Misen Energy AB: Misen Enterprises AB and LLC Karpatygaz Received a Second Partial Final Award

On 17 June 2020, Misen Enterprises AB and LLC Karpatygaz received a second final partial award rendered by the Arbitral Tribunal in arbitration proceeding commenced under the JAA No.3 dated 10 June 2002 (as amended and restated, further called as the "JAA") in accordance to the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. This award is a final award on those issues that were decided at this stage of the proceedings. In sum, the Arbitral Tribunal decided that JSC Ukrgasvydobuvannya should get title to the joint property only on payment in full of compensation to Misen Enterprises AB and LLC Karpatygaz. The Arbitral Tribunal fully rejected the overwhelming majority of JSC Ukrgasvydobuvannya's arguments concerning valuation of the joint property. The Arbitral Tribunal decided that:

1. Joint property should be valued solely by reference to the Depreciated Replacement Cost ("DRC") methodology. In a nutshell, DRC methodology derives the replacement cost of the asset by looking at current costs of a similar property or the costs of reproducing a replica and depreciates that cost based on physical deterioration and economic obsolescence. The Arbitral Tribunal decided that in many respects (including but not limited to allocation of fuel gas costs, application of the economic obsolesence test) the DRC method should be applicable as suggested by the quantum experts of Misen Enterprises AB and LLC Karpatygaz.

2. Value of the joint property shall not be reduced by the costs allegegly necessary to repair the Chervonodonetska BCS and amount for alleged penalties for maintainance of the Yulyivska BCS.

The Arbitral Tribunal decided that JSC Ukrgasvydobuvannya has not established any loss it allegedly suffered due to a failure of LLC Karpatygaz to engage a contractor to design and develop metering stations at certain wells under JAA. The Arbitral Tribunal also decided that JSC Ukrgasvydobuvannya should not be entitled to any damages for a failure of Misen Enterprises AB to make a full contribution under JAA. However, in light of this, the Arbitral Tribunal reduced the share of Misen Enterprises AB to 23.9% (as opposed to 50% under JAA) and the share of LLC Karpatygaz to 0.015% (as opposed to 0.01% under JAA) in the joint property.

As a result, the Arbitral Tribunal directed JSC Ukrgasvydobuvannya, Misen Enterprises AB and LLC Karpatygaz within 60 days of the date of the second partial award to agree on the net value of the joint property in Ukrainian Hryvnia as of 11 July 2018, based on the above determinations. If the parties fail to agree, the Arbitral Tribunal will determine the net value of the joint property in the final award.

Finally, the Arbitral Tribunal ordered JSC Ukrgasvydobuvannya to pay to Misen Enterprises AB and LLC Karpatygaz the majority of the legal and arbitration costs that Misen Enterprises AB and LLC Karpatygaz incurred in this arbitration.

Source: Cision
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