The US’ Dow Chemical and Kuwait’s Petrochemical Industries Company (PIC) are to try and settle a $2.5bn dispute over their aborted K-Dow petrochemicals joint venture at international arbitration hearings in the second quarter of this year.
Sources close to both companies confirm that the hearings will be held in London at an undisclosed date between April and June 2010.
UK law firm Denton Wilde Sapte will represent Dow while the UK’s Ashurst is advising PIC on the case. Because arbitration hearings are private, neither firm is obliged to disclose details related to the case and both Dow and PIC declined to comment on the matter.
Senior lawyers say that the case is likely to be held under rules similar to those the companies agreed for their other petrochemicals joint venture, Equate Petrochemicals Company.
Under the 1995 Equate joint venture agreement, any disputes between the companies are to be settled under London Court of International Arbitration (LCIA) rules.
Dow has repeatedly said that it intends to recoup the $2.5bn ‘breakout’ fee the companies agreed to if state-owned PIC cancelled the deal.
There were signs in mid 2009 that the companies were trying to settle the matter out of court. However, one lawyer with experience in arbitration cases says that the fact that the companies have decided to ask an independent body to settle the case suggests they have exhausted all other options.
“This is really happening,” says one source close to Dow. “It shows that [Dow] is serious.”
Dow, the second largest chemicals producer in the world, was verbally informed on 28 December 2008 that the 50:50 K-Dow joint venture had been cancelled by Kuwait’s Supreme Petroleum Council (SPC), following opposition to the deal in parliament (MEED 29:12:08).
The final agreement to form the company, which was valued at about $17.4bn, had only been announced on 4 December and the K-Dow project was due to be inaugurated on 1 January 2009.