three years on 6 August. The governments are expected to sign a final agreement by 22 September – a deadline set by the UN Security Council.
Meanwhile, South Sudan has been negotiating with Kenya on the construction of an alternative pipeline to the Kenyan port of Lamu in a bid to reduce its reliance on the north – though this would take around two years to complete.
Aside from the dispute over transit fees, there has also been violence between the two states over the town of Heglig and its oil field, which lie near their border.
A tribunal at the Permanent Court of Arbitration tasked with demarcating the borders of the disputed region of Abyei ruled in 2009 that Heglig belonged outside Abyei, in the control of the north.
South Sudan sent troops in to the city in April this year after the north said it would not share oil revenues from Heglig with its neighbour. The south has since been pressing for international arbitration to resolve continuing border delineation issues.
The referendum on South Sudan’s secession was provided for in a 2005 peace deal that ended Africa’s longest-running civil war.
Sudapet Company Limited v. Republic of South Sudan (ICSID Case No. ARB/12/26)
Counsel to Sudapet Company Limited
• S&A Law Firm (in association with SNR Denton)
Abdelrahman Elnafie in Muscat, Oman
• James Crawford SC of Matrix Chambers in London
Counsel to South Sudan
• Ministry of Foreign Affairs and International Cooperation in Juba, South Sudan
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