Suing for loss of opportunity to compete or bid

Federal District Court Opinions

OCEANIC EXPLORATION CO. v. CONOCOPHILLIPS, INC., (D.C.
2006) OCEANIC EXPLORATION CO., et al., Plaintiffs, v.
CONOCOPHILLIPS, INC., et al., Defendants. Civil Action No.
04-332 (EGS). United States District Court, D. Columbia.
September 21, 2006

MEMORANDUM OPINION

EMMET SULLIVAN, District Judge

Pending before the Court are defendant Timor Sea
Designated Authority’s (“TSDA”) Motion to Dismiss the
Second Amended Complaint and defendants ConocoPhillips’
Motion to Dismiss the Second Amended Complaint. Upon
careful consideration of the motions, the responses and
replies thereto, and for the following reasons, the Court
GRANTS TSDA’s Motion to Dismiss and GRANTS in part and
DENIES in part ConocoPhillips’ Motion to Dismiss.

I. FACTUAL BACKGROUND

Plaintiffs Oceanic Exploration Company and Petrotimor
Companhia de Petroleos, S.A.R.L. (collectively “Oceanic”)
commenced this action to recover damages for the loss of
opportunity to compete or bid for rights to explore for and
produce oil and natural gas from the seabed between East
Timor and Australia. The seabed between East Timor and
Australia is known as the Timor Gap.

In 1974, Portugal, then sovereign of East Timor, awarded
plaintiffs a concession to explore for and produce oil and
natural gas in the Timor Gap. In 1975, Indonesia
invaded East Timor, and established East Timor as the 27th
province of Indonesia. On December 11, 1989, Indonesia and
Australia agreed to exploit the oil and natural gas in the
Timor Gap by establishing a “Zone of Cooperation” and
signed the Timor Gap Treaty, effective February 9, 1991.
The Timor Gap Treaty negated the validity of all previous
unilateral concessions in the Timor Gap, including the
Portuguese colonial concession of 1974 and concessions
granted by Australia prior to signing of the Treaty.

The Timor Gap Treaty also created the Joint Authority,
which Page 3 had the exclusive authority to grant
concessions for the development of natural resources in the
Timor Gap, with royalties to be divided equally between
Australia and Indonesia. The Joint Authority awarded
concessions pursuant to a competitive bidding process
between June to October 1991. Defendants
ConocoPhillips became one of the recipients of
concessions at the conclusion of the bidding process.
ConocoPhillips eventually uncovered substantial oil and
natural gas reserves in the Timor Gap in an area
overlapping the area covered by plaintiffs’ colonial
concession from Portugal.

Plaintiffs abstained from the 1991 bidding process because
they believed that they already had legitimate rights to
explore for oil and natural gas in the Timor Gap from
Portugal. Rather than calling into question the concession
conferred by Portugal in 1974, the plaintiff chose not to
participate in the 1991 bidding process.

On August 30, 1999, the East Timorese people voted for
independence, and on May 20, 2002, East Timor formally
celebrated its independence. The new East Timorese
Constitution asserted sovereignty over its natural
resources, and specifically nullified any previous
concessions not ratified by the new independent government.
Pursuant to these provisions of the new constitution, the
governments of East Timor and Australia signed the Timor
Sea Treaty to govern natural resource exploitation in the
Timor Gap.

Like the Timor Gap Treaty signed by Indonesia and Australia
in 1991, the Timor Sea Treaty between East Timor and
Australia established the Timor Sea Designated Authority
(“TSDA”) to oversee the granting of exploration and
development concessions in an area designated as the “Joint
Petroleum Development Area” (“JPDA”) in the Timor Gap. The
Timor Sea Treaty also provided immediate concessions to
certain corporations holding existing contracts, including
ConocoPhillips. The value of the oil and natural gas
reserves in the disputed concession areas allegedly exceed
$50 billion.

Plaintiffs filed this suit seeking damages for the “theft”
of their oil and natural gas rights in the Timor Gap.
Plaintiffs allege that ConocoPhillips funneled illegal
payments to Page 5 Indonesian government officials leading
up to the 1991 bidding process in order to secure influence
in the region and eliminate competitors. Plaintiffs further
allege that when East Timor gained independence and
established its government, ConocoPhillips bribed East
Timorese government officials to ensure that they
recognized ConocoPhillips’ concession rights, but not
plaintiffs’ rights, in the Timor Gap.

In their complaint, plaintiffs accuse ConocoPhillips of
violating and conspiring to violate the Racketeer and
Corrupt Organization Act (“RICO”) (Count I and II);
violating the Robinson-Patman Act (Count III) and the
Lanham Act (Count IV); intentionally interfering with
prospective economic advantage (Count V); unjust enrichment
(Count VI); and unfair competition (Count VII). All of
these counts, but for Count III, are also alleged against
defendant TSDA. Plaintiffs seek damages of at least $10.5
billion.