Monde Petroleum SA (Claimant in 2013 Folio 308 & 2014 Folio 1060, Defendant in 2014 Folio 975) v Westernzagros Ltd (Defendant in 2013 Folio 308 & 2014 Folio 1060, Claimant in 2014 Folio 975)
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 22 January 2015 |
| Neutral Citation | [2015] EWHC 67 (Comm) |
| Docket Number | 2013 Folio 308, |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 January 2015 |
[2015] EWHC 67 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2013 Folio 308,
2014 Folios 975 & 1060
Eleanor Campbell (instructed by Candey LLP) for Monde Petroleum SA
Stuart Isaacs QC & Ruth M D Byrne (instructed by King & Spalding International LLP) for WesternZagros Ltd
Hearing date: 14 January 2015
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.
Introduction
WesternZagros Ltd ("WZL") is a company incorporated in Cyprus with its head office in Calgary, Canada. It carries on business exploring for, developing and producing crude oil and natural gas. In 2006 it was engaged in negotiations with the Kurdistan Regional Government in Iraq ("KRG") for the exploitation of oil in the South Sulaymaniyah region of Kurdistan.
Monde Petroleum S.A. ("Monde") is a company incorporated in the British Virgin Islands. It is wholly owned or controlled by Mr Yassir Al-Fekaiki, whose late father, Mr Hani Al-Fekaiki, was a leading figure in the Iraqi opposition to Saddam Hussein.
The dispute between the parties originates from an agreement for consultancy services dated 23 April 2006 ("the CSA"), by which WZL engaged the services of Monde, acting through Mr Al-Fekaiki, to assist WZL in concluding and maintaining the exploration and production sharing agreement ("EPSA") which WZL was negotiating with the KRG, and in relation to business opportunities in the region more generally. It provided for Monde to receive monthly fees, enhanced payments upon the achievement of certain milestones, and an option in certain circumstances to share in the benefit of a successful EPSA by acquiring a 3% interest. The CSA contained a London arbitration clause.
In January 2007 WZL stopped paying the monthly fee invoiced by Monde, and on 16 March 2007 WZL purported to terminate the CSA pursuant to a contractual termination provision. WZL disputed that the unpaid amounts invoiced by Monde, which included a milestone payment, were due.
On 18 April 2007 the parties entered into a settlement agreement ("the Termination Agreement"), under which WZL was to pay Monde's disputed invoices in full and there was a mutual release and waiver of all claims by each party against the other in respect of the CSA. The Termination Agreement contained a clause conferring exclusive jurisdiction on the courts of England and Wales.
Monde has commenced proceedings in 2013 Folio 308 ("the Commercial Court proceedings") by which it alleges that the Termination Agreement was induced by misrepresentation and/or duress. It claims damages for misrepresentation and/or duress in an amount which it alleges it would have earned under the CSA, including what it would have earned pursuant to the 3% option. The quantification of such damages claim necessarily involves the assumption that the CSA was not validly terminated, a matter disputed by WZL. The relief claimed by Monde in the Commercial Court proceedings also includes "further or alternatively" a claim for rescission of the Termination Agreement by reason of the alleged misrepresentation and/or duress.
Monde also commenced arbitration proceedings against WZL as a protective measure, notwithstanding that its primary case was that the Commercial Court had jurisdiction in relation to its claims. WZL made counterclaims for declaratory relief in the arbitration, including seeking declarations that Monde had no further entitlement under the CSA and so had not lost any benefit by entering into the Termination Agreement. Monde disputed that these questions fell within the tribunal's jurisdiction. By an award dated 16 July 2014 ("the Award"), the tribunal determined that it had no jurisdiction in the relation to the declaratory relief counterclaimed by WZL in the arbitration. It ordered WZL to pay Monde's costs of the arbitration proceedings.
There are four applications by WZL before the Court. The principal application is an appeal under s.67 of the Arbitration Act 1996 ("the s.67 appeal") by which WZL seeks to overturn the decision in the Award that the tribunal did not have jurisdiction over WZL's counterclaims for declaratory relief. The second application is to set aside an order of Flaux J dated 6 October 2014, made ex parte, granting Monde permission to enforce the Award in respect of the order for costs. The third application is a challenge to the Court's jurisdiction in respect of part of the claim made by Monde in the Commercial Court proceedings. It is common ground that the outcome of the second and third applications will be determined by the outcome of the s.67 appeal. The fourth application by WZL is for security for the costs of defending the Commercial Court proceedings in the event that it is unsuccessful on the other applications.
The Agreements
Under the CSA, the services to be provided by Monde through Mr Al-Fekaiki were set out in Schedule A. Mr Al-Fekaiki's principal function was to advise and assist WZL in " concluding and maintaining a fully operational and enforceable Exploration and Production Sharing Agreement between Kurdistan Regional Government – Iraq and [WZL]… (the " EPSA")". In return, Monde was to be paid monthly fees for an initial period, together with success fees on the achievement of certain milestones relating to the conclusion and performance of any EPSA between WZL and the KRG (Schedule B). By Schedule C Monde was granted an option to acquire a 3% working interest in any EPSA, exercisable on the declaration of commercial discovery under the EPSA, or 24 months from the commencement of the seismic programme, provided that the three events triggering payment of the various milestone fees under Schedule B had all occurred.
Clause 10 made provision for the term of the CSA and contractual rights of termination. Clause 5 contained detailed confidentiality obligations which would continue to bind the parties for a period of 5 years after termination of the CSA. Clause 12 provided that the CSA was governed by English law. Clause 13 provided:
"13.1 If any dispute, controversy or claim arises between the Parties in relation to, or in connection with this Agreement, or in connection with the interpretation, performance or non-performance hereof, including any questions regarding the payment of fees, (the "Dispute"), the Parties shall promptly meet to discuss the Dispute in an attempt to resolve such dispute amicably through negotiation.
13.2 If the dispute has not been resolved within sixty (60) days…, then either Party may, by notice in writing to the other, refer the dispute to arbitration to be fully settled."
Clause 13 went on to provide that the arbitration was to be held in London under the ICC Rules.
In the eleven months which followed, two of the three milestones in Schedule B to the CSA were achieved. In January 2007 WZL stopped paying the monthly fee of $50,000 invoiced by Monde. By letter dated 16 March 2007, WZL purported to terminate the CSA pursuant to clause 10.2 which provided an entitlement to do so if no EPSA became " fully operational and enforceable within six months" of the date of the CSA. Of the amounts invoiced by Monde, $700,000 remained unpaid by WZL, which disputed that such amount was due.
There is now a dispute between the parties whether WZL was entitled to terminate the CSA on this ground as a matter of construction, or as a matter of fact. There is also now a dispute between the parties as to whether Monde properly performed the services under the CSA during this period, and as to whether WZL ever complained about the performance of the services by Monde. There is also a dispute as to whether in the month or so prior to entering into the Termination Agreement any of these disputes were raised. In a 2013 witness statement, Mr Al-Fekaiki alleges that he had discussions with representatives of Monde in which he expressed concerns about signing the Termination Agreement because it would involve giving up the 3% option to which Monde remained entitled under the CSA. This suggests that he did at the time treat the termination as invalid. It is disputed by WZL that he did so. It is, however, common ground that a dispute had crystallised at the time as to whether Monde's outstanding invoices totalling $700,000 should be paid by WZL.
On 18 April 2007 WZL and Monde entered into the Termination Agreement. By Article 2.1 they agreed to terminate the CSA in consideration for the payment by WZL of Monde's outstanding invoices. Article 2.1 went on to make detailed and comprehensive provision for the surrender by Monde of any and all rights it might otherwise have had in or arising from the CSA, including any claims "with respect to [the CSA] or any other matter relating in any way thereto". By Article 2.2 WZL released Monde in similarly comprehensive terms from any claims by WZL.
Clause 3.2 of the Termination Agreement provided that:
"Notwithstanding the termination of the [CSA], the provisions of Section 5 thereof (Confidentiality) shall continue to apply."
Clause 3.3 of the Termination Agreement provided:
"This Agreement shall be governed by and construed in accordance with the laws of England and Wales. The parties herein irrevocably attorn to the exclusive jurisdiction of the courts of England and Wales."
Clause 3.5 of the Termination Agreement...
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