Claxton Engineering Services Ltd v TXM Olaj–és Gázkutató Kft

JurisdictionEngland & Wales
JudgeMrs Justice Gloster, DBE,MR JUSTICE HAMBLEN
Judgment Date01 February 2011
Neutral Citation[2010] EWHC 2567 (Comm),[2011] EWHC 345 (Comm)
Docket NumberCase No: 2010 Folio 47,Case No: 2010 Folio 0047
CourtQueen's Bench Division (Commercial Court)
Date01 February 2011
Claxton Engineering Services Limited

[2010] EWHC 2567 (Comm)

Before:mrs Justice Gloster, DBE

Case No: 2010 Folio 47




Mr. Matthew Cook, counsel (instructed by Birketts LLP) for the Claimant/Respondent

Mr. Stewart Shackleton, solicitor advocate (instructed by Mundays LLP) for the Defendant/Applicant

Hearing date: 4 August 2010

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mrs Justice Gloster, DBE

Mrs Justice Gloster, DBE:



This is an application by the defendant, TXM Olaj–és Gázkutató Kft (“TXM”), for a stay of proceedings issued by the claimant, Claxton Engineering Services Limited (“Claxton”), pursuant to section 9 of the Arbitration Act 1996 (“the Act”), or, in the alternative, pursuant to Article 2 of Council Regulation (EC) 44/2001, namely the Jurisdiction and Judgments Regulation (“the Regulation”), on the grounds that Article 2 requires that TXM be sued in the courts of Hungary, the State of its domicile.


Disputes between the parties have arisen in relation to a number of contracts (“the disputed contracts”) for the manufacture, sale and delivery of engineering equipment manufactured by Claxton in England, and sold to TXM pursuant to purchase orders raised by it. Delivery was ex-Claxton's works in Norwich, although, pursuant to separate transport agreements, Claxton arranged for transport to TXM's requested destination, priced on the basis of costs incurred plus 15%.


Claxton issued a claim form in the Norwich District Registry on 5 November 2009 claiming the sum of £2,061,451.20, alleged to be the balance due for goods ordered by, and manufactured for, TXM pursuant to some 19 invoices raised by Claxton in the period from 29 February 2008 to 29 April 2008. The date of the referable purchase orders raised by TXM range from 2 June 2006 to 19 July 2007, although Claxton claims that one TXM purchase order (referable to invoice number 8682) was raised verbally. Claxton also claimed interest and compensation pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 at the rate of 13.5% per annum, amounting to interest of £427,621.84 as at the date of issue of the claim, and at the daily rate of £762.45, and compensation of £100.


Following service of the proceedings, TXM indicated that jurisdiction would be contested. TXM applied for the proceedings to be transferred to the Commercial Court. That transfer was effected by an order of Tomlinson J dated 15 January 2010.


On 14 January 2010, TXM applied for a stay of proceedings on the grounds set out in paragraph 1 above. Its primary contention is that all of the disputed contracts, and the disputes arising from them, are governed by an arbitration agreement in writing set out at section 14 of TXM's General Terms and Conditions, and that accordingly all disputes between the parties should be resolved by the Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry, Budapest (“the Hungarian Tribunal”).


Claxton's position is that, as a result of exchanges in June 2006, the parties agreed to certain amendments to TXM's terms and conditions proposed by Claxton, which deleted the arbitration clause and incorporated an English exclusive jurisdiction clause instead.

The parties


Claxton is a private company established under the laws of England and Wales, and operating from Great Yarmouth. It manufactures specialist engineering equipment for exploration and extraction of natural resources. It provides engineering, services and equipment for well systems, pipelines and structures.


TXM is a wholly-owned subsidiary of Falcon Oil and Gas Limited, a Canadian incorporated company, which owns TXM through an American subsidiary, Mako Energy Corp. TXM is a private company established under the laws of Hungary, with its domicile, seat of business and principal operations in Budapest.


TXM is Falcon's Hungarian investment vehicle in relation to an oil and gas exploration project in the Mako Trough Basin, in Hungary. At all material times, TXM, together with others, including Falcon, and Exxon Mobil, were engaged in drilling and exploration in the Mako Basin.


For the purposes of its exploration and drilling works, TXM ordered and Claxton manufactured and supplied various well head and drilling equipment and parts over a period of time.

The issues


In the light of the submissions which have been put forward on behalf of the parties, the issues which arise on this application can be summarised as follows:

i) Whether this court, or an (as yet) unconstituted Hungarian arbitral tribunal, should decide the threshold question whether an arbitration agreement was reached between the parties.

ii) If this court is indeed the correct forum to decide the threshold question of jurisdiction, whether, as a result of exchanges between the parties in June 2006, the parties agreed to do business on TXM's unamended terms and conditions (including the Hungarian arbitration clause), or subject to the amendments proposed by Claxton (which deleted the arbitration clause and incorporated an English exclusive jurisdiction clause instead).

iii) If there was no arbitration agreement between the parties, whether Article 2 of the Regulation requires TXM to be sued before the courts of Hungary.

iv) In any event, even if Article 2 does not so require, whether a stay should be granted on the grounds that the Hungarian courts are the more appropriate forum.

Issue i): Who should decide the question of jurisdiction?


Mr. Stewart Shackleton, solicitor advocate and partner in the firm of SR Shackletons LLP, formerly a partner in Eversheds LLP, the solicitors formerly acting for TXM, submitted that the correct approach was for this court to conduct only a prima facie review of the existence of an arbitration agreement and refer the merits of all objections raised as to the scope, existence and validity of an arbitration agreement to a future Hungarian arbitral tribunal, for it to decide. He submitted that this was consistent with: (i) the United Kingdom's obligations to enforce arbitration agreements under the New York Convention 1; (ii) the principle of compétence—

compétence, now entrenched in the Arbitration Act 1996 (“the Act”); and (iii) the non-interventionist policy of the Act. He further submitted that the parties' contracts in this case referred to an arbitration agreement in writing. Accordingly, he submitted an arbitration agreement has prima facie been concluded and governed the parties' disputes. On this basis he submitted that the court should grant a stay of proceedings and remit the issue as to whether an arbitration agreement in fact existed to a Hungarian Tribunal.


In support of his arguments, Mr. Shackleton relied upon: the decision of Thomas J (as he then was) in Vale do Rio Doce Navagaçao SA and Anr v Shanghai Bao Steel Ocean Shipping Co Ltd and Anr; 2 the decision of Toulson J (as he then was) in XL Insurance Limited v Owens Corning: 3 and the decision of HH Judge Thornton, QC in Signet Health Care plc v Higgins City Ltd. 4


Mr. Matthew Cook, counsel acting on behalf of Claxton, submitted that, following the Court of Appeal decision in Ahmad Al Naimi v Islamic Press Agency5, the established position is that, in circumstances such as the present, it is appropriate for the court to decide threshold questions of jurisdiction rather than deferring such questions to arbitral tribunals. He submitted that the cases to which Mr. Shackleton referred related to cases where the issue was whether a contract, that would have included an arbitration clause, had been formed. He submitted that the issue in this case, in any event, is whether the English High Court or a Hungarian arbitral tribunal has jurisdiction. Given that the English High Court is first seized of that issue, and, depending upon the resolution of that issue, may have exclusive jurisdiction to resolve all disputes between the parties, he submitted that there was no basis for the English High Court to defer to an unformed arbitral tribunal to resolve the threshold issue.


Both Mr. Cook and Mr. Shackleton agreed that, if it were necessary for the English court to decide the threshold question as to whether the relevant contract between the parties contained a Hungarian arbitration clause or an English court exclusive jurisdiction clause, it could do so on the basis of the evidence before the court on the application, without the need for further evidence or cross-examination. That is because all the relevant communications consist of written or e-mail communications between the parties, save in one or two instances which are not material for the purposes of my determination.


In my judgment, the correct approach in circumstances such as these is that set out by the Court of Appeal in Ahmad Al Naimi v Islamic Press Agency6, which is binding on me. In a case where the issue is whether the underlying dispute is subject to an arbitration agreement at all, the court has a choice whether to decide that issue itself, or to stay proceedings whilst that issue is referred to arbitration. The Court of Appeal approved the approach taken by His Honour Judge Humphrey Lloyd QC in Birse Construction Limited v St. David Limited7 where the latter identified a number of factors which may influence a court as to what choice it makes. These factors include the circumstances of the application, the clarity of the evidence as to whether an

arbitration agreement existed in relation to the particular dispute, the interests of...

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