July 26, 2021

RSM to pay Saint Lucia’s legal costs, tribunal rules

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anthony_grynberg_753139312From Office of the Prime Minister St Lucia

The Government of Saint Lucia has won another round in the ongoing arbitration with RSM Production Corporation, the company owned by Jack Grynberg.

On Aug. 13, 2014, the Arbitral Tribunal ordered RSM to post a guarantee of US$750,000 to ensure that it will pay Saint Lucia’s legal costs if it is ordered to do so at the end of the case. This is Saint Lucia’s second major success, following the Tribunal’s order on Dec. 12, 2013, for RSM to pay all of the advances towards the administrative costs of the arbitration—which in all previous known cases have been paid 50 percent by each party.

Both of these orders are the first of their kinds in the history of the International Centre for Settlement of Investment Disputes (ICSID), which is administering the arbitration. The three arbitrators are independent of ICSID but are deciding the case under the ICSID Arbitration Rules, which are designed for disputes between host states and foreign investors. The Government is pleased to have achieved these unique successes.

The orders concern two categories of costs. The Dec. 2013 order related to “administrative” costs, namely the fees to ICSID for administering the proceeding and the fees and expenses of the arbitrators. The parties pay those costs in advances, which they replenish as the advances are used up. Each side usually pays half of the advances, but RSM has been ordered to pay all of the advances and to refund an advance that Saint Lucia had already made.

The recent order relates to Saint Lucia’s own costs. RSM must now post security because of the concern that, if the Tribunal later orders RSM to reimburse Saint Lucia, RSM will fail to do so.

The Tribunal’s order summarizes the parties’ claims and defenses, saying that the case arises from an offshore petroleum exploration contract. The Tribunal noted that, “according to [RSM’s] position, boundary disputes developed, affecting the exploration area, in particular in relation to Martinique, Barbados and Saint Vincent, which allegedly prevented [RSM] from initiating exploration.” RSM also claims that former Prime Minister Stephenson King signed a three-year extension to the contract but then retrieved the document before it could be delivered to RSM. RSM claims that the extension is valid, even though RSM never received it. RSM has asked the Tribunal to declare that the exploration contract is still in full force and effect.

In reply, Saint Lucia maintains that the Agreement “has expired or is at least not enforceable and therefore Saint Lucia has no obligation [to RSM].”

The latest order does not determine which party is correct on these matters. It relates only to the costs of the proceeding.

The Tribunal noted that RSM had had a history of non-payment of costs awarded against it. The Tribunal said it was “satisfied that also in this proceeding, there is a material risk that [RSM] would not reimburse [Saint Lucia] for its incurred costs, be it due to [RSM’s] unwillingness or its inability to comply with its payment obligations.”

Moreover, RSM admitted that it had received funding from a third party, and this “supports the Tribunal’s concern that [RSM] will not comply with a costs award rendered against it, since, in the absence of security or guarantees being offered, it is doubtful whether the third party will assume responsibility for honoring such an award. Against this background, the Tribunal regards it as unjustified to burden [Saint Lucia] with the risk emanating from the uncertainty as to whether or not the unknown third party will be willing to comply with a potential costs award in [Saint Lucia’s] favor.”

The Tribunal noted that its ruling does not mean that “it considers [Saint Lucia’s] defense on the merits to be successful. The Tribunal therefore ordered RSM to “post security for costs in the form of an irrevocable bank guarantee for USD 750,000 within thirty days of [its] decision.” If RSM fails to provide the bank guarantee, Saint Lucia can request the Tribunal “to cancel the hearing date” on the merits. The Government may, of course, choose to seek remedies other than postponing the hearing if RSM does not comply.

The hearing on the merits of the case is scheduled for Feb. 2015.

IMAGE: OIL TYCOON JACK GRYNBERG AND PRIME MINISTER DR. KENNY ANTHONY (RIGHT) (FILE PHOTO CARIBBEAN360).

See also related story “St Lucia claiming success in ongoing arbitration with US oil company” at: http://www.caribbean360.com/business/st-lucia-claiming-success-in-ongoing-arbitration-with-us-oil-company?utm_source=Caribbean360%20Newsletters&utm_campaign=4e9f7402e4-Vol_7_Issue_031_Business8_28_2014&utm_medium=email&utm_term=0_350247989a-4e9f7402e4-39393477

 

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