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KBR Wins Appeal for Pemex Offshore Platform Award

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By MarEx 2016-08-03 21:13:06

Oil and gas engineering firm KBR announced Tuesday that it has won an appeal for a judgement of nearly half a billion dollars against Pemex's exploration and production division, PEP. 

In 1997 and 2003, PEP hired COMMISA, a KBR subsidiary, for the construction of offshore natural gas platforms in the Gulf of Mexico. In 2004, PEP rescinded the contracts and accused COMMISA of breach of contract. COMMISA won a civil arbitration award, confirmed by a U.S. district court, while Pemex won the approval of Mexican courts, which nullified the award in 2011.

The U.S. district court confirmed the arbitration award once again in 2013, and the U.S. Second Circuit affirmed that decision on Tuesday, 12 years after the beginning of the dispute. 

"Giving effect to PEP's twelfth-hour invocation of sovereign immunity shatters COMMISA's investment-backed expectation in contracting, thereby impairing one of the core aims of contract law," the court found. "The [district court] exercised discretion, as allowed by treaty, to assess whether [the Mexican court's] nullification of the award offends basic standards of justice in the United States. We hold that in the rare circumstances of this case, the [district] did not abuse its discretion by confirming the arbitral award at issue because to do otherwise would undermine public confidence in laws and diminish rights of personal liberty and property." 

KBR said in a statement that "this positive result follows a decade of litigation involving two offshore natural gas treatment, processing and reinjection platforms which COMMISA built for PEP, platforms which have been working and in use by PEP since 2004 but for which COMMISA was never fully compensated."

"We are pleased the Court affirmed this substantial judgment for KBR's subsidiary COMMISA, an amount long overdue for work performed decades ago," said Stuart Bradie, president and CEO of KBR. 

Bradie added that Pemex could still appeal the decision to the U.S. Supreme Court or seek a rehearing, leaving the door open to years of additional litigation. 

Pemex has lost money every year since 2012, including a $30 billion loss last year. The Mexican government has taken measures to support the company, including easing taxes, injecting capital and opening up leases for offshore oil and gas blocks to foreign oil firm joint ventures.