China Export & Credit Insurance Corporation v Emerald Energy Resources Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Richard Field |
| Judgment Date | 22 June 2018 |
| Neutral Citation | [2018] EWHC 1503 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000658 |
| Date | 22 June 2018 |
[2018] EWHC 1503 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Richard Field
(sitting as a Deputy High Court Judge)
Case No: CL-2017-000658
Jamie Goldsmith (instructed by Simmons & Simmons LLP) for the Claimant/Respondent
Duncan Bagshaw (instructed by Stephenson Harwood LLP) for the Defendant/Applicant
Hearing dates: 21, 22 May 2018
Introduction
The Defendant (“Emerald”) applies for a declaration that the High Court of England and Wales has no jurisdiction or should in its discretion decline to exercise jurisdiction to determine the claim of the Claimant (“Sinosure”) on a promissory note (“the Note”) given by Emerald in the principal amount of US$66,500,000.
Emerald's principal contention is that the proceedings are covered by an arbitration agreement made between the parties and should therefore be stayed pursuant to section 9 of the Arbitration Act 1996 (“the 1996 Act”). In the alternative, Emerald submits that Sinosure's claim should be stayed under the inherent jurisdiction of the Court.
The Note contains an English law and non-exclusive jurisdiction clause (“the NEJC”) that reads:
“This Promissory Note shall in all respects be governed by and construed in accordance with the laws of England. The issuer hereby submits to the non-exclusive jurisdiction of the English courts in respect of any legal action or proceedings arising out of or in connection with this Promissory Note.”
Originally, Sinosure issued two sets of proceedings on the Note, Claim No. CL-2017-000150 (“the First Claim”) and Claim No. CL-2017-000658 (“the Second Claim”). In the belief that the permission of the Court was required to serve the Claim Form and the Particulars of Claim out of the jurisdiction, Sinosure issued an application for permission to serve out of the jurisdiction a Claim Form and Particulars of Claim seeking payment of US$54,352,597.38 by way of principal and accrued interest due on the Note. On 11 April 2017, Blair J granted Sinosure's application on the papers.
Subsequently, Sinosure came to the view that its claim was covered by Article 25 of the Brussels Recast Regulation (“the BRR”) and therefore permission to serve the proceedings out of the jurisdiction was not required. Article 25 provides (in relevant part):
“If the parties, regardless of their domicile have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to substantive validity under the law of the Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. The agreement conferring jurisdiction shall be either: (a) in writing or evidenced in writing; (b) …or (c)…”
Sinosure therefore issued the Second Claim on 27 October 2017 and served the Claim Form and Particulars of Claim pertaining thereto on Emerald at its last known place of business. On 8 February 2018, Emerald filed an Acknowledgement of Service stating that it would contest jurisdiction.
Emerald issued separate jurisdiction challenges in respect of each set of proceedings. At the start of the hearing, I directed that the application in respect of the Second Claim should be heard first and, if that failed, the First Claim should be discontinued on such terms as the Court might impose having heard argument on the matter.
The factual background to Emerald's application
Emerald is a Nigerian company whose share capital is owned by Nigerian shareholders. Sinosure is a Chinese state-funded insurance company that offers export credit insurance against the risk of financial default.
In 2001, together with another Nigerian Company, AMNI Oil and Gas Limited (“AMNI”), Emerald was granted an Oil Prospecting Licence (designated OPL229) to explore for and extract hydrocarbons in a coastal area of Nigeria and to sell the hydrocarbons so found and extracted. On 16 November 2007 OPL229 was converted to OML141.
In order to raise funds to cover the extremely high costs of finding and extracting hydrocarbons, the holders of the interests in OML141 (known as the Joint Interest Parties (“the JIPs”)), namely Emerald, AMNI and Bluewater Oil and Gas Investments Limited (“BOGI”)) entered into a suite of four contracts with Sinosure (known collectively as the ‘Farm-In Agreements’) by which Sinosure acquired a 38% interest in OML141 in return for a payment of US$30 million, and for providing other commitments principally to do with funding. The four agreements were: the Farm-In Agreement (“the FIA”); the Funding Agreement (“the FA”); the Joint Interests Operating Agreement (“the JIOA”) and the Technical Services Agreement (“the TSA”). All of the four contracts were expressed to be governed by Nigerian law.
The primary purpose of the FIA was to allocate to Sinosure its share of OML141. This agreement incorporated by reference all the terms of the other three contracts. Clause 2.8 of the FIA provides for each party to indemnify every other party to the extent of its interest for claims by any person not a party arising in or in connection with the operations in OPL 229. Clause 3.2 (B) to (E) obliges Sinosure to lead efforts to raise money on behalf of the Parties to cover the work program on OML141 (including the acquisition of seismic survey data) and to explore, develop and produce OML141 and to provide the guarantees and facilities for Full Funding as defined in the JIOA.
The JIOA required Sinosure to “full fund” the costs of the “Work Program” and to provide “certain guarantees and facilities related to Full Funding required for the exploration, development and production of [OML 141]” (see Clause 6.1, Recital L and Clause 6.2(C)). “Full Funding” is defined in Clause 1.46 of the JIOA as “the collaborative combination of Sinosure's credit, credibility and facilities, and the availability of, and access to, Joint Interest assets as collateral to secure such financing as may be required to meet the Work Program and the [authorisation for expenditure (“AFE”)] for the exploration, development and production of the Block”. Under clause 6.2(D) Sinosure was obliged to “secure from qualified banking, financial and/or other institutions […] confirmed and irrevocable commitment to fund, syndicate, document, and provide all such services as agreed to among the Parties that will enable and facilitate the ongoing funding and future funding requirements for the exploration, development and operation of [OML141]”.
Clause 1.63 of the JIOA defines “Net Revenue” as the Proceeds from the sale of Hydrocarbons, less all costs and expenses of Production and Sale of Hydrocarbons including … Principal and Interest on borrowed funds …”. Clause 10.4 (B) provides that “[t]he Operator and Foreign Technical Partner [viz Sinosure] shall be entitled to reimbursement of all verified initial operational expenditure toward the establishment and implementation of the Joint Interest Operations from the Joint Interests Operations Account and related fees within 30 days of the commencement of operations.”
The primary purpose of the TSA was to provide for Sinosure's obligation to provide technical services required for the exploration of the OML141.
The FIA (cl. 18), JIOA (cl. 18.2) and TSA (cl. 10) contain identical dispute resolution clauses (“the Arbitration Clause”) as follows:
“The Parties agree that their first course of action in the event of a dispute shall be to attempt to resolve the dispute without the intervention of outside parties. Should they be unable to do so, any dispute, controversy, or claim arising out of or in relation to or in connection with this Agreement, including without limitation any dispute as to the construction, validity, interpretation, enforceability, or breach of this Agreement, shall be exclusively and finally settled by arbitration under the Rules of the London Court of International Arbitration (or its successor), which Rules are deemed to be incorporated by reference into this clause. The arbitration shall take place in London, England.
The tribunal shall consist of five (5) members, of whom each Party shall appoint one (1) member, and the four (4) so appointed shall choose the fifth arbitrator. The fifth arbitrator must be a qualified petroleum engineer, geologist, or physicist. The language of the arbitration shall be English. The decision of the Arbitrators shall be final and binding upon the Parties.”
Sinosure was required to hold its interest in OML141 through a Nigerian company. For this purpose, AERD Projects Nigeria Limited (“AERD”) was incorporated and a formal transfer to AERD of Sinosure's interest in OML141 was completed on or about 17 October 2006.
Pursuant to a Share Purchase Agreement dated 27 January 2006 (“the SPA”) concluded by the individual shareholders of AERD and Sinosure and CNOOC Africa (a BVI company), Sinosure sold to CNOOC 92% of the shares in AERD.
All of the four Farm-In Agreements were expressed to be made by Sinosure for and on behalf of itself and “Sinosure Supported Companies”, these being companies defined in Clause 1.91 of the JIOA to mean “any entity or corporation which [Sinosure] may nominate to perform or undertake any of its rights, interests, duties, or obligations under this Agreement, it being understood that such nomination shall not relieve [Sinosure] of its obligations under this Agreement, the FIA, TSA or FA”.
BGP International Nigeria (“BGP”), a Nigerian company wholly owned by China National Petroleum Corporation, was engaged by...
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