November 23, 2010
Source: The Dallas Morning News
WASHINGTON – Fort Worth oilman Dick Moncrief says he had a dream to bring Russian gas to the world market, and a deal with Gazprom dating back to 1997 to make it possible. What happened to destroy the dream and the deal is in dispute. Moncrief Oil International has been trying for five years to get it heard in a courtroom.
Down in Spring, Texas, Rodrigo Castillo runs Azurix, the remnants of an international water utility that a decade ago put $578 million into a water project in the Argentine province of Buenos Aires. The dispute over who destroyed the deal ended with an arbitration verdict against the Argentine government. So far, Azurix hasn’t gotten a dime.
Getting justice when and how you want it is never a sure thing. The uncertainties are greater when you’re wrangling with a foreign government. There are treaties, arbiters and laws that companies now use routinely to work through these spats. Sometimes, however, there’s not much to show for this system but a multimillion-dollar legal bill.
“Obviously, it does boil down to, if a country doesn’t want to pay, there’s not much recourse,” Castillo said.
Ordinarily, Moncrief said, a contract specifying international arbitration of disputes makes sense.
“When we were negotiating a contract, with the political realities and the things going on in Russia in the ’90s, we weren’t surrounded by attorneys,” he said. “It would have been a negative concept to introduce into the negotiation.”
But that meant any disputes would be left to a Russian courtroom, where Moncrief said justice is not available.
“There’s never been any question in our mind that we wouldn’t get a fair trial in Russia,” he said.
He’s tried twice to get a trial in German courts, and in federal and state courts in Fort Worth. He’s zero-for-four so far, with an appeal pending.
Gazprom attorney Michael Goldberg, who heads the international arbitration practice of Baker Botts in Houston, says Moncrief doesn’t have a case.
“Their mantra, that they can’t find a court, is just baloney,” Goldberg said. “They keep filing claims, making things up, suing different people – it’s not a matter of a court can’t hear it. It’s that they haven’t brought a single cause of action for a court to hear.”
Moncrief was among the oil companies that went to Russia after the collapse of the Soviet Union, trying to profit by helping the world’s largest oil and gas province get back on its feet. Moncrief focused on one of the largest gas fields in the world, the Siberian Yushno-Rosskoye field. Moncrief offered to bring technical expertise and capital to develop the field in return for an ownership share.
Gazprom lost ownership of the field, and then got it back. In 2005, Gazprom made a deal to develop the field with two German companies.
Azurix went to Argentina soon after its corporate parent, Enron, decided to get into global water deals. Both Enron and Argentina went bust. What remained of Azurix went to the World Bank’s International Center for Settlement of Investment Disputes, as prescribed by the U.S.-Argentina Bilateral Investment Treaty.
ICSID ruled in Azurix’s favor but said the firm greatly overbid for its utility contract in the province of Buenos Aires. It awarded Azurix $165.2 million. With interest, that’s now grown to $220 million.
Argentina does not dispute the verdict. But it says Azurix has to go to an Argentine court to get its money, which Azurix says is a ruse for retrying the case in the loser’s home court.
Azurix wants the Obama administration to step in on its behalf by denying Argentina trade preferences.
Argentina says Azurix is a Wall Street speculator that will hurt Main Street American businesses by denying them low-cost access to Argentine goods.
In September, U.S. Trade Representative Ron Kirk’s office assembled a panel to hear Azurix’s petition to penalize Argentina.
If the panel rules in Azurix’s favor, it will be up to President Barack Obama to decide whether to drop Argentina’s tariff-free access to U.S. markets.