The International Chamber of Commerce has made a landmark decision in its arbitration proceedings over the high-profile financial dispute between the Dow Chemical Company and the Petrochemical Industries Company of Kuwait. The resolution of this commercial conflict, watched by industry professionals and interested stakeholders, brought an end to the long-lasting dispute with substantial economic impact. In this regard, it is essential to provide a brief narrative of the dispute before detailing the arbitration process and key findings. In 2008, Dow entered into a failed joint venture agreement with PIC under which the parties planned to establish the K-Dow Petrochemicals partnership. Its formation was set to leverage global resources and expertise to create innovative and durable petrochemical products to serve a broad range of industries. However, in December 2008, the Kuwaiti Government enacted significant pressure on PIC to withdraw from the global partnership while noting the global financial crisis as a relevant factor. This put Dow in considerable strategic difficulties given their significant investment plans. In 2009, Dow initiated arbitration proceedings against PIC. The arbitration was held in the ICC court in Paris, which is reputable for its adherence to fair and strict arbitration procedures. An ICC panel provided a comprehensive ruling with significant repercussions for all sides. Key rulings included:
Interest and Legal Costs:
In addition to the compensation amount to be paid to the principal, PIC is required to pay interest on the damages awarded, back to the date of the agreement’s termination. The interest is capitalized annually, adding significantly to PIC’s burden. Dow may also recover the legal costs it incurred during arbitration.
Implications for Commercial Behavior in the Future:
The judgment highlights again the need for the best possible contractual adherence, especially in large international business dealings. The detainment of the Q50 vetoes its entry in World Supersport till 2017:53British WSBK bosses urged not to rush Qatar’s decision:50Share Facebook Tweet Pinterest Email The International Chamber of Commerce has ruled that the International Automobile Federation would be legally entitled to allow a brake supplier other than Brembo to provide parts to Formula 1 teams – if similar construction problems with Brembo brakes reoccurred.
Confidentiality and Reporting:
The parties are obligated to issue public statements recognizing the result of the arbitration without revealing the detailed financial particulars or internal discussions by the panel which sustains the transparency and integrity of the arbitration process.
Implications for the Industry
The decision in this sensational arbitration will serve as an important guidepost in the global community for the petrochemical and indeed in international business generally. The decision also underscores the potency of arbitration for resolving sophisticated financial disputes, and the importance of the ICC in providing assurance that commercial agreements are rendered enforceable.
In her law firm practice in U.S. and international M&A and joint ventures, she has seen time and again that a lawfully imposed quid pro quo–such as access to the courts, access to a license, or acceptance into a business model–can serve not only as a financial remedy for a company like Dow but help solidify its strategic vision, all the while sending a powerful message to other potential partners of how much value can be at stake when the rules of business dealing are followed. On the face of it, the PIC outcome appears to be a lesson that negotiating and entering into legally binding agreements is expensive and politically consequential, the risks of which are reduced by not leaving them.
The ICC’s arbitration decision in the case of Dow v. PIC is a stark reminder of how essential effective implementation of contracts is to preserve both the continuity and the reliability of the international business environment. As industries grow and global economic challenges increase, the importance of arbitration in avoiding disputes and reaching equitable solutions remains more important than ever.
