Shearman And Sterling

News June 30, 2022

International Arbitration Team Obtains Crucial Victory for Major Client

On 24 June 2022, our International Arbitration team secured a significant victory for our client, an international joint venture, project owner, in an emergency arbitration against a European contractor.

Our client had entered into an EPC contract with the contractor for the construction of a gas processing and export facility in Africa. Following the contractor’s failure to deliver the project on time and multiple breaches of its contractual obligations, our client decided to draw on the Performance Guarantees provided by the contractor on 7 June 2022. Three days later, the contractor commenced emergency arbitration, seeking to restrain our client from calling on the Performance Guarantees and requesting that our client be ordered to withdraw its call on those guarantees until the end of a final arbitration on the merits.

The Emergency Arbitrator issued his Order on 24 June 2022, vindicating our client’s position in its entirety. It rejected the contractor’s request that our client withdraw its call on the Performance Guarantees, confirmed our client’s right to call on the guarantees, and ordered the contractor to pay 90% of the fees and costs incurred by our client in the proceedings.

This was a key victory for our client, considering the significant financial value of the Performance Guarantees and the impact that a successful drawdown may have on negotiations between the Parties.

This is the second time that our International Arbitration team wins on all counts in an emergency arbitration arising from a call on Performance Guarantees. The team secured a victory on a similar issue last year against a different contractor in the same project.

The Team