Global Coal Ltd v ICAP Energy Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Wilson,Lord Justice Ward |
| Judgment Date | 08 March 2006 |
| Neutral Citation | [2006] EWCA Civ 167 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 March 2006 |
| Docket Number | Case No: A3/2005/2940 |
[2006] EWCA Civ 167
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE PATTEN
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Ward
Lord Justice Lloyd and
Lord Justice Wilson
Case No: A3/2005/2940
Michael Silverleaf Q.C. and Brian Nicholson (instructed by Davenport Lyons) for the Appellant
Alastair Wilson Q.C. (instructed by Watson Farley & Williams) for the Respondent
On 15 December 2005 Mr Justice Patten refused the Claimant an interim injunction against the Defendant, on the ground that the Claimant did not have a seriously arguable case, on the construction of the relevant documents, for the grant of an injunction at trial. This is the Claimant's appeal, to which the Defendant has served a Respondents' Notice seeking to uphold the judgment on other grounds as well.
The case is about coal from Newcastle – but Newcastle in New South Wales, rather than Newcastle-upon-Tyne. More accurately, it is about broking deals in relation to financial derivatives of trading in such coal.
The Claimant is a company which was set up by a number of undertakings with large interests in the world coal industry—both as producers and as purchasers—with a view to designing and developing increased standardisation in the specification and trading of coal, for the sake of promoting electronic trading in coal and bringing transparency to the coal market. It has developed a standard form of contract, called SCoTA (Standard Coal Trading Agreement) , with standard specifications for various products, among which is Australian coal shipped from Newcastle. On the basis of this, and of information about spot trading on the basis of contracts in this form, it has also developed a number of indices, among which one relates to Newcastle coal, referred to as NEWC (which the Claimant has registered as a trade mark, as it also has NEWC INDEX) . These indices are used in the market, in particular as a reference price for price swap contracts.
According to the evidence, such swap contracts have come to be used extensively in recent years, because of the volatility of the price of coal and because of pressures on the price that can be charged to consumers for energy supplies, for example by way of post-privatisation regulatory processes, and as a result of competitive pressures following deregulation. A basic prerequisite for a swap contract is a reliable index of current prices of the relevant product, as a reference point for the application from time to time of the swap contract. Such an index also presupposes a standard specification so that the product to which the index relates and the product to which the swap contract relates can be seen to be identical. A number of indices exist in various markets, but according to the evidence some large participants in the market felt the need for such an index to be developed for other sectors of the coal market. That was the reason for the establishment of the Claimant.
By dint of substantial effort and expenditure, the Claimant has developed the form of agreement already mentioned, and the associated specifications, and has established its NEWC Index to the point where, although there are other indices for Newcastle coal, the Claimant's index has gained general acceptance in the market, so as to be the only such index which is in general use.
Participants in the market use the Claimant's index and other facilities provided by the Claimant, including SCoTA, by virtue of one or other of two forms of agreement. Traders use the Global Coal Usage Agreement (GCUA) . Brokers enter into a Product Licence Agreement (PLA) . The present proceedings turn on the PLA, as signed by the Defendant. But first I need to mention the GCUA.
7. According to the recitals to the GCUA, the Claimant owns and operates an internet-based system to provide its members with an online market place for trading coal and disseminating information about the coal industry, and the other party to the agreement, the member, wishes to have access to the Claimant's internet-based system for trading coal, among other purposes. Members pay an annual fee and also transaction fees for any transaction which is carried out using the Claimant's internet-based system. The Claimant grants to the member a licence to use the website and to trade on the internet-based market facilities on the terms of the agreement. The use of these facilities is limited to members, and members are bound by confidentiality undertakings. However, members are not limited to trading by way of these facilities and the agreement expressly recognises at clause 8.6 that the Claimant's service may not represent the whole of the market for any relevant product. Mr Silverleaf Q.C. for the Claimant accepted that it was open to members to trade in the relevant products by the use of brokers if they wished.
The evidence shows that the Claimant does not employ brokers. The Claimant's trading facilities are all to be found on its website. A member may post an offer or a bid for, say, Newcastle coal, in a given quantity for delivery at a given time, naming the price offered or asked (but not the identity of the person posting it) , or for a swap contract in relation to such coal. Other members will see the offer or bid on the relevant section of the Claimant's website, on their own computer screens. If another member wishes to accept the bid or offer, that can be done automatically by clicking on the relevant figure on the screen. The processing of the transaction is then carried out automatically through the computer system. If the other member wishes to bargain about the price, it can post a rival offer or bid, at a different price, to see if the first member will accept that or move towards it.
On the other hand, the Defendant's evidence suggests that, for a number of particular reasons, traders in the coal market may need, or want, the assistance of brokers to get to an acceptable transaction. The Defendant provides a brokerage service. At one time it did so for the trade of physical coal, but it is no longer active in that market. Now it only deals with swap contracts. It has a team of brokers whose job it is to encourage or help traders to enter into contracts for the swaps they need, in order to reduce their exposure as regards the price payable for physical coal to be delivered in the future. The Defendant's clients in the relevant market will be members of the Claimant's system and thus entitled to access to the Claimant's screens, with the information on them and the trading facilities which they provide. Originally brokers, such as the Defendant, did not themselves have any access to the Claimant's screens, other than that which is generally available. Now, however, they can, by means of the PLA. The Defendant entered into a PLA on 16 April 2003. The Claimant's evidence shows that all the major broking firms have entered into such an agreement with it.
Before setting out the relevant terms of the PLA, I will describe briefly the issue which has arisen. The evidence describes how, in the past (and in some other markets still) , all trading was done by individual bilateral communication – once upon a time face to face, more recently by telephone and now by phone or by email or text message – known as voice transaction. Today it is possible, in some markets, including that of Newcastle coal, to trade entirely on screen, as I have described at paragraph 8 above. But some trading is done using both facilities: bids and offers are posted on a screen, but rather than accept, or attempt to bargain, on screen the interested party uses a broker as an intermediary to get to a contract. Even in that case, however, the parties may wish the contract to be executed on line, because that secures benefits in terms of administrative savings and enhanced security and reliability, by way of what is called "Straight Through Processing" of the transaction. All relevant details of the transaction will be fed directly to each party's computer systems and, for a swap transaction, all the necessary material will be there, from which the calculations needed from time to time under the swap can be done automatically.
The Defendant's team of brokers get involved in hybrid trading such as I have just described. Their client may see a bid or offer posted on a screen, but may wish either to accept it or to negotiate about it off screen. For that purpose, the client may contact one of the Defendant's brokers. Alternatively they may be brought into contact by the broker's efforts without having seen a relevant bid or offer on screen. If a contract results from the broker's intervention, the client will want it to be executed on screen in order to secure the benefit of Straight Through Processing. The Defendant found that, from time to time, it lost the benefit of its broking efforts because clients, having got very close to a deal, would disappear, so to speak, instead of bringing the deal to contract by means of the Defendant. The explanation turned out to be the parties' need for the contract to be executed on screen, for the sake of Straight Through Processing. The contracting parties would therefore take the benefit of the Defendant's efforts but conclude the deal through the Claimant's screens. In this way the Defendant lost the reward for its efforts, since it would only earn commission if it was able to conclude the contract, and the parties would instead pay the Claimant its...
To continue reading
Request your trial
-
Global Coal Ltd v London Commodity Brokers
...considered, namely by Patten J and then by the Court of Appeal in Global Coal Limited v. ICAP Energy Limited [2005] EWHC 3006 (Ch) and [2006] EWCA Civ 167. In that case Global Coal sought an injunction to restrain ICAP from displaying prices, bids or offers for Newcastle Australia coal fin......