AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Wilson,Lord Justice Stanley Burnton |
| Judgment Date | 27 May 2011 |
| Neutral Citation | [2011] EWCA Civ 647 |
| Docket Number | Case No: A3/2010/1268 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 May 2011 |
[2011] EWCA Civ 647
Lord Justice Rix
Lord Justice Wilson
and
Lord Justice Stanley Burnton
Case No: A3/2010/1268
A3/2010/1443
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION, COMMERCIAL COURT
MR JUSTICE BURTON
2009 FOLIO 1035
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Antony White QC (instructed by Reed Smith LLP) for the Appellant
Mr Bernard Eder QC & Ms Jessica Wells (instructed by Allen & Overy LLP) for the Respondent
Hearing dates: Monday 13 th & Tuesday 14 th & Friday 17 th December 2010
This appeal is about the enforceability of an English arbitration clause in a concession agreement (the "concession contract") which binds two companies incorporated and carrying on business in the Republic of Kazakhstan. The contract is a 20 year concession between the owner and operator of hydroelectric facilities in Kazakhstan. Apart from its arbitration clause, which it is common ground is governed by English law 1, it is governed by Kazakhstan law. It is dated 23 July 1997. It was originally made between the Republic of Kazakhstan itself and AES Suntree Power Ltd ("Suntree"). Suntree almost immediately assigned its rights to an associated Dutch company, Tau Power BV ("Tau"); and the claimant, AES Ust-Kamenogorsk Hydropower Plant LLP, in turn became entitled to the rights of its parent or associate Tau as a result of a transfer agreement dated 1 October 2007. I shall call the claimant, in this court the respondent, the "operator". Similarly, the defendant and in this court the appellant, Ust-Kamenogorsk Hydropower Plant JSC, whom I shall call the "owner", became entitled to the rights of the Republic of Kazakhstan under the same transfer agreement. For good measure, that agreement expressly incorporated the contract's arbitration provisions.
In these proceedings, the operator has sought and obtained a declaration that the owner is bound to submit disputes, including disputes as to the effectiveness of the arbitration clause, pursuant to its terms and an anti-suit injunction to prevent the owner from litigating disputes within the arbitration clause in the courts of Kazakhstan. The owner disputed the jurisdiction of the English court but failed. The judge, Burton J, made an order dated 16 April 2010 which included the following declaration and injunction:
"2. The [owner] cannot bring the claim, the subject matter of the proceedings before the Specialized Inter-District Economic Court of the Eastern Kazakhstan Region commenced by the [owner] against the [operator] on 12 June 2009 ("the Kazakhstan Proceedings"), or any other claim arising out of or in connection with any matter or thing in relation to the provisions of the Concession Agreement dated 23 July 2007 (as amended), save only in those claims or matters which fall to be determined in accordance with Clauses 17.8 and 17.9 of the Concession Agreement, otherwise than by commencing arbitration proceedings in the International Chamber of Commerce in London and pursuant to its Rules.
3. The [owner] is restrained from bringing the claim, the subject matter of the Kazakhstan Proceedings, or any other claim arising out of or in connection with any matter or thing in relation to the provisions of the Concession Agreement dated 23 July 1997 (as amended), save only for those claims or matters which fall to be determined in accordance with Clauses 17.8 and 17.9 of the Concession Agreement, otherwise than by commencing proceedings in
the International Chamber of Commerce in London and pursuant to its Rules."
The exception within clauses 17.8 and 17.9 was for tariff issues and will be referred to below.
The operator submitted that, subject to the issues relating to the English court's jurisdiction, the court could, if so minded in its discretion, render a final, and not merely interim injunction, together with the declarations sought. That is what Burton J did. The owner made clear that, if its challenge to the court's jurisdiction here failed, it had no further submissions to make.
The "subject matter of the Kazakhstan Proceedings" referred to in those orders was a claim brought by the owner against the operator on 12 June 2009 for further information about the value of the concession assets. The operator countered with an application to dismiss that claim on the basis of the obligation to arbitrate in London. The Kazakhstan court (the Economic Court) on 28 July 2009 rejected the operator's application to dismiss, inter alia in reliance on a previous decision of the Kazakhstan Supreme Court dated 8 January 2004, made in proceedings between the Republic of Kazakhstan on the one side and Suntree and Tau on the other, which had ruled that the contract's arbitration clause was void.
In the present proceedings, the essential dispute concerns the jurisdiction of the English court. In this connection the following issues remain disputed on appeal: (i) the owner submits that the operator lacks a proper jurisdictional gateway for service of its proceedings out of the jurisdiction upon it in Kazakhstan; (ii) the owner submits that there is no power in the English court to intervene in arbitration in the absence of existing or prospective arbitration proceedings in England; (iii) the owner submits that the English court ought in any event to recognise and/or enforce the decision of the Economic Court, inter alia because the operator had submitted to the jurisdiction of that court in the Kazakhstan Proceedings. The judge rejected all these submissions and exercised his discretion to grant the declaration and injunction set out above. The owner made no submissions as to the exercise of the court's discretion: it founded its opposition entirely on the English court's lack of jurisdiction and power to make the orders sought. It now appeals, with the permission of Longmore LJ, to say that the judge was wrong to accept jurisdiction or to purport to exercise a power which he lacked.
The arbitration clause
The arbitration clause in question is clause 32 of the contract. The contract is expressed as being between the "Republic" and the "Company" (ie Suntree) and also refers to the "Concession Company", ie any company created or acquired by Suntree for the purposes of operating the concession. It will be observed that clause 32 begins by carving out of itself the subject-matter of clauses 17.8 and 17.9. Those latter clauses concern tariff disputes which have to be referred, not to arbitration, but to an independent expert. The respective clauses provide as follows:
"17.8 Expert
17.8.1 If, in its reasonable opinion, the Company and/or the Concession Company believes that the Tariffs and the level of payment defaults by its Customers makes it impracticable to carry out all or any of the Investment Programme or other Commitments the Company and/or the Concession Company will be entitled to refer the matter to the Republic by Notice with a view to agreeing to:
17.8.2 an appropriate immediate adjustment of the Tariffs; or
17.8.3 an adjustment of the level or terms of the Commitments in which case the Company's obligations will be suspended or adjusted until resolution of these matters; or
17.8.4 agreements are reached in writing between the Parties as to off-sets or other mutually acceptable methods of achieving resolution of all such matters.
17.9 If no agreement can be reached, the Republic and the Company will refer the matter to an independent Expert (not being a national of Kazakhstan or the US) agreed by the Parties, or in default of agreement, to one (1) Expert appointed by the President or Vice-President for the time being of the International Chamber of Commerce of London who shall act as an expert, but not as an arbitrator, and whose Costs (in an amount and manner agreed by both Parties) shall be borne by the Company and whose decision shall be binding on all Parties…
32. Dispute Resolution
32.1 Subject to the provisions contained in Clauses 17.8 and 17.9, should any dispute or difference arise out of or in connection with any matter or thing in relation to the provisions of this Agreement and the transactions contemplated by the Parties, then the Party or Parties shall issue a Notice to the other Party or Parties, and shall supply full details of the dispute or difference.
32.2 In the event of any such dispute or difference being notified pursuant to Clause 32.1, the Authorised Persons of each of the Parties shall promptly meet together and negotiate in good faith and take all practicable steps in order to try and resolve the same as quickly and economically as possible.
32.3 Should the Parties not have resolved the dispute or difference at the expiry of a period of one (1) month (unless otherwise extended by agreement of the Parties in writing) from the date of any Notice issued in accordance with Clause 32.1 such dispute or difference shall be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in force at the relevant time.
32.4 In accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce ("Rules"), the Parties have agreed that there shall only be one (1) arbitrator who shall be appointed by mutual agreement between the Parties. If the Parties fail to reach agreement as to the identity of the arbitrator to be appointed within thirty (30) Days of the expiry of the one (1) month period referred to in Clause 32, the arbitrator shall be appointed upon the application of any party to the dispute or difference by the President or Vice-President for the time being of the International Chamber of Commerce of London and the arbitration shall be commenced and carried out as...
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