Excalibur Ventures LLC v Texas Keystone Inc. [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Gloster J |
| Judgment Date | 28 June 2011 |
| Neutral Citation | [2011] EWHC 1624 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 28 June 2011 |
[2011] EWHC 1624 (Comm)
Gloster J.
Queen's Bench Division (Commercial Court).
Arbitration — Anti-arbitration injunction — Oil exploration collaboration agreement — Claimant commenced English action and New York arbitration against party to agreement and Gulf companies which had not signed it — Court had jurisdiction to grant injunction restraining claimant from proceeding with arbitration against Gulf companies — Gulf companies had not participated in arbitration proceedings — Court appropriate tribunal to decide whether Gulf companies party to arbitration agreement in collaboration agreement — Anti-arbitration injunction granted — No exceptional circumstances justifying stay of English proceedings on claimant's application — England appropriate forum — Case management grounds for refusing stay– Stay not in interests of justice.
These were applications by the second, third and fourth defendants (“the Gulf defendants”) for an order restraining the claimant (“Excalibur”) from pursuing arbitration proceedings against them, and by Excalibur for a stay of the proceedings.
Excalibur was a Delaware company. The first defendant, Texas Keystone Inc (“TKI”), was a Texan corporation. The second defendant, Gulf Keystone Petroleum Ltd (“Gulf Keystone”), and the third defendant, Gulf Keystone Petroleum International Ltd (“Gulf International”), were Bermudan companies. The fourth defendant, Gulf Keystone Petroleum (UK) Ltd (“Gulf UK”), was a UK company.
TKI was a substantial US oil and gas company founded by Mr Todd Kozel and other members of his family. Gulf Keystone was co-founded in 2001 by Mr Kozel, with UAE, Kuwaiti and US private equity investment, in order to explore oil and gas reserves in the Middle East, North Africa and elsewhere. The company was listed on the Alternative Investment Market. Mr Kozel had a small interest in the issued shares and was its executive chairman. Gulf International and Gulf UK were wholly-owned subsidiaries of Gulf Keystone.
Excalibur had political and commercial links to Kurdistan and Excalibur and TKI entered into a collaboration agreement to pursue and prepare consortium bids to develop petroleum blocks in Iraqi Kurdistan. TKI was to act as operator in relation to any blocks acquired. The “consortium interest” of the parties and their participating interest in any block was 30% to Excalibur and 70% to TKI. The collaboration agreement reserved to TKI the right to introduce Gulf Keystone as party to the collaboration agreement, and/or as a participant in any consortium bid.
In November 2007, a production sharing contract (PSC) was executed by TKI, Gulf International, the Kurdistan Regional Government and another company (Kalegran), to explore and develop the Shaikhan Block in Iraqi Kurdistan. Gulf Keystone was named as the operator under the PSC. Excalibur was not named as a party. TKI's case was that it was willing to include Excalibur in a bid for petroleum contracts in Iraqi Kurdistan, but Excalibur did not and could not meet the legal requirements for participation in any such bid. Accordingly, the defendants said that TKI was not obliged to include Excalibur as a participant in the PSC, or, alternatively, the statutory prohibition against the inclusion of Excalibur in the PSC amounted to a force majeure event.
In December 2010, Excalibur started an action in the Commercial Court against TKI and the Gulf defendants, alleging breaches of the collaboration agreement and contending that it had been wrongfully shut out from the PSC. In the claim form it made a series of contractual, tort and equitable claims against TKI and the Gulf defendants under New York and English law.
At the same time Excalibur also began arbitration proceedings against TKI and the Gulf defendants by filing a request for arbitration pursuant to clause 14.1 of the collaboration agreement between Excalibur and TKI, which provided that disputes should be submitted to arbitration under ICC Arbitration Rules with the seat of the arbitration in New York. Despite the fact that the Gulf defendants were not signatories to the collaboration agreement, Excalibur alleged that they were nonetheless parties to it. The Gulf defendants maintained that they were not parties to the collaboration agreement and not bound by the arbitration agreement.
The Gulf defendants applied for an injunction restraining the arbitration proceedings and Excalibur applied to stay the Commercial Court proceedings against all defendants pending the determination of any jurisdictional challenges in respect of the arbitration proceedings.
TKI did not dispute the jurisdiction of an ICC arbitral tribunal as regards claims falling within the scope of the arbitration clause, but contended that a number of the claims being advanced against it in the arbitration were not arbitrable, as not being within the scope of the arbitration clause.
Held, restraining Excalibur from pursuing the arbitration proceedings against the Gulf defendants and dismissing its application for a stay:
1. Section 9 of the Arbitration Act 1996 was not engaged, since Excalibur was not a party to an arbitration agreement against whom legal proceedings were brought. Despite the ability of an arbitral tribunal to determine its own jurisdiction even where challenged, the English court retained the jurisdiction to determine the issue as to whether there was ever an agreement to arbitrate. There was no reason why the power to grant an anti-suit injunction should not be available under the Senior Courts Act 1981, s. 37 in appropriate circumstances, even if s. 9 of the 1996 Act was not engaged. In the present case, Excalibur had clearly submitted to the jurisdiction of the English court by starting the substantive Commercial Court proceedings and seeking extensive injunctive relief. In the circumstances, there was jurisdiction to grant an anti-suit injunction should it be appropriate to do so. (Dallah Real Estate and Tourism v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46; [2010] 2 CLC 793 and AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSCUNK[2011] EWCA Civ 647; [2011] 2 CLC 51 applied.)
2. The circumstances of the case conclusively pointed to the court being the appropriate tribunal to decide whether or not the Gulf defendants were party to the arbitration agreement contained in the collaboration agreement, rather than the ICC arbitral tribunal. Such circumstances included not only the chronology of the litigation and the conduct of Excalibur, but also cost and case management considerations. It was also appropriate as a matter of discretion to grant an anti-suit injunction restraining Excalibur from pursuing the arbitration proceedings. The continuation of such proceedings by Excalibur would be unconscionable, oppressive, vexatious or otherwise an abuse of the due process of the court, and the grant of such an injunction was necessary to protect the Gulf defendants' legitimate interest in continuing the proceedings in England which was the natural forum for the litigation. (Glencore International AG v Exter Shipping Ltd[2002] CLC 1090, Albon v Naza Motor Trading Sdn Bhd[2007] 2 CLC 782 and Elektrim SA v Vivendi Universal SA[2007] 1 CLC 227 considered.)
3. This was an exceptional case, where the court's jurisdiction to injunct a party from proceeding with a foreign arbitration should be invoked. There was a strong arguable case that the Gulf defendants were not party either to the collaboration agreement or to the arbitration agreement contained within it. Moreover, none of the Gulf defendants had any connection with New York, or the ICC. To force them to participate in a jurisdiction dispute before New York arbitrators would involve, in practical terms, determining the issue against the Gulf defendants “by the back door”, and thus be likely to lead to a gross injustice. The Gulf defendants should not be compelled to go before an arbitral tribunal against whose jurisdiction they vigorously protested. That was particularly so where all the parties had voluntarily submitted to the jurisdiction of the English court in the substantive Commercial Court proceedings. It would be oppressive or unfair and unconscionable if the New York arbitration proceedings were to continue against the Gulf defendants, and the right course was for the English court to determine the issue of arbitrability of Excalibur's claims. (Anglia Oils Ltd v Owners of the Vessel “Marie Champion”[2002] EWHC 2407 (Admlty), Caparo Group Ltd v Fagor Arrasate Sociedad Co-operative[2000] ADRLJ 254 and Debenture Trust Corporation plc v Elektrim Finance BV[2005] 2 CLC 39 considered.)
4. Since Excalibur had voluntarily commenced two sets of proceedings, the court should not grant a stay unless Excalibur could show exceptional circumstances to justify that. There were no such circumstances. Any benefits of granting a stay to Excalibur were clearly outweighed by the burden which the Gulf defendants would suffer if they had to contest the issue of arbitrability and the substantive claim before an arbitral tribunal whose jurisdiction they did not accept and/or before the New York courts with which they had no connection and to whose jurisdiction they did not wish to submit. If the Commercial Court proceedings were stayed, there was a real doubt as to whether the arbitration proceedings would be binding on the Gulf defendants. Moreover, the arbitration proceedings would not necessarily or finally resolve all the issues before the court. In addition, the Commercial Court proceedings involved claims against TKI and the Gulf defendants under both English and New York law, whereas the arbitration proceedings only involved claims under New York law. Serious allegations of fraud and conspiracy were raised against the defendants who had submitted to the jurisdiction of the English court and were...
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