Chevron vs. Bangladesh
An important arbitral award
A dispute arose between Chevron and the People’s Republic of Bangladesh concerning the interpretation of five agreements governing the production, purchase and sale of natural gas, including two Production Sharing Contracts (PSCs) and three Gas Purchase and Sale Agreements (GPSAs). The dispute centred on pipeline tariff provisions under which Chevron paid tariffs for transporting gas through Petrobangla’s pipeline network. After several years of complying with the tariff arrangements, Chevron argued that title to the gas passed to Petrobangla before the gas entered the pipeline and therefore no tariff was payable. New GPSAs executed in 2003 and 2004 acknowledged the continuing disagreement through side letters, and in 2007 two Bermudan subsidiaries of Chevron commenced arbitration before the International Centre for Settlement of Investment Disputes (ICSID). Dr. Kamal Hossain represented Bangladesh in the arbitration.
Bangladesh challenged the tribunal’s jurisdiction, arguing that the dispute fell outside the scope of the ICSID Convention. The tribunal rejected the objection, holding that the investment satisfied the requirements of Article 25(1) of the ICSID Convention and the criteria identified in Salini v. Morocco, including contribution, duration, risk and significance to the host state’s economic development. It further ruled that Petrobangla constituted a de jure organ of the Bangladeshi state, relying on Article 152 of the Constitution of Bangladesh, the Bangladesh Oil, Gas and Mineral Corporation Ordinance 1985, and the International Law Commission’s Articles on State Responsibility. The tribunal also referred to the two-stage attribution analysis developed in Maffezini v. Spain and concluded that Petrobangla’s conduct was attributable to Bangladesh.
On the merits, however, the tribunal ruled entirely in Bangladesh’s favour. Applying Bangladeshi law, English common law and principles of contractual interpretation, it relied on authorities including Prenn v. Simmonds, Godhra Electricity Co. Ltd. v. State of Gujarat and Lord Denning’s judgment in Amalgamated Investment & Property Co Ltd v. Texas Commerce International Bank Ltd. The tribunal held that Chevron had accepted and performed under the tariff arrangements for many years and was therefore prevented from advancing a contrary interpretation. Upholding Bangladesh’s plea of estoppel by convention, the tribunal found that the parties’ consistent course of dealing established the proper interpretation of the agreements and that it would be unjust to reopen a dispute that had long been treated as settled. Accordingly, the tribunal dismissed Chevron’s claims and confirmed that the contractual pipeline tariffs remained payable to Petrobangla. This decision is regarded as a significant victory for Bangladesh, illustrating the application of state attribution principles under the ICSID Convention while reaffirming the importance of commercial certainty, consistent contractual performance and estoppel in long-term international energy agreements.
Footnotes
Chevron Bangladesh Block Twelve, Ltd. And Chevron Bangladesh Blocks Thirteen and Fourteen, Ltd. v. Bangladesh ICSID Case No. ARB/06/10