New Age Alzarooni 2 Ltd and Another v Range Energy Natural Resources Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 19 December 2014 |
| Neutral Citation | [2014] EWHC 4358 (Comm) |
| Docket Number | Case No: 2014 Folio 748 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 19 December 2014 |
[2014] EWHC 4358 (Comm)
Mr Justice Cooke
Case No: 2014 Folio 748
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Bools QC (instructed by Clyde & Co) for the Claimants
Graham Dunning QC and Catherine Jung (instructed by Vinson & Elkins LLP) for the Defendant
Hearing dates: 15th and 16th December 2014
Introduction
The Claimants bring an application under Section 68 of the Arbitration Act 1996 challenging a Final Arbitration Award dated 22 May 2014 on the ground of "serious irregularity which has caused or will cause substantial injustice" to them. I shall refer to the first and second Claimants as New Age 2 and Black Gold respectively.
I need not set out in great detail the structure of the contractual and shareholding arrangements between New Age 2, Black Gold and the Defendant to this application (to whom I shall refer as 'Range'). It is sufficient for current purposes to state the following, as appears in the skeleton argument of Range which was the Claimant in the Arbitration.
Range and Black Gold are, respectively, the 49.9% and 50.1% shareholders in New Age 2, a company incorporated under Jersey law, Range, Black Gold and New Age 2 are all parties to a shareholders' agreement dated 17 November 2009 (the "New Age SHA"). It was pursuant to an arbitration agreement, contained at clause 17.2 of the New Age SHA, that the Arbitration was brought.
New Age 2 is, in turn, the 50% shareholder in a company called Gas Plus Khalakan Limited ("Gas Plus"). The other 50% shareholder in Gas Plus is New Age (African Global Energy) Limited ("New Age African"), New Age 2, New Age African and Gas Plus are all parties to a shareholders' agreement dated 10 June 2009 (the "Gas Plus SHA"). The Gas Plus SHA is framed in materially similar terms to the New Age SHA.
Gas Plus is a party (by assignment) to a Production Sharing Contract (the "PSC") with the Kurdistan Regional Government (the "KRG") for the exploration and development of an oil and gas field (known as the Khalakan Block) in Kurdistan, Iraq, New Age African is engaged by Gas Plus, pursuant to a Management Services Agreement concluded on or about 27 May 2009, to perform a wide range of day-to-day management in respect of the Khalakan Block. In addition to being Gas Plus' 50% shareholder, New Age African was, by the time of the arbitration hearing, the 100% shareholder in Black Gold.
Gas Plus raises money to fund its operations in the Khalakan Block by making cash calls upon its shareholders (New Age African and New Age 2), New Age 2 raises funds by, in turn, making cash calls upon its shareholders (Range and Black Gold). If a shareholder does not meet its share of a cash call, then, pursuant to the terms of the Gas Plus and New Age SHAs, that shareholder's interest can be diluted, or made subject to a forced buy-out.
The Arbitration Agreement contained in the New Age SHA provided for ICC arbitration in London under the ICC Rules. The dispute as described in paragraphs 8–11 of the Particulars of Claim annexed to the Arbitration Claim Form, related to the failure of New Age 2 to supply Range with information to which the latter considered it was entitled as a shareholder under the New Age SHA in order for it to make informed investment decisions, Black Gold did not receive such information itself, as the majority shareholder in New Age 2, but its parent company, New Age African, which managed the Khalakan Block operations under the Gas Plus Management Services Agreement, had all the information in question and as the 100% beneficial owner of Black Gold could effectively give informed direction to Black Gold as to the steps it should take in responding to cash calls made by New Age 2 for more working capital in circumstances where similar calls had been made by Gas Plus to New Age 2.
As explained by the Arbitrators, under the terms of the New Age SHA, Black Gold was entitled to appoint four directors and Range one director to the Board of New Age 2, but Range was obliged to procure that the director appointed by it should sign such written resolutions as Black Gold should require, as long as doing so did not amount to a breach of the director's fiduciary duty to New Age 2. All directors appointed to New Age 2 were required to enter into a deed with New Age 2 and both shareholders, undertaking to comply with the terms of the New Age SHA.
Because I have come to the clear conclusion that the Section 68 application is groundless and misconceived, I need not set out full details of the Arbitrators' findings in a 168 page reasoned Award in which they examined the terms of the contracts and the obligations of the parties under English law which governed the contracts and under Jersey law which governed the question of minority shareholder relief available to Range in respect of its shareholding in New Age 2, Range was being asked to contribute millions of US dollars in response to cash calls for the exploration/ development of the Khalakan Block where it was hoped that significant quantities of oil/gas would be found.
Both under the express terms of the Arbitration Agreement to be found in the New Age SHA and under the ICC Rules of Arbitration, all rights of appeal were excluded. Consequently New Age 2 and Black Gold have made contrived attempts to mount a Section 68 challenge to the findings of the Arbitrators on the basis of alleged serious irregularity affecting the Tribunal, the proceedings or the Award.
The Complaints made and the relevant Provisions of the Arbitration Act and their effect
The relevant provisions of the 1996 Arbitration Act, for present purposes, are as follows:
..."68. Challenging the award: serious irregularity.
(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the Tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award."
"33. General duty of the tribunal.
(1) The tribunal shall—
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it."
"70. Challenge or appeal: supplementary provisions.
(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted—
(a) any available arbitral process of appeal or review, and
(b) any available recourse under section 57 (correction of award or additional award)."
"73. Loss of right to object.
(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection—
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or
(d) that there has been any other irregularity affecting the Tribunal or the proceedings,
he may not raise that objection later, before the Tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.
(2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling—
(a) by any available arbitral process of appeal or review, or
(b) by challenging the award,
does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of this Part, he may not object later to the tribunal's substantive jurisdiction on any ground which was the subject of that ruling."
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