SE Texas Record

Sunday, December 15, 2019

Federal judge mulling Carpatsky dismiss motion filed well after $145.7 million arbitration award

By Karen Kidd | Apr 16, 2018


HOUSTON – A federal judge in Houston is considering a Texas oil company's motion to dismiss a Ukrainian oil company's nine-year-old lawsuit over a failed energy development deal following an arbitrator's $145.7 million award.

Carpatsky Petroleum Corp., one of four defendants in OJSC Ukrnafta's lawsuit, says it has waited long enough, according to its reply in support of its motion for summary judgment and renewed motion to dismiss filed last month in U.S. District Court for Texas' Southern District, Houston Division. 

"Nine years ago, this court stayed these proceedings based on the ongoing arbitration in Stockholm," Capatsky's filing said. "Recognizing that all of Ukrnafta's claims center around the transfer of title from Carpatsky Texas to Carpatsky Delaware and the consequences of that transfer, the court held that 'Ukrnafta must pursue its claims . . . in arbitration.' Ukrnafta then spent the next several years arbitrating the issues in Stockholm and challenging the award in the Swedish courts. At every stage, the tribunal and the courts ruled against Ukrnafta, recognizing that it was trying to escape its contractual promises based on corporate technicalities."

U.S. District Court Judge Gray H. Miller

It's time for the Houston federal court to do that as well, Carpatsky's filing said.

"The court should accordingly grant summary judgment on preclusion grounds," the filing said. "But even if we are wrong – even if Ukrnafta's claims did not arise out of the same nucleus of operative facts – that would not justify allowing Ukrnafta to litigate its claims here."  

The case, first filed in March 2009, is assigned to District Court Judge Gray H. Miller.

Carpatsky Petroleum, a U.S.-based subsidiary of Kuwait Energy, is one of four defendants in the case. Other defendants are Taurex Resources, Robert Bensch and Kuwait Energy Co.

While Carpatsky is chartered in Deleware, its mailing address is on William Street in Houston.

The Arbitration Institute of the Stockholm Chamber of Commerce issued the arbitration award in the case in September 2010 and that award was confirmed by the district court in its ruling this past October.

Ukrnafta has claimed the district court has discretion in the case over preclusive effects, to determine whether the matter has been fully litigated, "on the counterintuitive theory that the arbitral tribunal ruled against it on too many different grounds," Carpatsky's filing said.

"And it urges the court to deny claim preclusive effects based on the incorrect premise that its current claims stem from different facts," the filing states.

That negates the district court's previous order directing the matter to be resolved in arbitration, according to Carpatsky's filing.

"On Ukrnafta's view, the court's nine-year stay accomplished nothing, and Ukrnafta should now get to pursue its claims as if the arbitration never happened," the filing said. "That cannot have been what the court intended."

Carpatsky also cried foul in its filing over Ukrnafta's assertion that Carpatsky has suffered no hardship in the case beyond "delay inherent in any trial or appellate proceeding," saying "this is no ordinary case."

"The tribunal issued its award in this case nearly eight years ago, yet Ukrnafta has avoided paying that entire time without even posting security, and it now seeks to avoid paying even longer," Carpatsky's filing said. "Those delays are an important factor here, where the court has a treaty obligation to ensure prompt enforcement of the award."

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U.S. District Court for the Southern District of Texas Houston Division