Arbitration

Interim injunction - Power of court - Whether anti-suit injunction should be granted

Excalibur Ventures LLC v Texas Keystone Inc and other companies: Queen’s Bench Division, Commercial Court (Mrs Justice Gloster): 28 June 2011

The claimant company claimed to offer advisory, investment procurement and public relations services in the energy business; it was incorporated under the laws of Delaware, US.

The first defendant, TK1, was a corporation incorporated under the laws of Texas; the second and third defendants were companies incorporated in Bermuda.

The fourth defendant was a company incorporated and domiciled in England.

TK1 had varying interests in the second to fourth defendants.

The second to fourth defendants were referred to collectively as the ‘Gulf defendants’, and along with TK1 had interests in the acquisition, exploration, development and production of natural gas and oil resources in the US.

The claimant and TK1 entered a collaboration agreement to pursue and prepare bids to acquire by way of ‘consortium bids’ and develop petroleum blocks in Iraqi Kurdistan (the blocks), and in the event of successful bids to produce and sell petroleum from the blocks.

None of the Gulf defendants were signatories to the collaboration agreement.

When a dispute arose regarding the collaboration agreement, the claimant commenced an action in the Commercial Court against TKI and the Gulf defendants, making a series of contractual, tort and equitable claims under New York and English law.

On the same day, 17 December 2010, the claimant also began arbitration proceedings against TK1 and the Gulf defendants under the International Court of Arbitration of the International Chamber of Commerce (ICC) arbitration rules with the seat of arbitration in New York.

In the arbitration proceedings, the claimant sought similar, but not identical, relief against TK1 and the Gulf defendants to that which it sought against them in the Commercial court proceedings.

The Gulf defendants maintained that they were not parties to the collaboration agreement and that they were not bound by the ­arbitration agreement.

They sought an anti-suit injunction to restrain the claimant from proceeding with the ICC arbitration against them. The claimant applied to stay the Commercial Court proceedings.

The issues were, among other things: (i) whether the court had jurisdiction to grant an anti-suit injunction to restrain the claimant from proceeding with the ICC arbitration, consideration being given to section 37 of the Senior Courts Act 1981; (ii) whether the court had jurisdiction to determine the issue as to whether the Gulf defendants could be compelled to arbitrate the claims which the claimant had made against them; (iii) whether an anti-suit injunction should be granted; and (iv) whether a stay of the Commercial Court proceedings should be granted.

The court ruled: (1) The English courts had jurisdiction under the act to grant injunctions restraining arbitrations where the seat of the arbitration was in a foreign jurisdiction, although it was a power that was only exercised in exceptional circumstances and with caution.

An English court would be particularly slow to restrain arbitration proceedings where there was an agreement for the arbitration to have its seat in a foreign jurisdiction and the parties had unquestionably agreed to the foreign arbitration clause.

Questions relating to arbitrability or jurisdiction, or to staying the arbitration, might in appropriate circumstances be left to the foreign courts having supervisory jurisdiction over the arbitration.

Nonetheless, in exceptional cases, the court might exercise its power under section 37 of the act to grant such an injunction. Despite the doctrine of kompetenz-kompetenz or ‘competence-competence’ (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 ever had been an agreement to arbitrate (see [54], [55], [56], [57] of the judgment).

In the present case, the claimant had clearly submitted to the jurisdiction of the English court by starting the substantive Commercial Court proceedings.

The claimant was therefore clearly amenable to the English court’s personal and territorial jurisdiction. In those circumstances, the court had jurisdiction to grant an anti-suit injunction should it be appropriate to do so (see [59], [60] of the judgment).

(2) Where a defendant in proceedings before the court applied for a stay of foreign arbitration proceedings in favour of domestic proceedings, the court had jurisdiction to decide itself whether to resolve the issue as to whether an arbitration agreement existed (see [66] of the judgment).

In the case of an English arbitration, the court might determine whether there was an arbitration agreement binding on a person alleged to be a party to arbitral proceedings, so long as that person had not taken part in the arbitral proceedings.

The fact that an arbitral tribunal was permitted to decide questions of jurisdiction was of no consequence.

The Arbitration Act 1996 did not require a party who maintained that there was no arbitration agreement to have that question decided by an arbitral tribunal.

The real purpose of the competence-competence rule was in no way to leave the question of the arbitrators’ jurisdiction in the hands of the arbitrators alone.

Their jurisdiction had instead to be reviewed by the courts if an action was brought to set aside or to enforce the award. The tribunal’s own view of its jurisdiction had no legal or evidential value, when the issue was whether the tribunal had any legitimate authority in relation to the government at all (see [63], [64], [65] of the judgment).

In the present case, as a matter of discretion, not jurisdiction, the correct approach conclusively pointed to the court being the appropriate tribunal to decide whether or not the Gulf defendants had been parties 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 the claimant, but also cost and case management considerations (see [67], [68] of the judgment).

(3) The present case was an exceptional one where it was appropriate for the court in the exercise of its discretion, to grant an anti-suit injunction restraining the claimant from pursuing the arbitration proceedings.

The continuation of such proceedings by the claimant 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.

The reasons were, among other things, first, there was, on the evidence, a strong arguable case that the Gulf defendants were not parties either to the collaboration agreement or to the arbitration agreement contained within it.

Second, none of the Gulf defendants had any connection with New York, or the ICC. Third, the claimant, the party pursuing the arbitration, had unequivocally elected to commence substantive proceedings before the Commercial Court.

By contrast, no substantive applications had been made in the arbitration proceedings. In such circumstances, it would be an abuse of process for it now to require the other parties to change course and proceed with the arbitration.

That was particularly so in circumstances where all the defendants, including TKI, had voluntarily submitted to the jurisdiction.

It would be vexatious for TKI and the Gulf defendants to be forced to defend two sets of proceedings involving the same issues in two jurisdictions at the same time ([70] of the ­judgment).

It would be oppressive or unfair and unconscionable if the New York arbitration proceedings were to continue against the Gulf defendants. The right course was for the English court to determine the issue of arbitrability of the claimant’s claims (see [71] of the judgment).

(4) In circumstances where a claimant was applying to stay proceedings voluntarily brought by it, it needed to show that there were special rare or exceptional circumstances to justify a stay.

The usual approach where a claimant was seeking a stay of proceedings brought by it was therefore to refuse the stay, but an exceptional case might be made out where the proceedings sought to be stayed were started purely to protect the claimant's limitation position.

Even where there were such reasons for a stay, a stay should only be granted if the benefits of doing so clearly outweighed any disadvantage to the other party.

A stay would not generally be appropriate if the other proceedings would not even bind the parties to the action stayed or finally resolve all the issues in the case to be stayed.

A defendant against whom a serious allegation (such as deceit) was made was entitled to an expeditious hearing, and should not be left for years waiting for the outcome of another case over which he (and the court) had no control.

An action alleging fraud should come to trial quickly (see [75]-[78] of the judgment).

In the present case, it would be wholly inappropriate to grant a stay.

The reasons included that England was the more appropriate forum for the determination of the claimant’s claim; 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 Commercial Court.

Serious allegations of fraud and conspiracy had been raised against TK1 and the Gulf defendants who had submitted to the jurisdiction of the English courts and they were entitled to have the allegations determined by the court expeditiously in accordance with the overriding objective (see [82]-[85] of the judgment).

An order would be made, among other things, (i) restraining the claimant from pursuing arbitration proceedings against the Gulf defendants instituted by the claimant in the ICC; (ii) dismissing the claimant’s application for a stay of the Commercial Court proceedings; and (iii) directing a trial of a preliminary issue as to whether the Gulf defendants were bound by arbitration proceedings (see [1] of the judgment).

Simon Picken QC, Timothy Kenefick and Benjamin Parker (instructed by Clifford Chance) for the claimant; Michael Crane QC and Tamara Oppenheimer (instructed by Jones Davy) for the first defendant; Jonathan Hirst QC, Harry Matovu QC and Richard Eschwege (instructed by Memery Crystal) for the Gulf defendants.