Dow Chemical Co. (DOW) said Thursday that an arbitrator has ruled that Petrochemical Industries of Kuwait must pay the company $2.16 billion in damages for pulling out of the planned $17.4 billion 'K-Dow' joint venture in 2008.
The International Court of Arbitration of the International Chamber of Commerce ruled that Petrochemical Industries of Kuwait or PIC must pay damages to Dow Chemical for pulling out of the 50:50 joint venture that would have specialized in the manufacture of plastics. PIC is a subsidiary of state-owned Kuwait Petroleum Corp.
As a part of the joint-venture deal, two of Dow Chemical's other joint ventures with Kuwait Petroleum were to be transferred to K-Dow.
Dow Chemical and PIC had mutually agreed to resolve their contractual disputes through arbitration before the ICC, which is comprised of preeminent legal experts with experience in high-value commercial litigation.
The $2.16 billion in damages do not include interest and costs, and the award is final and binding, Dow Chemical noted. Shearman and Sterling acted as legal counsel for Dow in the dispute.
Andrew Liveris, chairman and chief executive officer of Dow Chemical said, "This outcome brings resolution and closure to the issue. We remain focused on continuing to move forward with our transformation and profitable business partnerships - both in Kuwait and around the world."
Midland, Michigan-based Dow Chemical said in December 2008 that it signed a memorandum of understanding or MOU with PIC for the K-Dow joint venture.
The transactions was expected to close on January 1, 2009 with K-Dow expected to be an instant leading global petrochemical supplier. Operations were expected to begin on that same date.
Dow Chemical and PIC had earlier announced the selection of Michigan as the location of the world headquarters for the new joint venture.
However, the Kuwaiti government scrapped the deal prior to its launch, citing the global recession that began in the second half of 2008.
Dow Chemical has been doing business in Kuwait for nearly 40 years. The company and PIC currently operate four other joint ventures - EQUATE, ME Global, Kuwait Olefins Co. and Kuwait Styrene Co.
In Thursday's regular session, DOW is trading at $31.27, up $0.75 or 2.46 percent on a volume of 3.91 million shares.
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