MISC Annual Report 2017

NOTES TO THE FINANCIAL STATEMENTS 313 Financial Statements 42. SIGNIFICANT EVENTS (CONT'D.) Material litigation (cont'd.) (i) Gumusut-Kakap Semi-Floating Production System (L) Limited (“GKL”) and Sabah Shell Petroleum Limited (“SSPC”) (cont'd.) Arbitration Proceedings: On 30 May 2017, SSPC filed its Statement of Defence and Counterclaim (“SDCC”). In its SDCC, SSPC refuted GKL’s claims and is counterclaiming against GKL for alleged defective work, alleged limited functionality of the Semi-FPS, liquidated damages and a refund of the full amount paid to GKL under the First Adjudication Decision. SSPC’s claims cover, among others, the following: i The sum of approximately USD583 million together with any applicable interest; ii Repayment to SSPC for the full amount paid to GKL under the First Adjudication Decision; and iii The costs and expenses of the Adjudication and Arbitration Proceedings. GKL filed its Reply and Defence to Counterclaim on 29 August 2017, which was followed by SSPC’s filing of its Statement of Rejoinder and Reply to Defence to Counterclaim (“RRDC”) on 24 November 2017. In SSPC’s RRDC, the amount of approximately USD583 million included in SSPC’s original counterclaim was revised to approximately USD588 million. SSPC’s revision also claimed repayment of the full amount paid to GKL under the Second Adjudication Decision. Thereafter GKL filed its Statement of Rejoinder to Counterclaim (“RCC”) on 22 December 2017. Pleadings have now closed with the filing of GKL’s RCC on 22 December 2017. Parties are now in the process of carrying out procedural directions given by the Tribunal such as the production of documents, finalisation of expert witnesses and drafting of witness statements in preparation for the Arbitration hearing due to be held from 25 February 2019 to 16 March 2019. GKL maintains its view on the strength of its claims against SSPC and is of the view that GKL has a good legal position to resist and defend against SSPC’s counterclaims. The Legal Proceedings initiated to resolve the contractual disputes will not have any impact on the operation of the Semi-FPS or the performance of the Contract, including the lease payments which continue to be paid by SSPC since October 2014. The lease period pursuant to the Contract remains intact and GKL continues to receive payment from SSPC for the relevant lease period. Injunction: On 20 February 2017, GKL was ordered by the High Court to release the Bank Guarantee sum of USD20 million together with interest. GKL has filed an appeal at the Court of Appeal against the High Court’s judgment. The hearing date for the appeal has been set for 10 April 2018.