KUALA LUMPUR (Dec 5): The Court of Appeal has reduced the value of an arbitral award against a wholly owned subsidiary of MISC Bhd (KL:MISC) in its long-running legal dispute with Sabah Shell Petroleum Company Ltd (SSPC) over the Gumusut-Kakap semi-floating production system (semi-FPS).
In a filing on Friday, MISC, which is 51%-controlled by Petroliam Nasional Bhd (PETRONAS), said the court had allowed in part the appeal by its unit Gumusut-Kakap Semi-Floating Production System (L) Ltd (GKL) against the dismissal of its bid to set aside parts of the 2020 arbitral award and the enforcement order in favour of SSPC.
The decision reduces the value of the arbitral award to SSPC to US$200 million (RM822.20 million), down from US$330.17 million previously, excluding costs and interest.
The dispute stems from a 2012 agreement under which GKL constructed and leased the Gumusut-Kakap semi-FPS to SSPC for crude oil production offshore Sabah.
Contractual disagreements later arose over additional lease rate payments, charges for variation works and claims of limited functionality and defects in the semi-FPS.
GKL initiated arbitration in 2016, seeking payment for completed variation works and increased day rates it said were owed under the contract, resulting in awards of up to US$265.9 million across two adjudication decisions, of which approximately US$73 million in increased day rates was paid by SSPC.
But SSPC responded in 2017 with a US$588 million counterclaim, alleging defective work, liquidated damages and a refund of amounts paid under the adjudication decisions.
In April 2020, the Asian International Arbitration Centre awarded SSPC US$339.7 million comprising rectification costs, liquidated damages and a refund of additional lease payments after the tribunal upheld elements of its counterclaim relating to alleged defects and limited functionality.
The tribunal also allowed GKL’s claims for variation works, but with offsets for rectification manpower costs and conversion of the remaining balance into a reduced additional lease rate compared to the earlier adjudication outcome.
In the latest judgement by the Court of Appeal, MISC said the court granted an interim stay of execution, conditional upon SSPC filing a formal stay application within 14 days. Both parties have one month to seek leave to appeal to the Federal Court.
"GKL will further review its position upon receipt of the full written grounds of judgement," MISC added.
MISC shares closed nine sen or 1.2% lower at RM7.43 on Friday, with a market capitalisation of RM33.17 billion.