Shell Egypt West Manzala and Another v Dana Gas Egypt Ltd
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE |
| Judgment Date | 07 August 2009 |
| Neutral Citation | [2009] EWHC 2097 (Comm) |
| Docket Number | Case No: 2009 Folio 462 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 07 August 2009 |
[2009] EWHC 2097 (Comm)
Before: Mrs Justice Gloster, DBE
Case No: 2009 Folio 462
IN THE HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand, London, WC2A 2LL
John McCaughran Esq, QC (instructed by Herbert Smith LLP) for the Claimant
Robert Hildyard Esq, QC and Richard Hill Esq (instructed by Ashurst LLP) for the Defendant
Hearing dates: 24 th July 2009
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:
Introduction
1. This is my judgment in relation to two applications before the court in this matter:
i) an application by the claimants (together “Shell”) for permission to appeal, pursuant to section 69 of the Arbitration Act 1996 (“the 1996 Act”), on points of law arising out of a Final Partial Award dated 11 March 2009 (“the Award”) in the matter of an arbitration between Shell and the defendant to the arbitration claim, Dana Gas Egypt Limited (formerly Centurion Petroleum Corporation) (“Centurion”), under the UNCITRAL Rules (“the appeal application”); and
ii) an application by Centurion for an order that this court has no jurisdiction to hear Shell's application for permission to appeal or any substantive appeal, under section 69 of the 1996 Act (“the jurisdiction application”).
Background
2. The Award was made by an UNCITRAL arbitration tribunal (“the Tribunal”), consisting of Ali Malek QC (Chairman), Michael Brindle QC and Stephen York, in Centurion's favour.
3. The dispute arose in connection with a Farm-In and LNG Cooperation Agreement dated 17 March 2006 between Shell and Centurion in relation to two concessions for crude oil and gas exploration in the Nile Delta in Egypt (the “FIA” and the “Concessions”). Under the FIA Shell was to acquire a 50% interest in the Concessions.
4. The FIA was subject to a mandatory arbitration provision at clause 14. That provided:
“The construction, validity and performance of this Agreement shall be governed by English Law.
Any disputes arising out of or in connection with this Agreement or the application, implementation, validity, breach or termination thereof shall be settled by arbitration in London, under the UNCITRAL Arbitration Rules. The number of arbitrators shall be three. The appointing authority shall be the London Court of International Arbitration. The arbitration shall be conducted in the English language. The arbitrators shall not award consequential, punitive or other similar damages in connection with the decision of any dispute hereunder.
14.3 The dispute shall be submitted to the arbitrators in such manner as they shall deem appropriate and the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties, and the judgment upon such decision may be entered in any court of a country having jurisdiction.” [emphasis added]
5. On 22 December 2006 Shell sent a letter to Centurion giving it 30 days' notice to terminate the FIA (the “Termination Letter”) pursuant to its contractual right of termination under clause 3.1.8 of the FIA. Clauses 3.1.8 and 3.1.9 provided as follows:
“3.1.8 Without prejudice to Clause 3.1.6 and 3.1.9, if the Closing Date has not occurred within nine (9) months following the Agreement Date, then Shell may elect, by thirty (30) days notice in writing to Centurion to terminate this agreement.
In such event:
(a) Shell shall pay, in accordance with the terms of the JOAs, its share of any and all costs incurred in respect of Joint Operations up to the date of withdrawal;
(b) Centurion shall not be obliged to repay to Shell any amounts paid under Clause 3.1.1;
(c) Shell shall pay, in accordance with the JOAs, its participating interest share of any costs relating to completing the Concession Work Programmes. Shell shall have the benefit of any cost recovery of any sums paid by Shell pursuant to this Clause 3.1.8(c). Notwithstanding the foregoing, Shall shall have no liability of whatsoever nature for, and Centurion shall indemnify Shell against, any losses or damages arising out of any operations performed following termination of this Agreement; and
(d) Other than as provided for in this Clause 3.1.8, Shell shall have no obligations or liabilities under this Agreement of whatsoever nature.
3.1.9 If the Closing Date has not occurred within the nine (9) months referred to in Clause 3.1.8 because the condition precedent described in Clause 2.2(e) has not occurred and Shell has elected to terminate this Agreement in accordance with the terms of Clause 3.1.8, then the provisions of Clause 3.1.8(a),(b) and (c) shall not apply and the termination will be treated as if Government Consents had not been received under Clause 3.1.6. Accordingly Centurion shall refund any and all payments made to Shell.”
6. Thus, as appears from the relevant provisions of the clauses, Shell had a right to terminate the FIA if the Closing Date (as defined) had not occurred within nine months of the date of the FIA; such right was not dependent upon any breach of contract on the part of Centurion, but simply upon non-occurrence of the Closing Date within the relevant time.
7. In the Termination Letter Shell asserted that the CTIP Acquisition had not been completed, and that, accordingly, pursuant to clause 3.1.9, Centurion was required to refund all payments made by Shell. So far as material the Termination Letter was in the following terms:
“Following our meeting of the 18 December 2006 … and the various communications between our companies since then, we have further reviewed Shell's interest in the Concessions.
We note that the Closing Date has not occurred within nine months of the Agreement Date and Shell now issues notice of its election to terminate the FIA. Termination will become effective thirty days after the date of this letter.
We also note that we have not received information from Centurion that Centurion has received formal notification from the Government of its consent to the CTIP Acquisition and we therefore understand that the CTIP Acquisition has not been completed.
In the circumstances, in accordance with the terms of clause 3.1.9, Centurion shall refund any and all payments made by Shell.”
8. However it was common ground that, as at the date of the Termination Letter, the CTIP Acquisition had in fact completed. Shell's understanding, as set out in its letter, was, therefore, mistaken. The Tribunal held that when the Termination Letter was sent, Shell mistakenly believed that the CTIP Acquisition had not yet completed; see paragraph 100 of the Award, which states:
“when the Termination Letter was sent, as explained by Mr. Eggink in his written evidence, Shell mistakenly believed that the CTIP Acquisition had not yet been completed. We accept that evidence and find that Mr. Eggink and Mr. Crichton were acting under a mistake (Mr. Bloomfield of Shell had been informed of the true position and given the relevant documents at the meeting in Egypt on 15th November 2006)…. It is therefore common ground in this arbitration that Centurion was under no obligation to Shell to refund any payments pursuant to clause 3.1.9 of the FIA as Shell had asserted.”
9. The following day, 23 December 2006, Centurion responded to the Termination Letter pointing out that the CTIP Acquisition had completed earlier in the year and waiving the 30 day notice period. It was common ground that the FIA terminated on 23 December 2006.
10. There then followed more than a year of negotiations in which Shell asserted various different grounds for seeking to recover monies that it had paid under the FIA, or other compensation.
11. On 19 February 2008, Shell served a Notice of Arbitration under clause 14 of the FIA. Shell contended in its Notice of Arbitration that Centurion had been in repudiatory breach of the FIA in December 2006, in two material respects:
i) that Centurion was in breach of certain provisions dealing with change of control contained in the FIA and two associated joint operating agreements between the parties (“the JOAs”), which respectively required Centurion
a) in the event of a direct or indirect change of control of Centurion, to advise Shell as soon as reasonably practicable of such change of control and to give Shell the option to assume the “operatorship” of the Concessions;
b) in the event that it was subject to a direct or indirect change of control, to give to Shell a right of pre-emption, i.e. the opportunity to acquire Centurion's Participating Interest in the Concessions, upon the same terms and conditions as had been agreed with the party which was proposing to take over control;
ii) that Centurion was in breach of certain provisions relating to the carrying on of sole risk operations (i.e. operations undertaken other than for the account of all the co-venturers)
12. The Notice of Arbitration went on to claim that
“16. In view of Centurion's serious breaches of the terms of the FIA and the JOAs, Shell terminated the FIA on 22 December 2006 ….
18. As a consequence of each of the repudiatory breaches set out above, both individually and cumulatively Shell were entitled to terminate the FIA on 22 December 2006 and are entitled to damages.”
Shell also made a claim on the basis of breach of warranty by Centurion as a result of its conduct of the sole risk operations. Shell...
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