Winners also file lawsuits (+Update)

By Laura Suleimenova

Samat Serimbetov (on the left)“Cash all gone” – this expression became a common pun on the word “Kashagan”.  Enormous both by its scales and cost, Kashagan project once again has not entered final straight, despite participation in it of largest world oil and service companies. Without much effort they win the most enviable million dollar contracts in the project, but at the same time they violate the rights of the Kazakh contracting companies. An illustration to this is a difficult situation that local company Tulpar Energy Services LLP is currently facing.

Drawing Collapse

The background of this story is as follows: last year in March Worley Parsons Kazakhstan LLP (hereinafter - “WPK”) - the Australian company, Agip KCO’s contractor, announced an open tender for the purchase of structural steel elements for the construction of rail car loading facility at Karabatan. The loading facility was designed for export of recycled sulfur (and, probably, crude).

Employees of Tulpar Energy Services. On May 23, 2013 WPK announced the results of the tender and the winner was the Kazakhstan company from Mangistau region -  Tulpar Energy Services LLP that offered the lowest price (hereinafter - TESCO). On May 30, 2013 WPK and TESCO signed the contract for total amount of 843 million tenge.

According to Samat Serimbetov, TESCO director, his company fulfilled all its obligations: 

– According to the contract, we provided a bank guarantee. All work scope as per WPK’s request was insured. We mobilized equipment and 60 specialists and organized an additional workshop. We invested 38 million tenge from our funds and additionally borrowed 225 million tenge from our partners in business. And got down to work.

And then strange things started to happen. By the way, quite typical to some chaos that took place at Kashagan project since the beginning of its implementation. According to Sarimbetov, the client from the very beginning started to delay technical documentation:

- They explained to us that it is necessary to observe the priority during production of structural steel and said that other drawings are still under development and not yet ready for use. According to the contract the client sends us basic design (KM) and then we develop detailed drawings (KMD) and send them back to client for approval. Thus, we developed part of scope - the most difficult metalwork demanding a large number of detailed drawings of assemblies and connections. We did not receive the drawings for the rest of the scope. For two months, June and July, we were actively writing e-mails to the client and the part of documentation had undergone a long and difficult approval process. I developed a certain volume of documentation without approval and payment at my own risk and delivered it to Karabatan so that construction workers, who were lagging behind, could connect two industrial facilities for reception of the first Kashagan oil. Seconded Agip KCO employees to WPK Mike Petrovski, Baurzhan Nasimullin and Ivan Kostov named different reasons of delay of technical documentation. In the end, they proposed us to work according to, so-called, manufacturer’s drawings, i.e. not adapted to this project.

… And soon the Italians turned up

To recall, Worley Parsons Kazakhstan represents the British rep office of the similarly-named Australian company. On its website the company positions itself as a very successful engineering and design company that also offers a wide range of other services such as purchases, construction, consulting services. It also emphasizes its unbiased and  respectful relations to its suppliers, partners and clients.

Serimbetov says: -“ We were supposed to hand over our scope of work as per the contract terms in October, 2013. In September we informed  the client that we completed the scope, but only for 40 tons and warned that we received the approved drawings only for 40 tons instead of 250. To that WPK announced that if I don't want to work like this, then they will take the scope back and give it to the Italian “Sichim”. The Italians, as I learnt, completed the work order only by February, 2014. The client paid us fractionally for the completed scope only in November, 2013 and April, 2014. Our company is incurring huge losses due to unreasonable actions of WPK. We have salary debts and because of this we lost 50 workers who resigned. We have tax and other debts to our suppliers and partners in business.”- 

As for WPK’s participation in the construction of rail car loading facility, then according to information from our sources, Agip KCO signed with WPK a $339 million contract for design and project management, and the estimated profit of WPK at this project was nearly $60 million. If to speak about the work quality at this project, then it leaves much to be desired. As our sources informed, now due to design errors – the Kazakhstan company Isker, Agip KCO’s  general contractor at this project, is incurring losses. There is an impression that WPK management purposefully creates problems to the local companies in order to place all orders with the British or European suppliers.

Judicial Geography

TESKO filed a lawsuit to the specialized inter-district economic court of Mangistau Oblast about collecting from WPK of the missed profit and losses. But the first instance court left the lawsuit without consideration, allegedly in connection with existence between the parties of the agreement on resolution of any disputes of IUS by the International arbitration court in Almaty. The appeal board on civil and administrative cases of Mangistau Oblast court left the instruction of the court of the first instance without change, and the private complaint of the claimant was dismissed. However, Serimbetov claims that the corresponding appendices of the contract hadn’t been sent to him and, therefore, hadn’t been coordinated with him:

– The contract between our parties was signed and stamped, but the appendices stated in article 8 of the contract hadn’t been signed and stamped and I never saw them with my eyes. Therefore we demand in court to recognize them as invalid.

Now they appealed to Atyrau court – on the basis of the fact that WPK is legally registered in Atyrau.

On October 1, the specialized inter-district economic court of Atyrau Oblast refused WPK’s petition not to consider TESKO’s statement of claim about recognition of appendices as invalid. In other words, it actually recognized the right of the Kazakhstan company to defend its interests in the usual, but not in Arbitration court.

S. Serimbetov has his version of why the foreign company so persistently tries to consider the case in the International arbitration court. According to him, in court in Atyrau WPK’s interests were defended by Roman Podoprigora, who has their power of attorney and who is “part-time judge” of the International arbitration court of IUS. In order to hear the other party of the conflict, we called Worley Parsons Kazakhstan LLP, whose huge office is located near the airport highway. To our telephone call, the person who introduced herself as the assistant to the general manager Steven Cross, said that the company will not comment on this conflict. After my persistent request the person on the other side of the phone line thought a little and agreed to respond to the written inquiry of our editorial office. We are waiting for the answer.

(Update)

Peter Orrell's Letter

In the response letter signed by Peter Orrell, WorleyParsons Kazakhstan’s General Director, that came right after the publication of the article, there were no specific answers to the questions posed by the editorial office. In particular, about the reasons for transfer of the work scope to the Italian company, as well as the cost of the contract between Agip KCO and WPK, etc. Orrel’s justification was that “providing comments in response to your broad inquiry will constitute a direct breach of the undertaken contractual obligations of confidentiality”.

Tulpar Energy Services LLP is seeking invalidation of the attachments to the contract in the courts of the Atyrau Region. However, at the same time there are the judicial acts of the courts of the first instance, appeal and cassation of the Mangistau Region that have come into force, valid and are not cancelled. Those acts establish the legitimacy and validity of the contract concluded between Worley Parsons Kazakhstan and Tulpar Energy Services as well as all attachments thereof being its integral part,”-writes P. Orrell.

- In this regard, we consider it necessary to inform you that Mr. Serimbetov has disseminating the false information about Worley Parsons Kazakhstan, moreover, he allowed himself to distribute unacceptable and groundless statements about the court system and the judges, including the state ones , of the Republic of Kazakhstan (he is, possibly, talking about Serimbetov’s statement made at one of the TV channels, and also the letters addressed to Agip KCO and National Agency on Local Content Development” – L.S).

In 2014 Worley Parsons Kazakhstan filed a defamation of character law suit against Tulpar Energy Services to the International arbitration court IUS, for the protection of our business reputation. On August 01, 2014, the arbitral tribunal has satisfied our lawsuit in its entirety and established the obligation of Tulapr Energy Services LLP to withdraw the false information discrediting the reputation of Worley Parsons Kazakhstan LLP. The legitimacy of this decision was confirmed by the Specialized Interdistrict Economic Court of Almaty.

The above information should be taken into consideration in order to prevent the publication of the material that is not true.”

Thus, “Parsons” recommends us to refuse from publication, providing as arguments the  decisions of the courts of Mangistau Region and the International arbitration court. But, in doing so, they disregard the decision of the Atyrau economic court that came into force and ruled that Tulpar Energy Services has the right to further challenge Worley Parsons Kazakhstan’s position in the Kazakhstan courts. The decisions of the Arbitration court are currently at the stage of appeal at the  Almaty court (filed by Serimbetov). The first court session has been scheduled for 19 November, 2014.