HIALSA is delighted to launch a new stream of virtual programming: the Masterclass Workshop series! Our new series will be educational, inclusive and interactive.
Educational: Each session will begin with a lecture on the titled theme from a thought leader before the interactive ‘problem’ by way of a case study is introduced.
Inclusive: We aim to cater to both beginners and those who have some experience in arbitration through our multilayered problem scenarios and simulations. Our expert panelists are diverse and will range from different sectors, levels of expertise and geographic regions. For participants in the audience who want to simply watch and not speak, there is room for all. This aims to be a safe space where all are welcome.
Interactive: Our new ‘problem’ by way of case study component will allow for the audience to get creative and problem-solve in breakout rooms with the panelists, other participants, and members of HIALSA’s board. Participants can also expect prizes along the way as well as a certificate for participation dependent on attendance.
We are delighted to have secured world leading practitioners, judges, academics and public interest professionals and look forward to seeing you all soon.
The VPs for Masterclass Workshop are Richard Allemann (LL.M.’22), Suleyman Wellings-Longmore (LL.M. 22′) and Daniel Walker (J.D. 24′). Please direct sponsorship inquiries and media inquiries to email@example.com.
Masterclass Workshop organized by Harvard International Arbitration Law Students Association: Preliminary Determinations in International Arbitration: Pathways to Efficiency or Treacherous Shortcuts?
Fact Problem for Discussion: Worldwide Ammonia Ltd v Société nationale du gaz naturel de Mediterraneo
- The Parties
The Claimant, Worldwide Ammonia Ltd (“WAL”), is an Equatorianian ammonia producer that owns two ammonia plants in the island nation of Mediterraneo, which enjoys significant natural gas reserves. WAL uses natural gas both to power its ammonia plants and as raw material in the production of ammonia. WAL purchases natural gas from the Respondent, the Société nationale du gaz naturel de Mediterraneo (“SNGM” – the state-owned gas company of Mediterraneo), pursuant to a gas supply agreement (the “GSA”). SNGM is a monopolistic, mid-stream aggregator of gas. In other words, it purchases gas from upstream suppliers under supply contracts, accumulates the gas via its network, and then sells the gas to a variety of downstream customers, both international and domestic.
- The GSA
The GSA is to run for a six-year term from 1 January 2017 to 31 December 2022 and is governed by Equatorianian law. The relevant provisions of the GSA are as follows:
Article 2: Supply by SNGM
2.1 For every 24-hour period of the contract’s duration, unless otherwise specified by WAL, SNGM shall supply to WAL no less than 34,000 MMBTU of natural gas (the “Daily Quantity.”)
Article 3: Commercially Reasonable Efforts
3.1 SNGM acknowledges the importance of a stable supply of gas to WAL’s business and shall use all commercially reasonable efforts to ensure continuity of gas supply to WAL.
Article 6: Right of Extension
6.1 At any time between 1 January 2021 and 30 June 2021, WAL may give notice that it wishes to extend the contract for a further six-year term so long as there is: (i) continued availability of a gas supply; and (ii) a price that is economic for both SNGM’s and WAL’s requirements.
Article 11: Force Majeure
11.1 SNGM shall not be in breach of its obligations under Article 2 or incur any liability to WAL for any losses or damage suffered by WAL if, and to the extent that, SNGM was prevented from carrying out those obligations by, or such losses or damages are caused by, a Force Majeure Event.
11.2 A “Force Majeure Event” shall mean an event beyond the control of SNGM, which prevents SNGM from complying with its obligations under this contract, including acts of God, war, hostilities, rebellion, insurrection, contamination by radioactivity from any nuclear fuel, strikes, riots, lockouts, shortages, failures in upstream supply (not including scheduled maintenance) solely due to a force majeure event under the relevant upstream supply contract, and acts or threats of terrorism.
- The Dispute
On a number of days since the commencement of the GSA, SNGM has curtailed the supply of gas to WAL and on each occasion has given one of two reasons for doing so: unforeseen shortfalls in upstream supply or urgent maintenance works. WAL gave notice on 30 April 2021 that it wished to exercise its right under Article 6.1 to extend the GSA for another six-year term. SNGM responded on 31 May 2021 that the conditions in Article 6 were not met and that consequentially the GSA would not be extended. It has indicated in correspondence that it will not supply gas to WAL past the GSA’s end date of 31 December 2022.
Following a period of negotiation, WAL commenced arbitration on 2 January 2022 pursuant to the arbitration agreement in the GSA, which provides for arbitration under the Mediterranean Arbitration Act. WAL made two main claims in its Request for Arbitration: (a) that SNGM has breached its daily supply obligation under Article 2.1 on 1,200 separate days over the term of the GSA (the “Supply Claim”); and (b) that WAL validly exercised its extension right under Article 6.1 on 30 April 2021 (the “Extension Claim”). Furthermore, WAL claimed that if the Tribunal finds there was no continued availability of a gas supply on 30 April 2021 (see the condition in Article 6.1), that was wholly attributable to SNGM’s actions and omissions. SNGM signed too many GSAs with other downstream customers and explored no other means of acquiring upstream supply (which together amount to a breach of Article 3.1). WAL concluded that: “SNGM cannot defeat WAL’s extension right by means of a breach of Article 3.1 of the GSA.”
In its Answer, SNGM responded that many of the alleged breaches that together comprise the Supply Claim are time-barred by dint of Equatoriana’s three-year limitation period for actions founded on breach of contract. Further, that any and all failures of supply under Article 2.1 are excused under Article 16.2 as they were caused by Force Majeure Events (whether unforeseen shortfalls in upstream supply or urgent maintenance). In respect of the Extension Claim, SNGM said first that the question of a “price that is economic” is non-justiciable as the Tribunal has no right to judge SNGM’s subjective business requirements. In any event: (a) neither condition in Article 6.1 was met; and (b) any breach of Article 3.1 by SNGM (of which there was none) cannot lead to liability for non-satisfaction of the conditions in Article 6.1 – they are unrelated contractual provisions.
In its Reply, WAL elaborated on its claims as set out in its Request, but also stated that: (a) SNGM’s breaches of Article 2.1 were a “continuing breach” that tolled the limitation period; (b) that SNGM has provided no upstream force majeure notices that might allow it to invoke Article 16 in respect of curtailments caused by failures in upstream supply and this is fatal to any claim of force majeure as a matter of contractual construction because failures in upstream supply can only constitute force majeure where there is a force majeure event under the relevant upstream contract; and (c) the question of a “price that is economic” for each Party’s requirements can be readily appraised by a tribunal and is therefore justiciable. WAL has requested on three separate occasions in correspondence that SNGM produce any upstream force majeure notices but SNGM has not produced any such notices.
Following the constitution of the Tribunal, SNGM then averred in a short letter that it would be inappropriate for it to submit any upstream force majeure notices (should they exist) at this early stage of the proceedings, and that any such notices would be disclosed in the usual manner at the document production stage of the proceedings.
The Tribunal has convened the first case management conference at the end of February 2022. The Tribunal has indicated that it has availability for a one-week hearing in August 2022, and then a further three-week hearing in the latter half of 2023. As noted, the GSA is scheduled to end on 31 December 2022 and SNGM has indicated it will not supply WAL with gas beyond that date on the basis that the extension right in Article 6.1 was not validly exercised by WAL.
- Questions for Discussion
- What issues and points of law do you think might be proposed by either Party as suitable for preliminary determination at the August 2022 hearing?
- What arguments might be made in favour or against each issue/point of law being determined on a preliminary basis?
- What other procedural directions might aid the efficient and cost-effective resolution of this dispute and what arguments could be advanced in support of such directions?
 The limitation period under the law of Equatoriana for actions founded on breach of contract is three years.
 There is no dispute between the Parties as to the validity and interpretation of the arbitration agreement. Moreover, arbitral tribunals have a wide discretion to issue procedural directions under the Mediterranean Arbitration Act.