Supply & Services Firm vs. Cyprus-Based Oil & Gas Company
Claim Type – Breach of Supply Contracts & Recovery
Jurisdiction – UAE, Dubai

CHALLENGE

Practiclaim professionals were approached by Claimholder’s management regarding a possible DIAC arbitration dispute against a Cypriot oil and gas company. The dispute arose over supply contracts for the development of an oilfield in Iraq.

The dispute was worth USD 3,500,000 – excluding possible counterclaims – which did not justify lengthy procedures. A procedural multi-contract limitation and cost-efficiency issue were at stake, and winning was unlikely.

Previously, a top 50 international law firm had provided preliminary legal opinions for each contract for a legal fee of circa USD 50,000 legal cost, accompanied by hourly fee proposals that reached USD 1 million – despite the minimal claims value.

As a result of cost-sensitivity, current cash-flow situation owing to oil price volatility and COVID-related hurdles, the arbitral process was never initiated. No other firm took on this mandate.

PRACTICLAIM SOLUTION

A Practiclaim Pre-Assessment note was prepared after multiple discussions with Claimholder’s key advisors, taking into account the claim’s value, prospects and cost-sensitivity.

The decision was made to consider initiating a single multi-contract claim at DIAC rather than filing separate claims which was not cost effective. In addition to pressing for early settlement, Practiclaim sought to settle the jurisdictional issue via an interim award or by way of a summary recourse to the court.

The claim manager suggested boutique legal firms that would allow a multi-stage fixed fee with caps –for issuing a notice of dispute, initiating a multi-contract arbitration claim, addressing the jurisdictional matter, and conducting costly arbitration work if the case is to proceed, plus a settlement success mark-up. Clearing the jurisdictional hurdle for minimal cost set the stage for negotiations and consideration of the defendant’s position to gain visibility into success prospects.

To facilitate cross-collateralization, portfolio financing options were suggested, based on the Claimholder’s other arbitration claims. This financing would follow a gradual fee scheme, and be obtained at no substantial cost, in accordance with the Practiclaim model.

In conclusion, this comprehensive approach led to one single arbitration due to the varying procedural complexities in each contract claim.

EFFECT

Previous legal advice obtained by the Claimholder was insufficient in providing the corporate decision makers with practical information. There was costly legal expertise, heavy hourly-based disbursements were unnecessary or to the least premature, the fee was out of proportion, there were no strategic aspects considered, only speculative legal points and each claim was analyzed separately without considering the commercial realities and financial unity. The settlement route should have been the goal throughout, with all claim stakeholders’ interests aligned.

Practiclaim enabled the Claimholder to move forward without risking a lengthy dispute on the merits, as viable options and settlement projections were provided. It was recommended early on that the substantial settlement be reduced and mutual release be arranged, together with a bespoke financing model, thus offering a commercially and financially viable solution. The Claimholder was able to offload its risk, minimize its litigation budget and remove arbitration costs off the balance sheet.

Practiclaim addressed the problem; delivering a tailored commercial approach to progress the matter and bring it to an end, instead of theoretical advice that did not help the Claimholder.

© 2022 Practiclaim | Prior results do not guarantee a similar outcome.