Govt hires US law firm to collect unpaid tax from KrisEnergy

Bangladesh has appointed an international law firm to collect $36.8 million as unpaid income tax from Singapore-based multinational company KrisEnergy.
After receiving the prime minister’s nod, US-based law firm Foley Hoag LLP was given the task on March 30 this year. The firm will be paid $8,50,000 as legal fees for the job, a senior official of Petrobangla said.
Bangladesh and KrisEnergy are locked in an arbitration battle at the International Centre for Settlement of Investment Disputes (ICSID) in the UK.
Earlier this year, KrisEnergy brought the case to ICSID refusing to pay taxes on its income from producing gas during fiscal years 2008-09 to 2012-13.
Engineer M Shahinur Islam, director of PSC (Production Sharing Contract) of Petrobangla told the Business Insider Bangladesh that Foley Hoag has already begun working for Bangladesh in the legal fight.
The dispute
National Board of Revenue (NBR) claims that it owes the Singaporean company $36.8 million in unpaid income taxes from 2008 to 2013. The taxed amount is against the company’s gas production under onshore PSC Block-9.
According to the PSC contract, the contractor of block 9 has an obligation to submit the income tax return of the tax year through Petrobangla. However, violating the terms of the agreement, KrisEnergy (Tullow back then) submitted the return of FY03-FY09 directly to the tax authority without clearing with Petrobangla.
In addition, the multinational company did not start gas production during the FY03 to FY08 tax years. Before starting gas extraction commercially, KrisEnergy filed tax returns showing only zero income without showing the income made when it went into production.
Therefore, authorities levied a tax of $36.8 million with interest on KrisEnergy from FY09 to FY13.
Against this, the company took to local courts only to lose the cases. KrisEnergy, following this, moved to ICSID in January this year to settle the matter.
Foley Hoag’s history with Bangladesh
Foley Hoag LLP is already the legal adviser for Bangladesh in an ICSID case against Niko Resources.
Previously, the legal firm won a case in favour of Bangladesh in maritime border disputes with India and Myanmar.
Furthermore, the law firm assisted Bangladesh and BTRC in a case in the US Federal Court.
From Tullow to KrisEnergy
In 2001, Tullow Bangladesh signed a PSC (Product Sharing Contract) for extracting gas at Block-9 located at Cumilla’s Bangura gas field. Canadian energy company Niko Resources was working jointly with Tullow in that period.
Niko owned 60 percent share of the gas field, Tullow 30 percent, and Bangladesh Petroleum Exploration and Production Company (BAPEX) 10 percent share.
In April 2013, KrisEnergy bought Tullow’s 30 percent share for $42.5 million.
Tullow was supposed to be renamed as KrisEnergy Bangladesh Ltd. However, it couldn’t be done due to the official complications.
At present, through five wells from the Bangura field, a total of 46.2 mmcfd gas is supplied to the national grid.