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Petrotimor v. ConocoPhillips

Lawsuit dismissed by United States Courts

March 2004 - November 2009

La'o Hamutuk created this web page because information and accuracy is lacking regarding this lawsuit and its outcome. Although media were quick to report the sensational allegations when the case was filed in 2004, no journalist anywhere reported the dismissal of the case in the six weeks before La'o Hamutuk called it to public attention.

More information is on the OilWeb portion of this website, including the 2003 dismissal of Petrotimor's case in Australian court, their 2004 case against ConocoPhillips in US courts and its continuation in 2007, and the court's dismissal of the case because "it does not plead facts that, if true, would show that its loss was proximately caused by the bribery."

Petrotimor's backer Oceanic Exploration appealed the decision against them (docket), and the Fifth Circuit Court of Appeals upheld the lower court dismissal of the case in November 2009.  Follow this link for more information on the appeal proceedings.

 

Legal Process

In the United States, any individual, group or company can file a civil case against anyone else without providing evidence or proof before the case is heard. Often, such cases are privately negotiated away in an out of court settlement, with the defendant (the person being sued) paying the plaintiff (the person bringing the suit) to drop the case. That did not happen in this case.

A lawsuit like this goes through several phases before the alleged wrongdoing is evaluated:

  1. After determining that correct procedures have been followed and the court has jurisdiction, the judge decides if each of the defendants' wrongful actions would have caused harm to the plaintiffs, assuming that the facts are as the plaintiff claims.  In this case, the judge ruled that some defendants, including the TSDA, could not be responsible even if everything the plaintiff charged was true, but allowed the case to proceed against ConocoPhillips.

  2. Then, still assuming everything the plaintiff charges is true, the judge evaluates whether the harm that the plaintiff claimed was done to them was caused by the defendants' alleged actions, and whether that harm would not have occurred if the defendants had not acted improperly. This case was dismissed because the judge found Oceanic's claim of harm implausible, and did not believe that Oceanic would have secured rights to develop Timor Sea oil even if the defendants had not done what Oceanic claimed.

  3. If the judge had found that Oceanic's rights were injured by ConocoPhillips' alleged actions, the court would then have heard witnesses and evaluated evidence to determine if ConocoPhillips had actually done the misdeeds claimed by Oceanic. However, this case was dismissed before that became necessary.

  4. Finally, if the court had found that wrongdoing by the defendant had injured the plaintiffs, it would have ordered the defendant to pay the plaintiff.

Background

In 2004, the U.S. company Oceanic Exploration and its Petrotimor subsidiary filed a multi-billion dollar lawsuit against ConocoPhillips, the Timor Sea Designated Authority (TSDA), Pertamina and others. The lawsuit initially alleged that ConocoPhillips benefited illegally from the Indonesian occupation of Timor-Leste, and that ConocoPhillips (then known as Phillips Petroleum) bribed Prime Minister Mari Alkatiri and other Fretilin officials to continue contracts it had signed with the Australian-Indonesian Timor Gap Joint Authority during the illegal Indonesian occupation, rather than have a new bidding process in 2002 or revoke Indonesian-era contracts in favor of Portuguese-era ones. Oceanic claims that in 1974 Portugal awarded it an exclusive exploration contract for the entire Joint Petroleum Development Area (JPDA), and that ConocoPhillips illegal activities deprived Oceanic of its legal rights to exploit Timor Sea Oil. A similar lawsuit was dismissed by Australian courts in 2003 for lack of jurisdiction.

The case was filed in U.S. Federal District Court in Washington, DC on 1 March 2004 and assigned to Judge Emmet G. Sullivan.

Oceanic demanded US$10.5 billion in damages, multiplied by three because they claimed that racketeering and corruption deprived them of their rights. Oceanic alleges that ConocoPhillips bribed Timor-Leste Prime Minister Mari Alkatiri and Fretilin members of Parliament to secure the Timor Sea Treaty and a favorable tax regime. The allegations got a lot of coverage in Timorese and international media, and were immediately denied by the Prime Minister and the Fretilin bancada in Parliament.

A year later, Judge Sullivan rejected Oceanic's initial complaint, and Oceanic filed a new version on 1 March 2005, dropping some allegations and adding others. In September 2006, the judge dismissed the case against the TSDA and subsidiaries of ConocoPhillips, but allowed it to proceed against the parent ConocoPhillips company. ConocoPhillips filed its first answer to the substantive allegations in October 2006.

In February 2007, Judge Sullivan accepted ConocoPhillips' request that the case be transferred to Houston, Texas, where it continued before judge Lynn N. Hughes. Some hearings and filings took place over the next four months.

On 16 April 2008, Judge Hughes dismissed the entire case, issuing a final judgment the following week. About the bribery allegations, the judge wrote

Oceanic’s asserts abstract operative facts – bribery, hostility, causation, and damage. It supports the abstractions with over 50 pages of trivia. The details are not cogent; we are left with a metaphysical leap from this list of gossip and debris of ConocoPhillips’ working in the region to Oceanic’s particular interpretation of why it lost in Timor. For instance, Oceanic pleads that the president of ConocoPhillips flew to East Timor to hand an official a suitcase of cash. Implausibility aside, Oceanic simply can not link this fact with its injury. That is, it can not possibly have an idea why the president of an international corporation would personally deliver cash in a briefcase to an official of East Timor. It has assumptions – nothing more.

Judge Hughes concluded:

Oceanic speculates that absent the bribery:

  • East Timor would have chosen to abrogate the concessions.

  • Australia would have acquiesced.

  • East Timor would have reopened bidding.

  • Oceanic would have been permitted to bid.

  • Oceanic would have won the bid.

  • Oceanic would have profitably developed the concession.

To recover, Oceanic must show what would have happened absent the bribe to a high degree of probability. It can not. Assuming ConocoPhillips bribed officials of East Timor not to reopen bidding, the decision was made not by any one official but by an entity representing all of East Timor. This court will not imagine the decision-making process of East Timor, Australia, Indonesia, Oceanic, and dozens of oil companies.

In Oceanic’s long complaint – twice amended, not counting its practice run in the Australian courts – it has not pleaded facts that, if true, show its injury is connected to the acts it describes. If ConocoPhillips acted corruptly in East Timor, Oceanic was injured in common with oil companies, consumers, and the rule of law everywhere.

Assuming its facts – as opposed to assumptions and contentions, legal theories, and demands – to be true, Oceanic Exploration Company’s pleadings do not show that the wrongful acts of ConocoPhillips and ConocoPhillips Company proximately caused the harm it claims.

Oceanic may well have been the victim of international politics in 1974 when it lost its Portuguese concession to the Indonesian invasion. It cannot recover for its losses to political risk 30 years ago – not from Indonesia, not from ConocoPhillips.

Oceanic Exploration Company and Petrotimor Companhia de Petroleos, S.A.R.L. will take nothing from ConocoPhillips and ConocoPhillips Company.

In May 2008, Oceanic Exploration and Petrotimor appealed the decision to the U.S. Fifth Circuit Court of Appeals. The Appellate Court accepted filings and held oral arguments. On 6 November 2009, the Appeals Court issued an opinion that they "agree with the district court that Oceanic failed to set forth a plausible theory of proximate causation and accordingly affirm" the lower court ruling and rejected Oceanic's appeal, ordering Oceanic to pay the appeals costs incurred by ConocoPhillips and other defendants.

Although this case, including Oceanic's detailed allegations, has been on the public record for more than four years, no prosecuting authority anywhere brought criminal charges against anyone named by Oceanic's allegations. Most likely, prosecutors in the United States, Australia and elsewhere did not find the allegations of bribery, racketeering and corruption credible enough to bring alleged perpetrators to trial.

Follow these links to relevant articles and documents

Appeals Court proceedings


 

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua D. Alberto Ricardo, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
email: info@laohamutuk.org    Web: http://www.laohamutuk.org    Blog: laohamutuk.blogspot.com