Enron Europe has decided to pursue this claim. How involved would you like me 
to be?
---------------------- Forwarded by Richard B Sanders/HOU/ECT on 12/05/99 
01:44 PM ---------------------------


Jon Chapman
11/10/99 09:50 AM
To: Mark Frevert/LON/ECT@ECT, Danny McCarty/LON/ECT@ECT, John 
Sherriff/LON/ECT@ECT
cc: Matthew Scrimshaw/LON/ECT@ECT, Michael R Brown/LON/ECT@ECT, Richard B 
Sanders/HOU/ECT@ECT 
Subject: Warranty claim by Enron Teesside Operations Limited against ICI 
Chemicals & Polymers Limited ("ICI")

PRIVILEGED ATTORNEY - CLIENT COMMUNICATION  : CONFIDENTIAL  

Mark / Dan / John

As you are aware , earlier this year , we served formal notices of two 
potential warranty claims ( re. the Halochems. closure and the DuPont reduced 
steam-take ) on ICI , as required by the Sale of Business Agreement . We have 
subsequently prepared a detailed draft analysis and costing of our claims 
(the "Particulars of Claim") which has been served on ICI's lawyers , Herbert 
Smith . They have come back with some requests for supporting documentation 
which we are currently dealing with.

The Sale of Business Agreement requires us , unless ICI agree to settle which 
seems highly unlikely at this stage , to issue formal court proceedings 
against ICI before 21 November in respect of the Halochems. claim and before 
17 December in respect of DuPont  . We wish to deal with the two claims 
together and , accordingly , it is proposed that we issue proceedings , at 
latest , on 16 November . Issue puts us into a formal procedural timetable . 
ICI would have 14 days to reply indicating whether they wish to defend and a 
further 14 days to issue a defence , though this period is generally capable 
of being extended by a further 28 days . The process of discovery , whereby 
each side has the opportunity to examine relevant documentation in the 
possession of the other , would probably begin after 3 months or so . If we 
were to go to full trial , this could be in the second half of next year .

If we don't issue proceedings before the relevant dates , we lose the right 
to bring the relevant claim completely unless ICI has waived the requirement 
that we issue proceedings by these dates , which they have shown no 
inclination to do.The downside of issuing proceedings is that , whilst we are 
entitled to withdraw them at any stage if we decide not to proceed with the 
claims , we would then be liable for much of ICI's legal costs from the date 
of issue to the date of withdrawal .  Our lawyers' view  is that , were we to 
go to full trial and lose , the potential aggregate liability for ETOL's 
legal costs and ICI's legal costs would be between o1 million and o1.5 
million (our current costs are around o70 , 000 ).

In terms of the chances of success of our claims were we to go to full trial 
, I believe  , and am advised , that the DuPont reduced steam-take claim is 
more likely to succeed than the Halochems. shutdown claim . Given the legal 
complexities of contractual warranty claims , I do not think it would be wise 
, at this stage , to be overly confident of success at full trial . However , 
there is certainly , in my view , good potential for achieving a settlement 
with ICI which may involve more than simply a cash payment (eg restructuring 
of key contracts , land deals etc. ) .We do know that , as a matter of 
practice , ICI ignore potential claims unless proceedings have been issued . 
Issue of proceedings should , thus , be viewed primarily , at this stage , as 
a necessary means of getting ICI to the negotiating table . Their costs will 
not ramp up significantly until discovery starts , so we should be ready to 
monitor closely and constantly our prospects in the litigation as against our 
potential exposure should we withdraw or lose .

On the basis of the above , I would recommend that proceedings are issued 
against ICI and would very much welcome your views or comments on this.

Regards.

Jon