An arbitral tribunal must operate within the agreed scope of arbitration; courts will not intervene unless there are clear grounds established under specific legal provisions.

Mary Lim J:

THE PARTIES

[1]The plaintiff was the respondent in arbitration proceedings initiated by the defendants. The parties have been to court before in relation to the interim award rendered by an arbitral tribunal comprising Sir Anthony Evans, Dr AS Anand and Mr Andrew Berkeley (see The Government of India v Cairns Energy India Pty Ltd & Ors [2011] 6 MLJ 441

[2]The plaintiff’s application is made pursuant to sub-paras 37(1)(a)(iv) and (v) and (b)(ii) read with sub-ss 30(2)(5) Arbitration Act 2005

(a)the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;

(b)the award contains decisions on matters beyond the scope of the submission to arbitration;

(c)the award is in conflict with public policy.

[2014] 9 MLJ 149 at 156

[3]Specifically, she averred that the arbitral tribunal dealt with and decided the dispute in a manner not falling within the terms of the submission to arbitration within the meaning of s 37(1)(a)(iv)Act 646

(a)had failed to decide the BDC issue on the basis of capped costs involving 21 wells as expressly stipulated in cl 15.5(c)(xi) of the production sharing contract; and

(b)had disregarded the stipulation in cl 15.5(c)(xi) and decided on the costs of drilling an developing the seven wells separately for BDC purposes.

[4]Further, she claimed that the arbitral tribunal’s decision in para (I) of the award related to matters beyond the scope of submission to arbitration and as such offended s 37(1)(a)(v)Act 646

THE PRODUCTION SHARING CONTRACT

[5]In order to appreciate the plaintiff’s arguments, it is useful to review the contractual arrangements between the parties. The underlying contract between the plaintiff and the defendants is actually an agreement made with another party, that is, the Oil and Natural Gas Corporation Ltd (‘ONGC’, substantially owned by the plaintiff). In this production sharing agreement dated 28 October 1994 (‘PSC’), the defendants (‘the companies’) together with ONGC (‘contractor’) were appointed by the plaintiff to commercially explore and develop an oil and gas field known as the ‘Rawa Oil and Gas Field’ located in the offshore area in the Bay of Bengal in India. The designated oil fields under the defendants’ charge were covered by a plan known as the ‘Rawa Development Plan’ (‘RDP’) submitted by the defendants. The RDP was accepted and made part of the PSC.

[6]Pursuant to articles 11.1 and 11.2 of the PSC, the defendants were required to carry out petroleum operations as per the RDP. For these operations, the defendants could recover actual expenditure incurred in the exploration/development of and production from the Rawa Field. However, under articles 15.5(b) and (c), in respect of development cost, the costs recovery were restricted to USD188.98m plus 5% in what is called the ‘Base Development Cost’ (‘BDC’). The plaintiff referred to this cost cap as the ‘BDC cap’. The PSC envisaged that the revenue generated under the PSC was to be shared between the plaintiff and the defendants. Such recovery however, did not include the profit element.

[7]Now, in the RDP was a work program. In that work program, there was specific reference to the cost of drilling 21 wells which involved drilling 19 development wells and two gas production wells.

[2014] 9 MLJ 149 at 157

[8]In March 1999, the defendants had drilled 14 out of 21 wells. They had reached the production rate of 35,000 barrels of oil per day (‘BOPD’). The remaining seven wells were then reclassified as ‘additional work program’ which they claimed fell outside the BDC cap. The defendants claimed that they were entitled to recover th