By August 2, 2016 Read More →

Pemex loses US appeal of $406M arbitration award


In 2004, Pemex rescinded a construction contract for oil platforms in the Gulf of Mexico after the platforms were largely completed and ejected workers from the sites.  Company photo.

Pemex contract dispute with US engineering, construction company

By Nate Raymond

NEW YORK, Aug 2 (Reuters) – A U.S. appeals court on Tuesday upheld a decision confirming a $465 million judgment won through arbitration by a unit of KBR Inc in a contract dispute with Mexico’s national oil company, Pemex.

The 2nd U.S. Circuit Court of Appeals in New York let stand a decision confirming a $300 million arbitration award for KBR’s COMMISA unit in Mexico even though a Mexican court had nullified it, and upheld a lower court ruling that added $106 million to the judgment. The judgment also includes $59 million of interest, court papers show.

It is unclear whether Pemex plans to make a further appeal. The company did not immediately respond to requests for comment.

KBR Chief Executive Stuart Bradie in a statement said the engineering and construction company is pleased with the decision, over “an amount long overdue for work performed decades ago.”

The decision follows years of litigation between COMMISA and a Pemex subsidiary that began in 2004, and which resulted in court challenges in two separate countries.

The dispute stemmed from agreements COMMISA reached with Pemex beginning in 1997 to build oil platforms in the Gulf of Mexico.

Difficulties between the two companies emerged as Pemex insisted the platforms be fully constructed before being placed in the Gulf of Mexico, which COMMISA considered impractical, according to court papers.

In 2004, Pemex gave notice that it intended to rescind the contract, saying COMMISA had failed to meet various terms and had abandoned the project. Pemex also seized the platforms, which were largely complete, and ejected COMMISA from the work sites.

COMMISA subsequently began legal proceedings, including an arbitration demand filed with the International Chamber of Commerce (ICC). An ICC tribunal in 2009 found that Pemex breached its contracts with COMMISA and awarded $300 million.

U.S. District Judge Alvin Hellerstein in Manhattan subsequently confirmed the award in August 2010. Pemex appealed to the 2nd Circuit and also challenged the award in Mexico, where a court nullified it.

The 2nd Circuit then sent the case back to Hellerstein to consider the effect of the Mexican court’s ruling. He ultimately declined to defer to that decision and again confirmed the award.

The case is Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-Exploración Y Produccion, 2nd U.S. Court of Appeals, No. 13-4022.

(Reporting by Nate Raymond in New York; Editing by Alden Bentley, Steve Orlofsky and Chris Reese)

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