FYI. Jim

 -----Original Message-----
From: 	Browning, Mary Nell  
Sent:	Thursday, April 05, 2001 8:51 AM
To:	Derrick Jr., James
Subject:	RE: CATS litigation

Jim,  I cannot thank you enough for those incredibly kind words.  It will take a bit of time for my frustration to subside, but in the meantime we must carry on.  I am arranging a meeting with Jonathan to see if he can shed some light on this strange opinion and on why we were denied our costs on the restitution point.  He may not be available until after Easter.  I have spoken to Laurence who describes the opinion as pathetic.  Perhaps even more interesting and somewhat troubling is the fact that it was actually Pollack who said to Laurence that Enron had been "stitched up" by the Lords and that the opinion was a joke.  I do not want to sound like a sore loser, but it does make one think this is a bit of a kangaroo court if the winning counsel says the result is a joke.  Anyway, it is not a very funny one.  In all seriousness perhaps we should consider whether we ought to modify our policy permitting submitting to the exclusive jurisdiction of the English courts.  I realize they have not historically honored the non-exclusive jurisdiction clauses, but at least it might give us a fighting chance to go to a more neutral venue like Switzerland.  Anyway, give it some thought.  I will let you know as soon as I have been able to speak with Jonathan.  Again, many thanks for your wonderful support every step of the way.


From:	James Derrick/ENRON@enronXgate on 04/04/2001 17:16 CDT
To:	Mary Nell Browning/LON/ECT@ECT
cc:	 

Subject:	RE: CATS litigation

Mary Nell, no one could have worked harder or better than you in the effort to bring about a just decision in this matter.  Thank you for your tireless efforts--I am proud to serve on the Enron team with you. All the best. Jim

 -----Original Message-----
From: 	Browning, Mary Nell  
Sent:	Wednesday, April 04, 2001 1:59 PM
To:	Derrick Jr., James; Brown, Michael; Sherriff, John; Evans, Mark; Dyson, Fernley; Chivers, Paul; Frevert, Mark; Whalley, Greg; McConnell, Mike; Gentle, Jackie; Sanders, Richard; Wright, Claire; Patel - Tax, Raj; Rogers, Rex
Cc:	Harper, Richard; Turner, Paul; Crilly, Peter
Subject:	CATS litigation

Disappointingly, the House of Lords ruled 5 - 0 against Enron in the CATS litigation today.  This will mean that we will repay to the CATS parties approximately $150 million plus interest and court costs, putting the final figure at an estimated $155-160 million.  We expect to be invoiced for the principal amount in the next week or so; sorting costs and interest may take as long as 60 days.  The written opinion reflects a determination on the part of the Lords to rule against us regardless of what the contract says.  The opinion seeks to conclude "what rational businessmen could have intended" rather than applying the provisions of the contract.  

For example, Lord Hoffman (author of the primary opinion) makes it clear that the  "retrospective consequences" of discovering a latent defect after payments have been made (and would therefore need to be refunded) are unacceptable.  His view seems to be that because we were not ready to flow J-Block gas during the period of the T-6 leak, we are not damaged and therefore not entitled to relief under the contract.  Furthermore, he says that the Commencement Date notice sent by the CATS parties was in the nature of a declaration and as long as it is sent in good faith it is effective.

As far as the price reduction formula in Clause 7.5, Lord Hoffman opines that the clause is not operative until TGTL had tied in the J-Block field.  The contract makes no reference to this requirement.  Hoffman's view is that it is only upon tie-in that the CATS parties' obligation to provide the Transportation Service is triggered and therefore there can be no price reduction for not providing the service unless tie-in is complete. This statement is in stark contrast with Hoffman's earlier statement in the opinion that upon the giving of the Commencement Date notice the CATS parties have an absolute obligation to provide the Transportation Service.

Equally disappointing and surprising is the fact that the Lords rejected our submission for reimbursement of our costs incurred in connection with the restitution issue.  As you may recall, restitution was the primary issue upon which the CATS parties obtained leave to appeal, and they conceded the point at the commencement of the hearing.  Reimbursement of these costs should have been a given. 

Although I have not yet been able to speak to our most senior barrister, our other counsel have assessed the opinion as "appalling" and "pathetic," and describe the situation as one where Enron has been "stitched up".  Unfortunately, given that this is the court of last resort in this country (except of course the Court of Human Rights), there is not an avenue for recourse.

In conclusion may I say that although we did not get the result we wanted or expected from the House of Lords, I very much appreciate all the support from each of you for these past six years.  The case has been a roller coaster ride;  I hope our earlier victory in the Court of Appeal will evidence in fact that some tribunals in this country recognize that we did get it right. 

Please call me if you wish to discuss the case in any further detail, or if you wish to have a copy of the opinion.  My telephone number is 011 44 207 783 6582.  Many thanks.