San Leon Energy provides an update on the proceedings in the International Court of Arbitration of the International Chamber of Commerce, regarding the assets of Energia Zachód Sp. z o.o..
As announced on 11 April 2013, the Company received notice from the Secretariat of the International Court of Arbitration of the International Chamber of Commerce confirming the submission of a Request for Arbitration by Avobone N.V. and Avobone Poland B.V. in relation to the purchase by Aurelian Oil & Gas, San Leon's subsidiary, of Avobone's 10% shares and loans in Energia Zachód Sp. z o.o. - the titleholder of the Siekierki asset.
At the time San Leon reviewed the Request with counsel and believed the claims to be substantially without merit. San Leon contested these claims robustly at the hearing of the Court of Arbitration and believed it had a material advantage in the case.
The findings of the Court of Arbitration were received by the Company on Saturday 23rd May 2015, and provide for a total payment by Aurelian Oil & Gas (a subsidiary of San Leon plc) of approximately £13 million including costs. Two-thirds of the main award relates to the repayment of a loan provided by Avobone to Aurelian. In Aurelian's view, this loan was a standard industry-practice mechanism that was used to fund Avobone's share of the drilling and other field-related costs in a tax-efficient manner, and should only have been repayable had Avobone exited after the field had generated sufficient cashflow to repay the loan. As of the timing of Avobone's exit in early 2013, the field had yet to generate cashflow.