|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Norscot Rig Management PVT Ltd v Essar Oilfields Services Ltd  EWHC 195 (Comm) (12 February 2010)
Cite as:  2 Lloyd's Rep 209,  EWHC 195 (Comm)
[New search] [Context] [View without highlighting] [Printable RTF version] [Help]
QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| Norscot Rig Management PVT Ltd
|- and -
|Essar Oilfields Services Ltd
Mr Timothy Young QC (instructed by Vinson & Elkins RLLP) for the Defendant
Hearing dates: 26 & 27 January 2010
Crown Copyright ©
Mr Justice Burton :
"Law and Jurisdiction
This agreement shall be governed and construed under the English law and the Courts in England alone shall have the exclusive jurisdiction. Any dispute, controversy or claim arising out of or relating to this agreement, or the breach, or invalidity thereof, shall be settled by binding arbitration by one or more arbitrators in accordance with the … ICC Rules … The place of arbitration shall be London, England. The arbitration shall be conducted in English."
i) The Defendant placed purchase orders with the Claimant for various items of equipment, including the BOP Stack, in December 2006. The Claimant does not accept that the purchase orders (which, as it happens, if they had become contractual, would have incorporated a jurisdiction clause by reference to the Court of Mumbai) were ever sent, and relies rather on its own invoices rendered in January 2007. There was plainly a contract of purchase, and it is common ground that the BOP Stack so acquired, which was not new, required considerable work of refurbishment and repair before it could be in a position to be fitted to the Rig. As I have indicated above, there was no arbitration clause in such agreement. There is also an unresolved issue as to whether such contract or contracts was or were on a fixed price basis. There is no doubt however that both parties knew that the BOP Stack and other equipment were to be fitted to the Rig, that it was to perform to 15,000 psi and that the Rig, once fitted to the BOP Stack, was itself to operate to 15,000 psi, and for the purpose of the drilling contract referred to above.
ii) On 1 January 2007 (i.e. simultaneously with the purchases described above), the Claimant and the Defendant entered into a Memorandum of Understanding ("MOU"), which recited that the Defendant was the owner of the drilling unit "Essar Wildcat", had been awarded the drilling contract for a firm period of 2 years, and wished to appoint the Claimant as "Operations Manager" for carrying out such drilling operations of the drilling unit: by Clause 3 of the MOU they agreed to convert the MOU into a proper "Operations Management Agreement" prior to commencement of drilling operations. The MOU contained detailed terms, many of which were subsequently incorporated into the OMA, but did not contain an arbitration or jurisdiction clause.
iii) The OMA was entered into on 14 August 2007. This provided (by Clause 2.1(a)) that:"The Operations Manager shall assist the Owner in reactivating the Drilling Unit and also assist the Owner in carrying out various repairs/refurbishment activities during the reactivation phase. The Operations Manager shall assist the Owner in getting the said drilling unit inspected and approved by GSPCL …"By Clause 5 of the OMA, a monthly management fee was payable, backdated to 1 January 2007, by the Defendant to the Claimant. As set out above, it contained the material arbitration clause.
"The Plaintiffs' claim against the Defendants is for the sum of US$8,356,427.91 and/or alternatively damages to be assessed, being sum due to the Plaintiffs under an Operations Management Agreement ("Management Agreement") between the Plaintiffs and the Defendants dated 14 August 2007 for ship management services rendered to the Defendants' ship or vessel "Essar Wildcat" of the Port of Liberia ("Vessel") pursuant to the Management Agreement and/or for goods or materials supplied to the Vessel for her operation or maintenance at the request of the Defendants, their servants or agents, together with interest thereon and costs."
"7. During 2006 the Respondent decided to re-enter the deepwater drilling business after almost a decade of focusing its efforts elsewhere. Given its absence from the drilling market, the Respondent was keen to get assistance with its reintegration into the market. The Claimant's Managing Director, Mr. Ola Tollefsen ("Mr. Tollefsen") had worked for a number of years in the semi-submersible market and offered to assist the Respondent.
8. The Respondent bid for a drilling contract to be awarded by the Gujarat State Petroleum Corporation Limited ("GSPCL") for drilling operations in Exploration Block KG-OSN-2001/3 off the coast of Andhra Pradesh in India for a firm 2 year period.
9. Mr. Tollefsen was involved in the GSPCL tender process and personally participated in all of the technical discussions. Along with another representative of the Respondent, he negotiated and finalised the list of required equipment and had detailed knowledge of GSPCL's technical requirements.
10. One such requirement was that any rig to be employed under the proposed drilling contract was to be equipped with, inter alia, a Subsea Blow Out Preventer Stack (a "BOP Stack") of 15,000 psi rating along with other associated equipment (namely risers and slip joints).
11. The Respondent was successful in its tender for the drilling contract. On 16 December 2006, GSPCL and the Respondent entered into a drilling contract for a firm 2 year period (the "Drilling Contract").
12. The Respondent approached Mr. Tollefsen for advice on purchasing a suitable rig. Mr. Tollefsen located a second-hand rig and recommended that the Respondent buy and refurbish it.
13. The Respondent purchased the rig recommended to it by Mr. Tollefsen from a subsidiary company of Mike Mullen Energy Equipment Resources Inc for a total of US$219 million (the "Rig") and paid the Claimant a US$500,000 finder's fee. ...
15. Since the Drilling Contract required a BOP Stack of 15,000 psi rating whereas, on purchase, the Rig had a BOP Stack of 10,000 psi rating only, the Respondent enlisted Mr. Tollefsen's assistance in locating a BOP Stack of 15,000 psi rating as well as the other associated equipment required by the Drilling Contract.
16. In light of the tight mobilisation schedule under the Drilling Contract and the full order books of original equipment manufacturers at the time, Mr. Tollefsen advised the Respondent against ordering a new BOP Stack with a 15,000 psi rating and new associated equipment. He recommended a second-hand BOP Stack and associated equipment should instead be purchased and refurbished.
17. By its Purchase Order No. OR1/PO/140002/06-7 (the "BOP Stack Purchase Order") the Respondent placed an order for a fully refurbished BOP Stack with a 15,000 psi rating.
18. In addition the Respondent placed a second purchase order with the Claimant (Purchase Order OR1/PO/140003/06-07) instructing it to procure other second hand equipment (the "Associated Equipment") also required in order to equip the Rig to meet GSPCL's requirements under the Drilling Contract (the "Associated Equipment Purchase Order").
19. The BOP Stack Purchase Order was for US$11 million payable in 3 tranches (US$3 million immediately, US$3 million by 31 January 2007 and US$5 million by 28 February 2007) and provided that the BOP Stack would be delivered in mid July 2007.
20. The Associated Equipment Purchase Order was for US$2.59 million and provided for the purchase of 29 risers on an as is basis and 1 slip joint and 2 riser pup joints (which were all to be upgraded to 15,000 psi work pressure).
24. Shortly thereafter, a Memorandum of Understanding was entered into dated 1 January 2007 (the "MOU") by which the Respondent agreed to appoint the Claimant as Operations Manager of the Rig. The MOU provided that the Claimant's duties included, inter alia, crewing the Rig and assisting the Respondent in reactivating the Rig and carrying out repair and refurbishment activities during the Rig's reactivation phase.
25. In particular, Clause 4.3(a) of the MOU provided that the Operations Manager was to assist the Respondent in reactivating the Rig and in carrying out repairs and refurbishments activities during the reactivation phase.
26. Clause 4.5 of the MOU provided that the Claimant was to be paid a US$50,000 management fee each month (effective of 1 January 2007) and to be reimbursed for its actual documented cost of provided personnel together with a 5% administrative fee on such amount (effective from the acquisition of the Rig until 31 December 2006).
27. The MOU further provided that the Parties would convert the MOU into an operations management agreement (the "OMA") prior to the commencement of drilling operations under the Drilling Contract. This was duly done when the OMA was entered into on 14 August 2007.
28. During the course of 2007 it became apparent to the Respondent that, notwithstanding the Claimant's various assurances that the refurbishment works were on schedule and that all equipment would be delivered in time for commencement of drilling operations under the Drilling Contract, the refurbished BOP Stack was not in fact likely to be delivered on time thereby exposing the Respondent to, inter alia, liquidated damages liability under the GSPCL.
30. The Claimant pushed back the delivery date of the BOP Stack and Associated Equipment on more than one occasion and intimated to the Respondent that there were significant cost overruns (in excess of US$10 million) which it was looking to the Respondent to pay.
31. The Claimant sent the Respondent a table outlining these cost overruns ... and made it clear that unless the increased costs were paid by the Respondent, the Claimant would not deliver the BOP Stack and Associated Equipment.
32. On 9 November 2007, the Parties met at the Respondent's offices in Mumbai to discuss the BOP Stack delays and the cost overruns (the "Meeting").
33. The Claimant continued to push the Respondent to pay the cost overruns and, since the Rig was already more than 3 months behind schedule under the Drilling Contract and the Respondent had already become liable to pay substantial liquidated damages to GSPCL, the Respondent felt that it had no practical option other than to pay the additional costs. The Respondent agreed to pay the additional costs claimed. It was agreed, however, that such payment of such cost overruns was to be on a reimbursement only basis and furthermore that payment would only be made against production of documentary proof of (i) the cost escalation and (ii) prior payment of such increased cost by the Claimant.
34. The Respondent further agreed to pay the Claimant a 10% service charge on the cost of refurbishment of the risers only. No agreement was reached as to whether a 10% service charge would be paid on the amount of the BOP Stack cost overruns.
37. Given the urgent need to complete the refurbishment works so that the Rig could be mobilised, the Respondent had no practical option but to release a further US$10.35 million in 6 instalments between November 2007 and January 2008 as on account advances towards the alleged cost overruns in order to ensure the Claimant did not stop work.
41. In addition to the BOP Stack
,issues concerning the delay in the provision of the BOP Stack and the Associated Equipment and the cost overruns, the Parties experienced frictions over operational and control issues. In response to such issues, Mr Tollefsen sent the Respondent an email on 28 March 2008 stating, inter alia, "I have cancelled our O&M Contract" ...
42. On 19 April 2008, GSPCL accepted the Rig into service and allowed the Respondent to commence drilling operations under the Drilling Contract subject to the BOP Stack being tested.
43. During such tests a number of serious faults were identified in particular the BOP Stack was not holding pressure as required and leaks were observed from several bonnet sealing cases. The Claimant (as Operations Manager) was fully aware of these faults. The original manufacturer of the BOP Stack, Cameron International Corporation ("Cameron"), was commissioned in order to carry out further tests.
44. On 20 May 2008, a Cameron representative boarded the Rig, supervised further testing and advised that in order to identify the cause of the pressure leaks, he needed to take the BOP Stack to Cameron's authorised workshop in Singapore for disassembly and inspection.
45. Since the entire BOP Stack would require rebuilding and then onboard testing before being accepted by GSPCL under the Drilling Contract, the entire Rig was taken to Singapore.
46. Cameron was not able to estimate when (or indeed if) the BOP Stack would be ready to be reinstalled on the Rig. Faced with this uncertainty and mounting pressure from GSPCL to start operations under the Drilling Contract, the Respondent was required to purchase a substitute BOP Stack from Aker at the cost of US$31,253,171 and works to install the new BOP Stack (which included some parts from the defective BOP Stack) were commenced.
47. By that date, the Respondent's liquidated damages liability for delayed mobilisation of the Rig had reached US$1,500,000 under the Drilling Contract which amount has been paid to GSPCL by the Respondent.
58. The report made by Cameron on the defective BOP Stack ... concludes that the pressure leaks occurred as a result of "dimensional deviations". The evidence suggests that these "dimensional deviations" occurred when the Claimant failed to refurbish the BOP Stack in accordance with the required machining tolerances and manufacturer's detailed specifications.
61. During testing by West Engineering (GSPCL's experts), it was discovered that the choke and kill lines on the risers which should have been upgraded to 15,000 psi were in fact rated for 10,000 psi only.
62. In short, the Claimant has tried to pass off 10,000 psi risers with choke and kill lines stating that they were rated to 15,000 psi working pressure. The use of non-conforming lines could have proved fatal to the lives of those on board the Rig and disastrous to the Rig and other surrounding property.
89. The Claimant failed to procure the provision of a properly refurbished BOP Stack with a 15,000 psi rating and Associated Equipment as it had agreed to do and otherwise failed to carry out its refurbishment activities in the manner provided for in the MOU and OMA.
90. Instead, the Claimant procured the provision of a defective BOP Stack as a result of the operation of which the Respondent has suffered loss.
91. In this respect, the Respondent will contend that:
(a) even had the BOP Stack not failed, the Rig would still not have been able to perform under the Drilling Contract on account of the under-rated risers; and
(b) by supplying under-rated risers, the Claimant put at risk the lives of the crew of the Rig. A failure of the choke and kill lines attached to the risers due to high well to bore pressure might have led to loss of life on board the Rig and damage to, or the loss of, the Rig.
92. The Claimant knew that the installation of a 15,000 psi rated BOP Stack was necessary in order for the Rig to be able to operate under the Drilling Contract. The Claimant breached its obligation under the MOU and later the OMA when it failed to refurbish the BOP Stack in accordance with the requirements of the Drilling Contract.
93. Furthermore, the Claimant has breached its obligations under the OMA including Clause 2.1(c) (obligation to keep the Respondent fully and currently informed of all matters related to the operation of the Rig), Clause 2.3(i) ("prior to any equipment being sent to the drilling unit, take all appropriate measures to ensure that all equipment is fit for immediate service") and Clause 2.3(g) (obligation to make every effort to produce a certificate from all manufacturers stating any repairs to all or any part have been carried out in accordance with the manufacturer's specifications).
95. In the event, the BOP Stack and Associated Equipment procured by the Claimant were deficient and unusable and required to be replaced in order to make the Rig suitable and safe to be operated under the Drilling Contract.
98. As a result of the breaches mentioned in paragraphs 89–97 above, the Respondent has suffered the following losses:
(a) US$24,130,916 being the total sum paid by the Respondent to the Claimant for the defective BOP Stack as thrown away or, alternatively, US$31,253,171 being the sum paid by the Respondent to Aker for the new BOP Stack;
(b) US$2,265,851 being the total amount paid by the Respondent to replace the Choke and Kill lines (being part of the Associated Equipment supplied by the Claimant) with equipment meeting the Drilling Contract requirements;
(c) US$728,417 being the sum which the Respondent paid to discharge the crew claims made against the Rig;
(d) US$1,500,000 being the liquidated damages which the Respondent has paid to GSPCL under the Drilling Contract on account of the Rig's delayed mobilisation;
(e) US$5,500,000 being the sum demanded by GSPCL on account of the standby costs paid by GSPCL to third parties service providers up until April 2008 by reason of the delayed commencement of drilling operations;
(f) US$14,469,000 being the Respondent's loss of profit during the period between 20 May and 18 November 2008; and
(g) US$5,000,000 being the expenses incurred by the Respondent for having the rig towed from Kakinada to carry out the repairs and charges for technical consultants and agencies appointed to make the necessary investigations in respect of the defective BOP Stack.".
i) Neither the MOU nor the OMA makes any reference to the BOP Stack or its acquisition.
ii) The main clause of the OMA, upon which the Defendant relies, Clause 2.1(a), spells out an obligation to assist the Defendant in reactivating the Drilling Unit, and to assist the Defendant in carrying out various repairs/refurbishment activities during the reactivation phase. He does not accept that such activities refer to the refurbishment of the BOP Stack with reference to its being connected to the Drilling Unit, and, in any event, such references to assisting are, in his submission, inconsistent with the obligation under the purchase contract, which was to supply the BOP Stack fit for its purpose.
iii) None of the other clauses of the OMA, some of which are referred to expressly in the Answer, as set out above, spell out an obligation, such as is relied upon, to take steps in relation to the BOP Stack to repair, upgrade, refurbish or render it fit for connection to the Rig. The other subclauses of 2.1 all relate to the responsibilities of the Claimant as Operations Manager in respect of the operation of the Drilling Unit. Clause 2.2 particularises the broad scope of work of the Operations Manager, by reference to Annexures 1 and 1-A, and the responsibilities nearest to those alleged by the Defendant are "overall responsibility for Operation of the Drilling Unit" and "overall responsibility for maintaining the equipments in good working condition". From neither of these is it easy to spell out the asserted obligation, while it is provided that "procurement of the equipment" is at the responsibility and cost of the Owner. Clause 5 provides for the Operations Management Fee which, again, although retrospective to January 2007, makes no reference to the BOP Stack. I should not, submits Mr Boyd, simply take the Answer at face value, but should consider the terms of the OMA itself, which must be the foundation for any claim.
iv) The correspondence between the parties in 2007-8, to which he refers, regularly makes mention of the 'BOP project', as if it was a separate project, even though all issues between the parties were discussed, and an attempt at resolution of them made, in the Mumbai meeting in November 2007, referred to in paragraphs 32-34 and 35 of the Answer, set out above.
v) Mr Tollefsen's explanation in paragraph 17 of his witness statement (set out in paragraph 9 above) and his description of the BOP Stack in paragraph 18 as a "natural adjunct of the Rig acquisition project" does not mean that it is part of the Drilling Unit (and hence within Clause 2.1(a) of the OMA), indeed the contrary.
vi) The apparent oddity that there was undoubtedly work carried out by sub-contractors on behalf of the Claimant in respect of the BOP Stack and its associated equipment, long after the purchase contracts in December 2006-January 2007 and the delivery of the BOP Stack to Singapore, is explained by the fact that, on the Claimant's case, the price was not fixed. Mr Tollefsen of the Claimant asserts, in paragraph 24 of his witness statement, that the Defendant agreed to pay for the second-hand BOP Stack and associated spare parts and elements, and, additionally, for the invoiced costs of the refurbishment works to be carried out by Singapore-based specialist contractors.
i) Fiona Trust (Fiona Trust v Privalov  1 Lloyd's Rep 254 (HL)). This decision, together with the earlier Court of Appeal decision in Ashville Investments Ltd v Elmer Contractors Ltd  QB 488, which it approved, definitely marked a sea-change in the liberalising of the approach of the courts to the construction and ambit of arbitration clauses. Mr Boyd submitted that, given that the facts of that case related to one contract, and whether allegedly tortious activities prior to that contract fell within it, it had particular relevance to cases where such issue arose in respect of one contract, and the relationship being considered by Lord Hoffmann at paragraph 6 was the relationship of having entered into that one contract. The significance of the decision would thus be less great where the issue related to two or more contracts, i.e., as here, to whether claims under an earlier contract between the parties related to a later contract between them. Mr Young however submitted that Fiona Trust was in no way limited, and that the references to relationship in Lord Hoffmann's speech were not restricted to one contract, as appears in particular from his statement, in paragraph 13 of his speech, that "in my opinion the construction of the arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal".
ii) Retroactivity. This was a rather broadbrush word, adopted in his argument by Mr Boyd by reference to its use in Merkin Arbitration Law (1st Ed Service Issue 48-17 March 2008) at paragraph 5.39, where Merkin contends that "the reluctance of the English courts to recognise retroactivity means that in the latter situation the clause is unlikely to be taken as referring to disputes which arise between the parties out of some earlier agreement". Mr Boyd gave only lukewarm support to such proposition. Mr Young pointed, as he had before the Arbitrator, to words of Borins JA in the Canadian case of Huras v Primerica Financial Services Ltd  55 O.R.3d (Court of Appeal for Ontario) in which he had referred (at paragraph 19) to authorities in the United States which had "overwhelmingly held that arbitration clauses may apply to [contractual] disputes arising prior to the signing of a contract containing an arbitration clause": and before me he referred to one of those authorities, namely Drews Distributing Inc v Silicon Gaming Inc 245F. 3d 347 (US Court of Appeals 4th Circuit 2001). Mr Boyd did not encourage reliance upon such US cases, but he had to recognise that US authorities played an influential part in the conclusions of Lord Hope in Fiona Trust (see paragraph 31). Mr Boyd in fact accepted that there was no question of a 'jurisdictional bar' to considering whether a dispute under an earlier contract would sufficiently relate to a later contract as to fall within an arbitration clause within that contract. Such examples as there are in the reported English decisions (whether concerning arbitration clauses or the related questions on jurisdiction clauses) were considered, including CMA CGM SA v Hyundai Mipo Dockyard Co Ltd  1 Lloyd's Rep 213. As was the case in Huras, the two contracts in X Ltd v Y Ltd  BLR 341 (an arbitration case) were concluded by Jackson J to be remote or different from each other – any links were tenuous and the suggestion of a relatedness bizarre (paragraphs 39(3)-(4)). A similar conclusion that an earlier joint venture agreement and two subsequent sales contracts were "quite distinct from one another" was reached by Field J in Choil Trading SA v Addax Energy SA  EWHC 2472 (Comm) (at paragraph 18 (a jurisdiction case)). In Satyam Computer Services Ltd v Upaid Systems Ltd  2 AER (Comm) 465 (CA) (a jurisdiction case) Collins LJ did not consider that the Fiona Trust case was of assistance, because it was clear in that case, by reference to the express terms of the second (settlement) agreement, that certain matters remained governed by the earlier agreement. This, I suggest, is the kind of contra-indication to which the Arbitrator may have been referring when, in a passage with which Mr Boyd took issue, he referred to discharging the presumption of relatedness by an express term (paragraph 77 of the Award). In UBS AG v HSH Nordbank AG  2 Lloyd's Rep 272 (CA) the now Lord Collins, giving the judgment of the Court of Appeal, came to a different conclusion, again in relation to a jurisdiction clause :"83. But the essential task is to construe the jurisdiction agreement in the light of the transaction as a whole. As I suggested in [Satyam] at , whether a dispute falls within one or more related agreements depends on the intention of the parties as revealed by the agreements …84. … in my judgment, sensible business people would not have intended that a dispute of this kind would have been within the scope of two inconsistent jurisdiction agreements."
iii) Set-Off. Mr Young refers to the disconcerting result, if the Defendant's counterclaims could not be resolved in this Arbitration, that the Defendant would thus be deprived of a defence of set-off, and one based upon transaction set-off, and not simply independent set-off. He refers to Aectra Refining and Manufacturing Inc v Exmar NV  1 WLR 1634, referring to the words of Hoffmann LJ at 1650 A-C, that "In cases of transaction set-off … it would be quite unreasonable for a plaintiff who has chosen to sue in one forum to rely upon an arbitration … clause to confine the court to the facts which he chooses to prove and prevent it from examining related facts as well." He points to the 2001 Companion volume to the Second Edition of Mustill & Boyd at paragraph 130, which appears to be to similar effect. The decision of Field J in Econet Satellite Services Ltd v VEE Networks Ltd  2 Lloyd's Rep 423 is not relevant because of the precise words of the UNCITRAL Rules, which he was construing. Consideration of obiter remarks in paragraph 33 of Gross J's judgment in Ronly Holdings v JSC Zestafoni G Nikoladze Ferroalloy Plant  EWHC 1354 (Comm) and of Cresswell J's judgment in Metal Distributors (UK) Ltd v ZCCM Investment Holdings plc  2 Lloyd's Rep 37 at paragraph 18(7)-(11) would support the proposition that an arbitrator would have jurisdiction to entertain a defence of transaction set-off, but subject to Cresswell J's natural caveat that "regard must be had to the true construction of the particular arbitration agreement in question". Mr Young relies upon the seminal definition of a transaction set-off most recently set out in the judgment of Potter LJ in Bim Kemi AB v Blackburn Chemicals Ltd  2 Lloyd's Rep 93, by reference to the words of Lord Brandon in Bank of Boston Connecticut v European Grain and Shipping Co Ltd  1 Lloyd's Rep 431, namely:"For myself, I consider that Lord Brandon's formulation, [of the test for transactional set-off] is to be preferred because on the one hand it emphasises that the degree of closeness required is that of an "inseparable connection", while on the other it makes clear that it is not necessary that the cross-claim should arise out of the same contract; all that is required is that it should flow from the dealings and transactions which gave rise to the subject of the claim."Whereas Mr Boyd understandably emphasises that there are still two questions and two tests, one as to whether there is a transaction set-off and the other as to whether a claim, controversy or dispute under an earlier contract, can be said to relate to a subsequent contract, nevertheless I agree with Mr Young's submission (and I do not, in the event, think that Mr Boyd substantially differed from it), that if there is a sufficient connection between a claim under an earlier contract and a dispute under a later one for the former to amount to a defence of transaction set-off, then it seems likely, if not inevitable, that it will satisfy the relating to test as well.
iv) Convenience/practicability. The learned Arbitrator, at paragraph 78, indicated that he "[did] not base [his] conclusions on 'convenience' alone, but on the broader concept of practicability. In the instant case it is not merely 'convenient' to have the set-off disputes decided under one roof, it is much more 'practicable' to do so in order to avoid, for example, inconsistent outcomes and increased costs". With regard to this passage, neither Counsel before me was able to put his finger on a distinction between convenience and practicability, and both were agreed that there was no place for any doctrine close to "forum non conveniens" in the resolution of what is, in fact, a jurisdiction question arising out of the construction of an arbitration clause. In that paragraph, the Arbitrator stated:"It would be open to a party to show that separate proceedings would be more cost effective than a combined process or that it would be less problematic to keep them separate. [The Claimant] does not so argue."As it happens, there was evidence put in by the Claimant before me, by reference to which Mr Boyd asserted that, if the question arose, Singapore would be a more convenient forum (though Mr Young suggested that at least some of any problems could be resolved by holding the Arbitration in Singapore if such could be agreed). However, as I have said, in the event neither Counsel rested their case upon any such arguments, and indeed both accept that in law they are not open to a party on a s67 application. What there is, as recognised by the Arbitrator at paragraph 74, is the underlying guidance, to be derived not only from Fiona Trust, but also from the words of Lord Collins in UBS (themselves derived from Bingham LJ in E.I du Pont de Nemours & Co v Agnew  2 Lloyd's Rep 585 at 589), cited in subparagraph (ii) above. The issue which the Arbitrator described as practicability, but which rather less elegantly but, in my judgment, more accurately, could be summarised as one-stopness or togetherness, derives from paragraph 27 of Lord Hope's speech in which, after deprecating "fussy distinctions", he refers to arbitration as being, preferably, a "one-stop method of adjudication for the determination of all disputes".
i) They concern the equipment which was to be, and was, purchased for the express purpose of fitting to the Rig, and as part of the upgrading of the Rig, and, enabling its operation, at 15,000 rather than 10,000 psi, with the intention of the Rig being used for operations in respect of which the Claimant was to be, and was, the manager under the OMA.
ii) The BOP Stack, if not a part of the Drilling Unit, about which I remain insufficiently certain, is, nevertheless, as Mr Tollefsen said in paragraphs 17 and 18 of his witness statement, an "essential integral component" of the drilling operations of the Rig and a "natural adjunct" to the acquisition of the Rig.
iii) The purchase contract only marginally, if at all, antedated the MOU which was to, and did, become the OMA, and the work on the BOP Stack ran in tandem with all and any management of operations and supervision by the Claimant (including services prior to the OMA – see the Request for Arbitration) involving or in respect of the Drilling Unit, whether under the MOU or the OMA or otherwise.
iv) The Claimant was only incorporated on 5 January 2007, and then, as it was put by Mr Tollefsen in paragraph 34 of his witness statement, it "assumed responsibility of the conduct of the BOP acquisition project", in parallel with its assumption of responsibility under the MOU, and subsequently the OMA. The Arbitrator found, in paragraph 62 of his Award, that "the relationship and status of the parties remained constant throughout". Mr Boyd objects that the status of the Claimant under the purchase contract was as vendor (but then, on its own case – see paragraph 11(vi) above – as provider of services in respect of the BOP Stack) and then under the MOU/OMA as the provider of services as Operations Manager. But what is quite clear is that there was a seamless continuum of contact between the parties from 2006 through to 2008.
v) The present Answer seemingly suggests that the counterclaims arise both out of the purchase contracts (and any contracts for services resulting therefrom) and further or in the alternative out of the OMA. I have presently concluded that I am not sufficiently certain, on the present pleadings and evidence, that such is the case. However, what is certainly the case is that the alleged serious failures by the Claimant are an important part of the factual history leading up to the alleged repudiatory and other breaches of the OMA, which will be required to be considered in the Arbitration as part of the history.
vi) The BOP Stack was, as set out above, referred to in correspondence between the parties by the Claimant as a separate project, but that does not mean that it was an independent one – and it plainly was not. All the matters between the parties were being dealt with as necessary simultaneously, and often in the same correspondence, including the BOP Stack, and the Mumbai meeting is simply one example of that.
vii) The Arbitrator referred in paragraph 73(iv) to the fact that "the parties operated a running account and it would not be possible to consider the running account and assess the balance due without considering a significant part of the entries appearing in the running account in respect of the BOP Stack entries". Mr Boyd does not accept that a running account is a fair description of the statement of account to which I have referred in paragraph 5 above, but the fact remains that:a) The Claimant kept that account, in which all the items and their totals appear. The claimed entitlement of the Claimant in respect of the BOP Stack was included alongside, and as part of, the totalling of the sums claimed for crew salaries and expenses, for operation and management and for catering costs, the latter all plainly being referable to the OMA and of course to the same time period.b) The indorsement in the Singapore action, which I have set out in full at paragraph 4 above, is a clear indication of the connection, indeed the inter-connection, between the contracts and the claims.
Ad Hoc Agreement.
"... forthwith to take all necessary steps to refer to arbitration in accordance with clause 12 of the [OMA] and the ICC Rules all of its claims which are the subject matter of dispute thereunder between the parties."