A very odd set of facts recently came out of a recent legal dispute between Vantage Drilling, a Houston-based drilling contractor, and Brazil’s state-owned oil company Petrobras.

Vantage Drilling successfully pursued a $622 million breach-of-contract claim against Petrobras for its failure to pay Vantage for services delivered. The award was made in a private arbitration, the preferred mechanism for settling such international commercial disputes.

Petrobras had claimed it had not paid Vantage because of material operational failures. Petrobras defenses at the arbitration stage did not succeed. Nor did its counter-claims against Vantage. 

However, after it lost the arbitration award, Petrobras claimed the contract under which Vantage had performed the work, and under which Vantage prevailed at arbitration, was procured through corruption and, therefore, void. Vantage responded that the Justice Department had given it a pass on any Foreign Corrupt Practices Act violations in 2017, but had agreed in principal to a settlement with the Securities and Exchange Commission for $5 million, which has yet to conclude. 

However, after the arbitration award was announced, it was reported that Brazilian authorities have now charged Paul Bragg, the CEO of Vantage Drilling between 2006 and 2016, with corruption and money laundering. The prosecutors alleged that Bragg, together with an agent and a lobbyist, paid $31 million to former Petrobras officials and the Brazilian Democratic Movement Party for a $1.8 billion contract in 2009 with Petrobras that was the basis of the arbitration award.

The case raises numerous legal issues, both on the civil and criminal side. Additionally, it is anomalous that a company would receive a declination from the Justice Department, and that its former CEO has been  indicted by prosecutors of a foreign government for engaging in bribery and corruption in said country. It certainly is a fine mess.