U&M Mining Zambia Ltd v Konkola Copper Mines Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 15 February 2013 |
| Neutral Citation | [2013] EWHC 260 (Comm) |
| Docket Number | Case No: 2013 Folio 161 |
| Court | Queen's Bench Division (Commercial Court) |
[2013] EWHC 260 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
The Rolls Building
7 Fetter Lane
London, EC4A 1NL
Mr Justice Blair
Case No: 2013 Folio 161
Andrew Mitchell QC & Marianne Butler (instructed by Clyde & Co) for the Claimant
Justin Mort (instructed by Latham & Watkins) for the Defendant
Hearing dates: 11 & 12 February 2013
This case concerns an anti-suit injunction obtained by the claimant, U&M Mining Zambia Ltd ("U&M"), against the defendant, Konkola Copper Mines Plc ("KCM"). The injunction obtained by U&M restrains KCM from pursuing proceedings in Zambia contrary (U&M submits) to various London arbitration clauses. Though the general principles applicable in such a situation are well settled, counsel agree that there is no direct authority on the particular issue that is raised in this case. That is because the suit in Zambia which U&M seeks to restrain is, or is in the form of, an application made for interim measures in support of, rather than in opposition to, the arbitration. The issue is essentially whether these proceedings amount to a breach of the arbitration clauses in question so as to justify the grant of an injunction by this court.
The facts
U&M is a Zambian company which is a subsidiary of a major Brazilian mining and construction contractor. KCM is also a Zambian company (according to U&M it is a subsidiary of Vedanta Resources Plc, a company headquartered in London, England, but KCM did not confirm this at the hearing).
KCM owns copper mines in Zambia. This case concerns an open pit copper mine called COP F&D which is in the Nchanga area of Zambia's copperbelt. Some idea of the scale of the operation comes from the fact that the mine is at least 4km long by about 3km wide. Many people (local and expatriate) work there, and I was told that it accounts for a substantial percentage of the entire country's GDP.
U&M has operated the COP F&D mine for KCM since 2007. KCM says that U&M was incorporated for this purpose, and no contrary suggestion has been made. In simple terms, the evidence is that mining takes place as follows. Rock is blasted with explosives, excavated by hydraulic shovels and loaded into very large trucks. Waste is deposited in nearby dumps, while the ore is hauled to KCM's plant for extraction of the copper. All this requires heavy duty machinery of various kinds which is provided by U&M. I am told by U&M that, leaving aside certain equipment that has been treated as security for advances made by KCM to U&M, the value of U&M's equipment on site is around US$95m.
Since the first Mining Contract between the parties dated 25 April 2007, there have been numerous further contracts by way of amendment, or self-standing agreements of various kinds. For present purposes, this application is primarily concerned (it is stated in U&M's evidence) with a contract entered into by the parties on 15 December 2011 for mining waste from what is called the Footwall and Hanging Wall ("the FW/HW Contract"). However various other contracts feature in the evidence, including a Settlement Agreement dated 26 October 2012 (one of two settlement agreements entered into in 2012). A common feature of the parties' various contracts is that they are governed by Zambian law, and provide for LCIA arbitration in London.
The fact that there were two settlement agreements between the parties in 2012 indicates, as is the case, that relations between them have not been good in recent times. Among other things, disputes have arisen as to what sums are due to be paid to U&M.
Matters came to a head at the beginning of 2013. On 28 January 2013, KCM terminated (or purported to terminate) the FW/HW Contract on the grounds that U&M had failed to meet production targets over five consecutive months from August 2012 to December 2012. U&M denies any such breach, and says that (even if established) it was subsumed in the Settlement Agreement of 26 October 2012.
Clause 35.1.8 of the FW/HW Contract provides that upon termination, the contractor (that is U&M) shall leave the site. It does not state (U&M contends) that it should do so "immediately", and it contends that given the size of operations, and the nature of its mining equipment (much of which would need to be dismantled before it could be moved and shipped elsewhere), that would be quite impossible. U&M says that by implication it must be entitled to a reasonable time to vacate and de-mobilise the operations. It believes that KCM is intent on seizing the equipment without paying for it. This is denied by KCM, which says that it is acting in accordance with the contractual provisions, and for good reason, since operations need to restart as soon as possible.
The obtaining of the order in Zambia
The parties appear to have been in negotiations as regards demobilisation, but there then followed the step that has lead directly to these proceedings in England. On 31 January 2013, KCM applied to the District Registry of the High Court of Zambia sitting at Kitwe (a major city in the copperbelt) under s.11 of Zambia's Arbitration Act 2000. It sought, and obtained, an ex parte interim mandatory injunction compelling U&M to vacate the mine immediately, and hand over certain identified equipment that had (in effect) been pledged by U&M to KCM as security for an advance payment guarantee and performance guarantee given by U&M in KCM's favour in 2012. I am told that the value of this equipment is US$12m.
KCM emphasises the form in which these proceedings were brought. The Originating Summons refers to s.11 Arbitration Act 2000, and a statutory instrument of 2001, the Arbitration (Court Proceedings) Rules. The affidavit in support of the summons states as follows:-
"25. That all the contracts and amendments including the guarantees dictate resolution of the matter by arbitration.
26. That the arbitration proceedings are yet to be commenced and preliminaries are being undertaken to appoint the Arbitral Tribunal."
The ex parte summons similarly refers to s.11 Arbitration Act 2000. The Order made by the court on 31 January 2013 is stated to be made "until further order of this honourable Court or an Arbitral Tribunal as the case may be". The order relating to the two guarantees is stated to be made "pending the conclusion of the arbitration proceedings".
KCM's evidence asserts that its intention in bringing the proceedings was to protect its contractual rights and interests pending LCIA Arbitration in London. It was made by way of provisions in the Arbitration Act 2000 equivalent to those in the UK Arbitration Act 1996, and these steps were taken "to support the arbitration process rather than to contradict or hinder it".
For completeness, I should add that U&M contends that KCM failed to put the matter properly before the court, given that it was an ex parte application. It says that the court was not told, for example, about the 26 October 2012 Settlement Agreement. These points may have substance, but as U&M accepts, they are matters for the Zambian court, not this court.
The order was served at U&M's site office at about 4pm on Thursday, 31 January 2013. U&M points to the fact that armed police officers attended along with officials from KCM itself. On its part, KCM asserts that this was not unusual, and in any event the police officers attended without any request on its part. U&M is seeking to comply with the order. Most if not all of the equipment identified in the order (as varied) has been handed over.
The evidence is that conditions at the mine are tense. All work at the mine has stopped. U&M has begun to lay off workers. KCM says that losses are accruing at the rate of US$1.5m per day so long as U&M remains in possession of the site in breach of contract. U&M asserts that it is no longer in possession, its presence now being limited to the company compound outside the precincts of the mine. It says that KCM operates another mine, and could readily operate this one if it chose to. Alternatively, U&M could itself operate the mine, but for the fact that KCM is preventing it from doing so.
The obtaining of the order in England
There followed proceedings in England, first by way of arbitration, then in court. On 31 January 2013, that is, the same day as the Zambian proceedings, U&M commenced an LCIA arbitration in London by way of a formal Request for Arbitration under the Settlement Agreement of 26 October 2012. (Other Requests for Arbitration under other agreements have since followed.)
At about 8:45pm on Friday, 1 February 2013, U&M applied on the phone to the Queens Bench Division out of hours judge, who was Hickinbottom J that evening, for an anti-suit injunction restraining KCM from taking steps in the proceedings commenced in Zambia in breach, it was submitted, of the arbitration provisions in the contracts which require LCIA arbitration. The judge granted the order, with a return date of 11 February 2013, recognising that only exceptional urgency could justify an application in a commercial matter made in this way.
At some point over the next few days, the court in Zambia fixed a return date of 12 February 2013 in respect of the order which it had granted.
On 11 February 2013, I extended Hickinbottom J's order to permit argument to take place as to whether, as U&M submitted, the order should be made final requiring KCM to discontinue the Zambian proceedings, or, as KCM submitted, the order should be discharged.
I...
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