CMS Nomeco appeals to Congress after court loss

Nick Snow
Washington Correspondent

WASHINGTON, DC, July 13 -- A producer that had its Congo (Brazzaville) production garnished by a US court to pay some of that nation's creditors is taking its case to the US Congress and the administration of President George W. Bush (OGJ, Apr. 24, 2006, p. 26).

CMS Nomeco and Nuevo Congo, US affiliates of London-based Perenco Holdings, have hired former US Rep. Geraldine A. Ferraro (D-NY) and lobbying firm Global Consulting Group, where she heads the public interest practice, to intercede in the case.

Ferraro and Andrew B. Derman, a partner in Dallas firm Thompson & Knight LLC, which represented CMS Nomeco in the case, said July 12 that a federal court's decision in Texas in favor of three hedge funds and an insurance company could make it harder for US oil and gas companies to win overseas production concessions.

US companies also could be forced to become guarantors of defaulted sovereign debt in foreign countries where they do business and to violate court orders and contracts in those countries if the decision stands, they said in a briefing for congressional staff members and the press.

"Risk is being increased as a result of this judicial process," observed economist Noel Perryman, president of the Waco, Tex.-based Perryman Group, who also participated in the briefing.

He noted that the International Monetary Fund and the World Bank are trying to restructure $2.5 trillion of developing countries' debt. "A lot of this involves the production of natural resources," he said.

Ferraro said that it might be appropriate for Congress to revisit the Foreign Sovereign Immunity Act, which was passed in 1978, and examine how it affects a foreign country's natural resources.

"There is very little sympathy for a government that doesn't pay its debt. At the same time, when a country is trying to restructure its debt, it should have access to revenues from its natural resources," she said.

Derman added, "It might help the World Bank and the IMF restructure debt because vulture or hedge funds wouldn't be able to grab foreign governments' revenues or assets in this country."

Opposing view
But a lawyer representing Af-Cap, one of three hedge funds that sued CMS Nomeco, said trying to overturn the court's decision through legislature would be a mistake.

"This is cookie-cutter litigation made incredibly complex by CMS Nomeco and the Congo's refusal to pay. If they win, there will be no further way for private banks to lend money to the Third World," Ronald W. Kleinman, a managing shareholder of Greenberg Traurig LLP in Washington, told OGJ July 12.

He explained that since 1952, the US State Department has considered any commercial activity by a foreign government, including receiving oil royalty payments, is not sovereign if it's used commercially in the US.

Congo's government did exactly that for 15 years to pay an earlier obligation to National Union Fire Insurance Co. of Pittsburgh, the lawsuit's fourth plaintiff, under a federal court order in the northern district of Illinois, Kleinman said.

National Union came back into the picture after it provided insurance to C. Itoh & Co. of Japan for machinery sold to Congo. When the government defaulted, Itoh collected on the policy, National Union went to Congo for the money, and it was rebuffed, according to the insurance company's attorney, Mark Rosenberg, a partner at Sullivan & Cromwell LLP in New York.

Derman said that the obligation originally acquired by Af-Cap and the two other hedge funds came from a $35 million highway construction loan to Congo in 1982 on which the country defaulted 5 years later. The hedge funds took it on as distressed loans years later for pennies on the dollar, he said.

"CMS Nomeco had nothing to do with this loan. It simply was trying to do business in Congo's oil and gas sector," he said. Most of the company's production there is delivered to US refineries, Derman noted.

'Fully assignable'
Kleinman said that Congo agreed to commit its natural resources as collateral for the obligations. "The loans are fully assignable. Our clients are the assignee, like any secondary financial market. They're part of the process for making a market for defaulted debt," he said.

"These loans probably wouldn't have been made if sovereign immunity hadn't been waived and they hadn't been assignable," Kleinman added.

He said that Af-Cap sued to attach Congo assets in Britain and won. Attachment proceedings also are under way in Monaco, and there have been attachments in the Cayman Islands, he said.

Derman said that the plaintiffs also sued Murphy Oil Corp. and lost, and Chevron Corp., where the case has been appealed to the Ninth Circuit. "Canada is in a similar situation where one of its oil companies has been sued," he said.

When the court in Texas served CMS Nomeco with a garnishment writ ordering it not to deliver oil to Congo, the African nation's government responded that the company had a legal and contractual obligation there to continue deliveries, Derman said. Satisfying both requirements means CMS Nomeco effectively would pay for the oil twice, he said.

"The government in Brazzaville has no intention of paying this money," said Ferraro. She warned that if the situation is not resolved, other oil producing nations in Africa might not want to do business with US companies. "If we become nonplayers, we open Africa up for China and other competitors," she said.

Contact Nick Snow at

Related Articles

La Jolla Conference: Mexican energy reform a 'telenovela,' panelist says

06/01/2015 Energy reform in Mexico is a telenovela wherein stories of intrigue and suspense will arise, but in the end, everything will turn out okay, opined ...

Court greenlights Chevron's Richmond refinery project

05/25/2015 A California superior court has cleared the way for Chevron Corp. to proceed without further delay in executing its long-planned, $1-billion projec...

EnLink Midstream enters Permian basin through acquisitions

04/01/2015 EnLink Midstream made two acquisitions early this year to give it a position in the Permian basin. An EnLink subsidiary said it would buy LPC Crude...

Johnson to succeed Kirkland as Chevron executive VP, upstream

03/31/2015 Chevron Corp. has appointed James W. Johnson to succeed George L. Kirkland as executive vice-president, upstream. Kirkland, who also serves as vice...

Chevron to sell Caltex Australia interest

03/27/2015 Chevron Global Energy Inc. has entered an underwriting agreement for the sale of its 50% interest in Caltex Australia Ltd. to what it described as ...

Chevron, Shell among most active bidders in gulf lease sale

03/23/2015 Chevron Corp., ExxonMobil Corp., Royal Dutch Shell PLC, and Statoil ASA mostly led the way as Gulf of Mexico central planning area Lease Sale 235 d...

Chevron, Shell among most active bidders in central gulf sale

03/18/2015 Chevron Corp., ExxonMobil Corp., Royal Dutch Shell PLC, and Statoil ASA mostly led the way as Gulf of Mexico central planning area Lease Sale 235 d...

EIA forecasts continued rise in US oil production from gulf

03/16/2015 Crude oil production from the Gulf of Mexico will reach 1.52 million b/d in 2015 and 1.61 million b/d in 2016-or respectively 16% and 17% of total ...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected