Petrochemical Industries Company (PIC) is studying with its parent company, the state-owned Kuwait Petroleum Corporation (KPC), the possibility of paying the $ 2.16 billion penalty ruled recently over the cancelation of the K-Dow contract a few years ago.

This was disclosed by KPC insiders who said “this is one of multiple scenarios the two firms are discussing” as they try to find a way to handle the payment if it becomes obligatory.

Sources, who were granted anonymity to speak, said PIC – which handled the negotiation process with Dow Chemical over the canceled project – would consider taking responsibility for paying the fine if KPC pays part of it as well.

“PIC’s demands are based on the fact that KPC was supposed to fund the K-Dow deal had it gone through”, one source explained.

PIC reportedly has 28 days from the date of the International Chamber of Commerce’s International Court ruling on Friday to pursue legal procedures in an attempt to appeal the verdict.

The sources said the appeal can only be taken into account if PIC provides proof that “major issues” were ignored during the trial or that errors in procedures preceding the ruling happened.

Speculations have been ongoing since Friday in Kuwait, given the belief that the government canceled the K-Dow contract on Dec 28, 2008, and ahead of a Jan 2, 2009 deadline after which the penalty clause could have been activated.

Maha Mulla Husain, Managing Director and Chairperson of the PIC Board, argued that the K-Dow agreement became binding the moment the contract was signed on November 28, 2008. She said the period until Jan 2, 2009 was to meet certain preparations regarding the partnership, and not a period during which a party could cancel the deal and avoid the penalty as widely speculated.

“The jury did not take our argument, considering instead that the contract was commercial and thus commercial reasons for its cancelation were not present”, Husain said during a recent interview with Al-Rai TV, adding that the Cabinet was warned before the cancelation that they weren’t giving much attention to the legal repercussions of their decision.

Husain also argued that attempts to reach a compromise with Dow Chemical were made between 2009 and 2010 “but ministers gave us no directions after discussing a number of scenarios with them at the time”.

The talk show hosted two other PIC officials, including Deputy Managing Director for Financial and Administrative Affairs Saad Al-Ajmi who described the talks about the penalty clause as “a big lie”.

“The $ 2.16 billion fine was ruled as compensation for actual losses as a result of the contract’s termination provided by Dow to the court”, Al-Ajmi explained, adding that the “maximum cap of litigation” prevented Kuwait from having to pay the entire value of the deal in compensation “as only 40 percent of Dow’s demands were approved”.

Al-Ajmi explained that signing the contract followed recommendations by the Supreme Petroleum Council (SPC) “who chose to go ahead with the deal instead of putting it on hold after the global economic crisis”.

Yousef Al-Otaiqi, Deputy Managing Director of the Kuwait Olefins Company, insisted that “the Cabinet was told before signing the agreement that once the contract was signed, Kuwait would be bound by all articles included”. He added that lawmakers ignored their calls to hold a meeting to explain the details of the deal and the profits projected.