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URL: http://www.bailii.org/ew/cases/EWHC/Comm/2011/1624.html
Cite as: [2011] EWHC 1624 (Comm), [2011] ArbLR 27, 138 Con LR 132, [2011] 2 Lloyd's Rep 289, [2011] 2 CLC 338

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Neutral Citation Number: [2011] EWHC 1624 (Comm)
Case No: 2010 Folio 1517

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
28 June 2011

B e f o r e :

MRS JUSTICE GLOSTER, DBE
____________________

Between:
Excalibur Ventures LLC
Claimant
- and -

1) Texas Keystone Inc
2) Gulf Keystone Petroleum Limited
3) Gulf Keystone Petroleum International Limited
4) Gulf Keystone Petroleum (UK) Limited
Defendants

____________________

Simon Picken Esq QC, Timothy Kenefick Esq and Benjamin Parker Esq
(instructed by Clifford Chance LLP) for the Claimant
Michael Crane Esq, QC and Ms Tamara Oppenheimer
(instructed by Jones Day) for the First Defendant
Jonathan Hirst Esq, QC, Harry Matovu Esq, QC and Richard Eschwege Esq
(instructed by Memery Crystal LLP) for the Second – Fourth Defendants
Hearing dates: 4th and 8th April 2011

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mrs Justice Gloster, DBE:

    Introduction

  1. These are the reasons for the order which I made in these Part 7 proceedings ("the Commercial Court Proceedings") on 8 April 2011 ("the 8 April Order"):
  2. i) restraining the Claimant, Excalibur Ventures LLC ("Excalibur"), up to, and including, the final determination of these proceedings or until further order in the meantime, from pursuing or taking any further steps in, or procuring or assisting the pursuit of, arbitration proceedings against the Second, Third and Fourth Defendants (collectively "the Gulf Defendants"), which have been instituted by Excalibur in the International Court of Arbitration of the International Chamber of Commerce ("the ICC") in New York on 17 December 2010 under reference 17599/VRO ("the Arbitration Proceedings");

    ii) dismissing Excalibur's application for a stay of the Commercial Court Proceedings, pursuant to CPR 3.1(2)(f) until: (i) final determination of any and all jurisdictional challenges made in respect of the Arbitration Proceedings; and (ii) further order of the court;

    iii) directing a trial of a preliminary issue whether the Gulf Defendants are bound by the terms of clause 14.1 of a Collaboration Agreement dated 16 February 2006 in relation to the Arbitration Proceedings; and

    iv) making further directions about the trial of the preliminary issue, including giving a short extension of time for service of Excalibur's Particulars of Claim.

    Background

  3. Excalibur is a limited liability company incorporated under the laws of Delaware, USA. The First Defendant, Texas Keystone Inc ("TKI"), is a corporation incorporated under the laws of Texas, USA. The Second Defendant, Gulf Keystone Petroleum Ltd ("Gulf Keystone"), and the Third Defendant, Gulf Keystone Petroleum International Limited ("Gulf International"), are companies incorporated in Bermuda. The Fourth Defendant, Gulf Keystone Petroleum (UK) Limited ("Gulf UK"), is a company incorporated and domiciled in England.
  4. Excalibur was apparently founded by a Mr. Rex Wempen ("Mr. Wempen"), a US citizen, in or about 2000. Mr. Wempen is the managing member of the company. According to its evidence, it is:
  5. "… a very small enterprise, the success of which rests with the energy, commitment and innovation of Rex Wempen, together with the support and expertise of his brother Eric Wempen."
  6. According to the evidence of the Gulf Defendants, Excalibur claims that it offers advisory, investment procurement and public relations services in the energy business, but its website was blank concerning such matters. In 2007, Mr. Wempen provided information to Mr. Todd Kozel ("Mr. Kozel") (a director or other officer of the First, Second and Third Defendants) in which Mr. Wempen described Excalibur as "a consulting and advisory firm", providing "strategic advice to companies working internationally in the energy and infrastructure fields". However, there was no evidence before me showing that Excalibur had ever participated in any project, or that it possessed the technical know-how, capability or capital required to invest or participate in an oil exploration and production venture. It has not apparently filed accounts, or made any public statement regarding its assets, liabilities, income or expenditure. I had little or no evidence before me of its financial position, save that it had offered a bank guarantee in the sum of US$ ("$") 2 million, to fortify a cross-undertaking in damages in respect of a without notice freezing order which it had previously sought against the Defendants in the sum of $ 510 million, and which the court had refused. I was told that it was only in late 2010 that Excalibur obtained funding from an unidentified third party to pursue its claim against the Defendants.
  7. TKI was founded in 1988 by Mr. Kozel and other members of his family, for the purpose of developing oil and gas interests in the United States. It has interests in the acquisition, exploration, development and production of natural gas and oil resources in over 1,000 properties and ventures in the United States. Its principal place of business is in Pittsburgh, Pennsylvania, USA.
  8. Mr. Kozel was the president of TKI from 1995 until 2003. He is now a director and vice-chairman of the company. TKI is operated by Mr. Kozel's brother, Mr. Robert Kozel, from its offices in Pittsburgh. It currently has approximately 50 employees, all of whom live and work in the USA. The directors of TKI from 2006 to the end of 2007 were Robert Kozel, Mr. Kozel, David Kozel (all brothers) and their father, Frank Kozel. In November 2007, Robert Kozel was the president and CEO of the company and Mr. Kozel was a director. Mr. Kozel owns one third of the common stock of TKI, and his two brothers also own one third each.
  9. Gulf Keystone is a Bermudian company, and its shares are listed on the Alternative Investment Market ("AIM") of the London Stock Exchange ("LSE"): as such it is subject to the regulatory requirements of the LSE. The company was co-founded in 2001 by Mr. Kozel, with UAE, Kuwaiti and US private equity investment, in order to explore oil and gas reserves in the Middle East and North Africa. It has interests in the acquisition, exploration, development and production of natural gas and oil resources, with a current focus on exploration in Kurdistan.
  10. Gulf Keystone has its registered office in Hamilton, Bermuda. It has further offices in London, Algeria and Iraqi Kurdistan. At the date of the hearing, there were over 754 million issued shares in Gulf Keystone. The company had a market capitalisation of approximately £902,800,000, at the then current price of £1.22 per share. Those shares are owned by 2,262 shareholders, including substantial institutional shareholders such as M&G Investments (one of the UK's largest fund management companies) and Capital Research and Management Company (a large US fund management company which provides investment management services to US mutual funds). According to the Gulf Defendants' evidence, Mr. Kozel has a very small (less than 1%) minority interest in the issued shares in Gulf Keystone. Excalibur disputes this, and seeks to contend that he in fact controls 9.45% of the issued share capital in Gulf Keystone. According to the Gulf Defendants' evidence, this figure of 9.45% appears to be reached by wrongly including:
  11. i) share options, which are subject to restrictive performance criteria and have not yet vested in Mr. Kozel;

    ii) bonus shares which have not yet vested in Mr. Kozel, and which carry no voting rights until they have vested;

    iii) shares which are owned, not by Mr. Kozel, but by a UAE company of which he is not a majority shareholder; and

    iv) shares which were gifted to a trust in which Mr. Kozel has no legal or beneficial interest.

    For the purposes of the issues which I have to decide on these applications, I regard the question whether Mr. Kozel has a shareholding of less than 1% or less than 10% in Gulf Keystone as irrelevant.

  12. According to the Gulf Defendants' evidence:
  13. i) Mr. Kozel is the current chairman and CEO of Gulf Keystone. Throughout 2007 he was the Chief Executive Officer of the company, and, in July 2007, he became its Executive Chairman. There are three other executive directors on the board of the company, and two non-executive directors. None of these individuals, apart from Mr. Kozel, is a director of, or involved in, the management of TKI. Furthermore, with the exception of Mr. Kozel, none of the directors and officers of Gulf Keystone throughout 2006 and 2007 was a director or officer of TKI. Nor have Mr. Kozel's brothers or father ever been officers or directors of Gulf Keystone. As a AIM-listed company, Gulf Keystone is regulated by a system involving supervision by a Nominated Advisor (or "Nomad") who is required to meet the eligibility criteria set out in the AIM Rules for Nominated Advisors, and is subject to approval and review by the AIM Regulation Team of the LSE.

    ii) In 2007, neither TKI nor Gulf Keystone held any equity interest in the other, and that remains the case today. TKI has therefore never been part of the Gulf Keystone group of companies. The sole link between TKI and Gulf Keystone in 2006 and 2007, and at all relevant times, was, and is, Mr. Kozel.

  14. Gulf International is a wholly-owned subsidiary of Gulf Keystone. It was incorporated on 6 August 2007, and provides exploration and evaluation services to companies in the Gulf Keystone group. The directors of Gulf International in 2007 were Mr. Kozel, Mr. Ali Al-Qabandi and Mr. Jon Cooper. The company holds the interest in the Production Sharing Contract ("PSC") referred to below.
  15. Gulf UK is also a wholly-owned subsidiary of Gulf Keystone. It was incorporated on 17 November 2004, and provides geological, geophysical and engineering services and administration to companies in the Gulf Keystone group. The directors of Gulf UK in 2007 were Mr. Christopher Garrett and Mr. Iain Patrick.
  16. Pursuant to a Unification Agreement dated 21 January 2006, which came into force on 7 May 2006, the Kurdistan Regional Government ("KRG") was formally established to administer the Kurdistan Autonomous Region of Northern Iraq.
  17. According to its evidence, Excalibur had political and commercial links to Kurdistan prior to 2006, and, through Mr. Wempen's contacts, had become aware that the KRG wished to develop Kurdistan's natural hydrocarbon resources, and intended to invite bids for the exploration and development of oil resources, at least. Excalibur did not have the resources or oil industry experience to pursue this opportunity on its own, so (according to its evidence) Mr. Wempen sought other parties "in partnership" with whom Excalibur could develop business proposals for oil and gas exploration in Iraqi Kurdistan.
  18. This led to meetings between Mr. Wempen and Mr. Kozel, to discuss gas and oil exploration in Kurdistan. According to Excalibur, prior to being introduced to the region, none of the Defendants had had any dealings or involvement with Kurdistan or the KRG, or knowledge of the KRG's intention to invite bids for the exploration and development of oil and gas resources in Kurdistan.
  19. As a result of these discussions, Excalibur and TKI entered into a collaboration, evaluation and bidding agreement dated 16 February 2006 ("the Collaboration Agreement"). None of the Gulf Defendants were parties or signatories to the Collaboration Agreement. According to the Gulf Defendants' evidence, this was because Gulf Keystone was not interested in participating at the time, and the KRG was keen for consortium partners to be American, which the Gulf Defendants were not.
  20. The Collaboration Agreement recited that Excalibur and TKI wished to collaborate to pursue and prepare bids to acquire by way of "Consortium Bids" (as defined) and develop petroleum blocks in Iraqi Kurdistan ("the Blocks"), and, in the event of successful bids, to produce and sell petroleum from the Blocks. Excalibur and TKI are referred to in the Collaboration Agreement as the "Parties", and each as a "Party". TKI was to act as operator in relation to any Blocks acquired.
  21. The Collaboration Agreement set out each Party's Consortium Interest, namely its participating interest share in the interests, rights, duties, obligations and liabilities which arose under the Collaboration Agreement; according to clause 3 of the Collaboration Agreement, the Consortium Interest of Excalibur was 30% and that of TKI was 70%. Each party's "Participating Interest" was defined as the party's participating interest share in the interests, rights, duties, obligations and liabilities which arose in respect of any particular Block which was acquired pursuant to the Collaboration Agreement as a result of a successful bid. Unless otherwise agreed, a Party's Participating Interest in any Block was the same percentage as its Consortium Interest.
  22. However, the Collaboration Agreement expressly referred to Gulf Keystone. Recital D set out TKI's reserved right to introduce Gulf Keystone as Party to the Collaboration Agreement, and/or as a participant in any Consortium Bid. The terms expressly envisaged that Gulf Keystone might eventually become a party to the Collaboration Agreement, and set out a detailed contractual mechanism whereby this could take place. Clause 1.1 of the Collaboration Agreement expressly provided that Gulf Keystone was not an "Affiliate" (as defined) of TKI, with the consequence that TKI could not freely assign, under the provisions of clause 3.2.1 of the Collaboration Agreement, all or any part of its Consortium Interest or Participating Interest to Gulf Keystone or any of its subsidiaries. Pursuant to clause 3.3, TKI had an option to assign "part (but not all) of its Consortium Interest" to Gulf Keystone "upon written notice to Excalibur to that effect". Such assignment was stated "to become effective upon the execution by Gulf Keystone" of a "Deed of Adherence" (in the terms of a pro forma in the 4th Schedule). TKI could not assign to Gulf Keystone its position as operator under the Collaboration Agreement without the consent of Excalibur. No notice was at any time given by TKI to Excalibur of an assignment of any part of its Consortium Interest to Gulf Keystone, or any other Gulf Defendant. The Gulf Defendants' evidence is that at no time was any Deed of Adherence executed by any of the Gulf Defendants.
  23. When TKI sought to transfer its rights under the Collaboration Agreement to Gulf Keystone, in April 2007, the Gulf Defendants' evidence is that Excalibur refused to allow Gulf Keystone to establish an interest in any bid for a production sharing contract with the KRG for oil exploration in the region, or to permit Gulf Keystone to become a party to the Collaboration Agreement.
  24. In June 2006, Excalibur and TKI (by Mr. Wempen and Mr. Kozel, respectively) visited Kurdistan to meet the KRG's Minister for Natural Resources, Dr. Ashti Hawrami, to explore the possibility of securing a PSC with the KRG for oil exploration in the region. According to the Defendants' evidence, Dr. Hawrami made it clear that any prospective bid participant for a petroleum contract was required to satisfy certain criteria, in particular in relation to its professional and technical experience, capacity and financial resources. These criteria were subsequently set out in the Kurdistan Oil and Gas Law which was enacted by the KRG in August 2007.
  25. It is the Defendants' case that Excalibur could never have qualified to be a party to any PSC, as it did not satisfy the relevant statutory criteria, and that there was no realistic prospect that it would be approved by the KRG to carry out petroleum operations in Iraqi Kurdistan, or that it would be accepted as a party to a PSC. Their evidence is that, so far as they are aware, Excalibur never presented any information to the KRG Ministry for Natural Resources to demonstrate that it met the criteria for participation, even though the Minister had emphasised those requirements in his meetings with Mr. Kozel and Mr. Wempen in June 2006. The Defendants contend that Excalibur could not have done so, and it did not, therefore, qualify to participate in oil exploration or production ventures in Iraqi Kurdistan, and it could not be included in a bid. Its name was therefore omitted from the drafts of the PSC for the Shaikhan Block which were issued by the KRG.
  26. The Ministry's concerns were apparently not limited to Excalibur. The Defendants' evidence is to the effect that, although the Ministry was satisfied that Gulf Keystone had demonstrated ample technical expertise, nonetheless it had concerns about the financial status of TKI and the Gulf companies. A large Hungarian corporation, MOL Hungarian Oil and Gas Company, was competing for licences in respect of other Blocks in Kurdistan at that time. The Minister proposed that Gulf introduce a co-bidder with additional financial strength, and in response, Gulf suggested that MOL should be brought into the bid for the Shaikhan and Akri Bijeel Blocks, as it appeared to be financially and technically more substantial than Gulf. MOL was willing to enter into the bid, and it did so through its wholly-owned subsidiary, Kalegran Limited.
  27. On 6 November 2007, a PSC was executed by TKI, Gulf International, Kalegran Limited and the KRG, to explore and develop the Shaikhan Block in Iraqi Kurdistan. Gulf Keystone was named as the Operator under the PSC. Excalibur was not named as a party.
  28. However, according to the Gulf Defendants' evidence, even after the execution of the PSC, TKI was willing to consider a "farm-in"[1] by Excalibur to the Shaikhan and Akri Bijeel PSCs, if such a proposal were feasible and if Excalibur were able to meet the qualification requirements. On 24 November 2007, Mr. Kozel wrote on behalf of Gulf Keystone to the Minister, asking for approval to add Excalibur as a non-operating partner in the PSCs for the Shaikhan and Akri Bijeel blocks. However, no such approval was ever given.
  29. Accordingly, it is the Defendants' case that, in spite of TKI's willingness to include Excalibur in a bid for petroleum contracts in Iraqi Kurdistan, Excalibur did not meet the legal requirements for participation in any such bid, or in any venture for the exploration and development of hydrocarbons in that region. They point to clause 14.2.1 of the Collaboration Agreement, which expressly required compliance with all relevant local laws governing oil blocks in Iraqi Kurdistan; to clause 14.2.2, which provides:
  30. "Nothing herein shall be constructed so as to require the commission of any act contrary to law in any relevant jurisdiction";

    and to clause 14.2.3 which contained a warranty by each party that it had all relevant licences, permits and other government authorisations required in the conduct of its business.

  31. They also point to clause 19, which provided that the parties would be released from liability by reason of force majeure, which was defined in clause 1.1 to include:
  32. "… compliance with any laws, rules, regulations or orders of national or other governmental agencies or bodies having jurisdiction in or in respect of Iraqi Kurdistan, any Acreage acquired or to be acquired pursuant to this Agreement."

    Thus it is the Defendants' case that Excalibur did not, and could not, meet the statutory requirements of the Kurdistan Oil and Gas law for participation in a PSC in Iraqi Kurdistan; and that, as a consequence, it did not and could not comply with its part of the bargain under the Collaboration Agreement. Accordingly, the Defendants say that TKI was not obliged to include Excalibur as a participant in the PSC, or, alternatively, the statutory prohibition against the inclusion of Excalibur in the PSC amounted to a force majeure event.

  33. Since the date of the PSC, the Gulf Defendants and their shareholders have invested a total of $ 500 million in the development and exploration of the Shaikhan Block. In August 2009, Gulf Keystone announced that oil had been discovered in the Shaikhan Block. There is no evidence that Excalibur took any positive steps to assert its claim to any entitlement under the PSC until the events referred to below, although there may have been some without prejudice discussions before that time.
  34. Procedural Chronology

  35. On 17 December 2010, Excalibur started an action in the Commercial Court against TKI and the Gulf Defendants, alleging breaches of the Collaboration Agreement and contending that it had been wrongfully shut out from the PSC. In the Claim Form it makes a series of contractual, tort and equitable claims against TKI and the Gulf Defendants under New York and English law as follows:
  36. "(a) New York law
    The Claimant's claims arise under the laws of New York and are for: (a) relief to restrain the Defendants, and each of them, from interfering in any way with the Claimant's rights under … 'the Collaboration Agreement' with regard to hydrocarbons in petroleum exploration blocks in Kurdistan; (b) declaratory relief; (c) specific performance of the Collaboration Agreement; and/or (d) other equitable relief; and/or (e) damages, in each case in respect of the Defendants' unlawful conduct under the laws of New York in that they, jointly and severally:
    (i) breached the Collaboration Agreement; (ii) perpetrated fraud by concealment; (iii) made fraudulent, alternatively negligent, misrepresentations; (iv) committed constructive fraud; (v) aided and abetted fraud; (vi) conspired to defraud the Claimant of its legitimate interests; (vii) have been unjustly enriched; (viii) are estopped from denying the Claimant's interests; (ix) breached an implied covenant of good faith and fair dealing and/or have unconscionably sought to deny the Claimant's interest; (x) breached fiduciary duties owed to the Claimant, and/or aided and abetted breach(es) of fiduciary duty; (xi) unlawfully interfered in the Collaboration Agreement, and/or in the Claimant's contractual relationship with a third party (the Dabin Group), and/or with the Claimant's prospective interest; and/or (xii) unlawfully converted the Claimant's interests in the hydrocarbons contained in the blocks.
    Further or alternatively, under the laws of New York the Claimant has a superior right in replevin to 30% of the hydrocarbons currently in the possession of the Defendants and/or there is a constructive trust in favour of the Claimant, in that the Defendants by fraud, duress, abuse of confidence, and/or other unconscionable conduct have obtained rights to property or assets which in equity and in good conscience they ought not to hold and enjoy.
    (b) English law
    Further or alternatively, the Claimant's claims arise under English law and are for relief in like terms to that described above in respect of the Defendants' (i) breach and/or breaches of the Collaboration Agreement; (ii) breach and/or breaches of fiduciary duty; (iii) tortiously having induced a breach and/or breaches of the Collaboration Agreement; (iv) tortiously having induced a breach and/or breaches of the Claimant's agreement with the Dabin Group; and/or (v) having committed the tort of conspiracy by unlawful means, and/or having by conspiracy or otherwise caused loss to the Claimant by unlawful means. Further or alternatively, the Claimant claims in restitution and/or unjust enrichment in respect of the benefits received by the Defendants."
  37. At the time of the without notice application, I was told by Mr. Simon Picken QC, leading counsel for Excalibur, that no claim of deceit under English law was currently being made in the Commercial Court Proceedings, but a claim for dishonest knowing assistance was going to feature in the statement of case, when served. However, it is clear that, both in respect of its claims under New York law and under English law, Excalibur will be alleging dishonest conduct as against the Defendants.
  38. On the same day (17 December 2010) Excalibur also began the Arbitration Proceedings against TKI and the Gulf Defendants by filing a Request for Arbitration. Excalibur purported to do so pursuant to clause 14.1 of the Collaboration Agreement between Excalibur and TKI, which provides that disputes in relation to the Collaboration Agreement should be submitted to arbitration under ICC Arbitration Rules with the seat of the arbitration in New York. In the Arbitration Proceedings, Excalibur seeks similar, but not identical, relief against TKI and the Gulf Defendants to that which it seeks against them in the Commercial Court Proceedings.
  39. Despite the fact that the Gulf Defendants are not actual signatories to the Collaboration Agreement, Excalibur alleges that they are nonetheless parties to it, and therefore bound not only by its contractual provisions, but also by the arbitration clause. Excalibur relies on various alleged grounds to support its contention; these include: agency; "alter ego/piercing the corporate veil"; transfer; assignment; estoppel; and "direct benefit". It also suggests that a Deed of Adherence may have been executed by Gulf Keystone, albeit not presented to Excalibur.
  40. Shortly thereafter, on 21 December 2010, Excalibur made an application without notice to this court, seeking a worldwide freezing order against TKI and the Gulf Defendants. This was originally for an unlimited sum, but was then reduced to an amount of $ 510 million in aid of both the Commercial Court Proceedings and the Arbitration Proceedings. Excalibur was, however, only prepared to offer a cross-undertaking in damages secured in the sum of $ 2 million. I refused the relief sought, for the reasons set out in my ex tempore judgment of that date. These included the fact that I regarded the amount of the offered secured cross-undertaking as inadequate; that I was not satisfied that Excalibur had shown any risk of dissipation; and that after a delay of three years, the application should have been made on notice. I also formed the strong impression that the application was opportunistic, in the light of the recent press announcement referring to rumours of a possible sale of Gulf Keystone or Gulf International. It was also apparent that Excalibur had been advised that world-wide freezing order relief would not be granted if an application were to be made to the New York courts.
  41. On 20 December 2010, Excalibur issued a with notice application for disclosure in the Commercial Court Proceedings.
  42. Also on 20 December 2010, Excalibur issued a Part 8 claim form in the English court pursuant to CPR Part 62 (the "Arbitration Claim Form") in support of the Arbitration Proceedings. The Arbitration Claim Form was served as a formality to cover the alternative basis of Excalibur's application for a freezing order against TKI and the Gulf Defendants, namely as an order in aid of the proposed arbitration pursuant to s37 of the Senior Courts Act 1981 and/or s44 of the Arbitration Act 1996.
  43. The Gulf Defendants have consistently maintained that they are not parties to the Collaboration Agreement and that they are not bound by the arbitration agreement at Clause 14.1. On 13 January 2011, they wrote to the ICC's International Court of Arbitration in Paris making very clear their objection and reserving all their rights as to jurisdiction. All subsequent correspondence was made under similar protest. At the date of the hearing before me, no arbitral tribunal was yet in existence and no substantive application had been made in the Arbitration Proceedings.
  44. On 20 January 2011, Excalibur informed the Gulf Defendants that it was in the process of preparing Particulars of Claim in the Commercial Court Proceedings.
  45. On 24 January 2011, the Gulf Defendants wrote to Excalibur asking it to confirm that it would indeed serve Particulars of Claim. On 27 January 2011, Excalibur refused to confirm whether it was, or was not, doing so.
  46. On 28 January 2011, the Gulf Defendants issued an application for:
  47. i) an order that Excalibur do serve its Particulars of Claim, or, alternatively, that the Gulf Defendants be permitted to file and serve a counterclaim prior to service of the Particulars of Claim; and

    ii) an injunction restraining the Arbitration Proceedings ("the Anti-Arbitration Injunction").

  48. On 31 January 2011, Excalibur wrote to the Gulf Defendants again, saying that the Particulars of Claim were being prepared. On 4 February 2011, the Gulf Defendants wrote again to inquire as to the position regarding the Particulars of Claim.
  49. On 10 February 2011, TKI voluntarily submitted to the jurisdiction of the English court in the Commercial Court Proceedings.
  50. On 15 February 2011, Excalibur issued an application to the Commercial Court to stay the Commercial Court Proceedings against all defendants until:
  51. i) the final determination of any jurisdictional challenges in respect of the Arbitration Proceedings ("the Stay Application"); or

    ii) further order of the court in the meantime;

    and a further application to extend time for service of the Particulars of Claim until the determination of the Stay Application ("the Extension Application")

  52. On 7 March 2011, TKI submitted its answer to the Request for Arbitration.
  53. On Friday 25 March 2011, the ICC Secretariat notified all the parties that the ICC Court had decided that the arbitration reference could proceed between Excalibur and all the Respondents, including the Gulf Defendants. It asked the Gulf Defendants to provide any comments on Excalibur's nominated arbitrator and to nominate an arbitrator themselves by 1 April 2011, making it clear that, so far as the ICC was concerned, the arbitration was to proceed.
  54. The ICC secretariat stated that the ICC Court had decided, "pursuant to Article 6(2)" of the ICC Rules, that the arbitration should proceed. Article 6(2) provides as follows:
  55. "If the Respondent does not file an Answer, as provided by Article 5, or if any party raises one or more pleas concerning the existence, validity or scope of the arbitration agreement, the [ICC] Court may decide, without prejudice to the admissibility or merits of the plea or pleas, that the arbitration shall proceed if it is prima facie satisfied that an arbitration agreement under the Rules may exist. In such a case, any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself. If the Court is not so satisfied, the parties shall be notified that the arbitration cannot proceed. In such a case, any party retains the right to ask any court having jurisdiction whether or not there is a binding arbitration agreement."
  56. However, the notification gave no reasons for the decision that was reached by the ICC Court pursuant to Article 6(2). It is clear from that Article that any such decision is "without prejudice to the admissibility or merits of the plea or pleas" as to arbitrability. I accept the Gulf Defendants' submission that the decision was a purely administrative act based on a low test as to whether or not the ICC was satisfied that there was a prima facie case that an arbitration agreement might exist. It is also clear from Article 6(2) that the issue of arbitrability has not been determined in the Arbitration Proceedings.
  57. It is also clear that the Gulf Defendants have not made any submissions to any arbitral tribunal and they have not taken any material step in the arbitral process – not least because there is as yet no arbitral tribunal. Excalibur and TKI have nominated an arbitrator, but the Gulf Defendants have, for obvious reasons, not done so.
  58. Whilst TKI does not dispute the jurisdiction of an ICC arbitral tribunal as regards claims falling within the scope of the arbitration clause, it contends that a number of the claims being advanced against it in the ICC arbitration are not arbitrable, as not being within the scope of the arbitration clause.
  59. Principal issues on the application

  60. The principal issues which arise in relation to the Gulf Defendants' Anti-Arbitration Injunction, and its near-mirror image, Excalibur's Stay Application, can be summarised as follows:
  61. i) Does the court have jurisdiction to grant an anti-suit injunction in the circumstances of this case, to restrain Excalibur from proceeding with the ICC Arbitration Proceedings against the Gulf Defendants?

    ii) Does this court have jurisdiction to determine the issue whether the Gulf Defendants can be compelled to arbitrate the claims which Excalibur has made against them?

    iii) If so, should this court, as a matter of discretion,

    a) direct the trial of the issue as to whether the Gulf Defendants are bound by the terms of the arbitration agreement in clause 14.1 of the Collaboration Agreement and
    b) grant an Anti-Arbitration Injunction restraining further prosecution of the Arbitration Proceedings against the Gulf Defendants?

    iv) Should the court exercise its inherent[2] jurisdiction and/or case management powers under CPR 3.1(2)(f) to stay the Commercial Court Proceedings on the application of Excalibur?

    v) So far as Gulf UK is concerned, does this court have a discretion as to whether to permit the Commercial Court Proceedings to continue, or is it obliged to do so?

  62. It is clear that the issues in relation to the Gulf Defendants' Anti-Arbitration Injunction and Excalibur's Stay Application are interlinked.
  63. Nature of the Commercial Court Proceedings

  64. Before I turn to consider the various issues, it is appropriate to say something about the nature of Excalibur's Commercial Court Proceedings. In its evidence, Excalibur sought to downplay the substantive nature of the Commercial Court Proceedings. In the third witness statement of Mr. Alexandros Panayides (a solicitor at Clifford Chance, Excalibur's solicitors), he states that Excalibur only commenced the Commercial Court Proceedings in order:
  65. "… to protect time and to ensure that there would be an appropriate forum seized [sic] of the Claimant's non-contractual claims, in the event that a Tribunal constituted under the ICC rules concluded that it did not have jurisdiction over one or more of the Defendants and/or claims."
  66. I reject this assertion for the following reasons, put forward by Mr. Jonathan Hirst QC, leading counsel on behalf of the Gulf Defendants, and by Mr. Michael Crane QC, leading counsel for TKI.
  67. i) There is nothing in the Claim Form to suggest that it is intended to be subsidiary to any arbitration proceedings; it contains no reference whatsoever to any arbitration.

    ii) Excalibur has not adequately articulated what the limitation issues are, or in connection with which claims such issues might arise. It is also somewhat surprising that the imminent expiry of an un-articulated limitation period coincided with Excalibur's perceived urgent need for Mareva relief, three years after the alleged acts and conduct on which the claims are based had taken place. In any event, had the purpose of the proceedings simply been to guard against the expiry of particular causes of action, it would have been sufficient simply to issue a claim form without serving it.

    iii) Moreover, TKI had never disputed the arbitration agreement and by commencing a reference to arbitration on 17 December 2010, TKI accepts that Excalibur has effectively secured its limitation position as regards all claims falling within the scope of the arbitration clause. Furthermore, had Excalibur merely wished to protect its limitation position as regards TKI in relation to causes of action potentially falling outside the scope of the arbitration clause, it could have issued proceedings in the courts of the seat of the arbitration (New York). As Mr. Crane pertinently submitted, however, that course would not have enabled Excalibur to apply for an order without notice freezing TKI's assets worldwide.

    iv) The limitation argument might have some logical basis had the claims brought in the Commercial Court Proceedings been limited to non-contractual claims, which arguably risked falling outside the scope of the arbitration agreement. The Commercial Court Proceedings are not however limited in this way, and they incorporate claims for breach of contract against TKI (both under New York and English law), which clearly fall within the scope of the arbitration agreement.

    v) However, instead of taking standard limited steps to protect any possible limitation position:

    a) Excalibur made an immediate application for a freezing order in aid of the claim in the Commercial Court Proceedings, against a background where it would not have been possible to obtain such relief in New York;
    b) Excalibur made an immediate application for permission to serve the Claim Form on the Gulf Defendants either out of the jurisdiction or by alternative means, on the grounds that the case has "numerous links to England and Wales", and I duly granted permission to do so on 21 December 2010;
    c) despite its failure to obtain a freezing order, Excalibur nevertheless ensured that the Claim Form was served as soon as possible – it was served on the Gulf Defendants on 23 December 2010;
    d) Excalibur made and pursued an application for specific disclosure against the Gulf Defendants, which is still pending – it was the subject of correspondence by Clifford Chance a day before the Gulf Defendants issued the present application to restrain the Arbitration Proceedings; and
    e) Excalibur spent three months preparing Particulars of Claim which Excalibur was apparently on the point of serving before seeking its own stay of proceedings after being served with the Gulf Defendants' anti-suit application.
  68. Accordingly, I approach the issues which I have to decide on the basis that the Commercial Court Proceedings were not issued as protective proceedings, but as substantive proceedings.
  69. Issue i): Does the court have jurisdiction to grant an anti-suit injunction in the circumstances of this case, to restrain Excalibur from proceeding with the ICC arbitration against the Gulf Defendants?

    Issue ii): Does this court have jurisdiction to determine the issue whether the Gulf Defendants can be compelled to arbitrate the claims which Excalibur has made against them?

  70. These two questions are related, so I deal with them together.
  71. It is clear that the English courts have jurisdiction under s37 of the Senior Courts Act 1981 to grant injunctions restraining arbitrations where the seat of the arbitration is in a foreign jurisdiction, although it is a power that is only exercised in exceptional circumstances and with caution: see, for example, Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenberg AG [1981] 2 Lloyds Rep. 446, 458; Cetelem SA v Roust Holdings Ltd [2005] 2 Lloyd's Rep 494 per Clarke LJ at [74]; Weissfisch v Julius [2006] 1 Lloyd's Rep 716 per Lord Phillips CJ at [33(v)]; Elektrim SA v Vivendi Universal (No 2) [2007] 2 Lloyd's Rep 8 at [51]; Albon v Naza Motor Trading Sdn Bhd (No 4) [2007] 2 Lloyd's Rep 420; affirmed [2008] 1 Lloyd's Rep 1; Claxton Engineering Services v TXM [2011] EWHC 345.
  72. An English court will be particularly slow to restrain arbitration proceedings where there is an agreement for the arbitration to have its seat in a foreign jurisdiction and the parties have "unquestionably agreed" to the foreign arbitration clause: see Weissfisch v Julius (supra) at paragraph 33. That is because, given the priority to be accorded to the parties' choice of arbitration, and the limited nature of the court's powers to intervene under the provisions of the Arbitration Act 1996 ("the Act"), the court should not simply apply the same approach as for the grant of the normal anti-suit injunction: see Elektrim SA v Vivendi Universal SA (No 2) (supra) per Aikens J (as he then was) at paragraph 77. Questions relating to arbitrability or jurisdiction, or to staying the arbitration, may in appropriate circumstances better be left to the foreign courts having supervisory jurisdiction over the arbitration.
  73. Nonetheless, in exceptional cases, for example where the continuation of the foreign arbitration proceedings may be oppressive or unconscionable so far as the applicant is concerned, the court may exercise its power under s37 to grant such an injunction. Those circumstances include the situation where the very issue is whether or not the parties consented to a foreign arbitration, or where, for example, there is an allegation that the arbitration agreement is a forgery. See also: Dicey, Morris & Collins: The Conflict of Laws, 14th Edition, 4th Cumulative Supplement at 16-0-88.
  74. Moreover, it is clear from the decision of the Supreme Court in Dallah Real Estate and Tourism v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46 that, despite the doctrine of "Kompetenz-kompetenz" or "competence-competence" (i.e. the ability of an arbitral tribunal to determine its own jurisdiction even where challenged), the English court retains the jurisdiction to determine the issue as to whether there was ever an agreement to arbitrate; see ibid per Lord Mance at paragraphs 26 - 30; Lord Collins at paragraphs 84, 93-98, 105-106. The question is whether it is appropriate to do so in the particular circumstances of the case.
  75. Mr. Picken submitted that Lord Collins' remarks in paragraphs 97 and 98 of his judgment in Dallah meant that (absent exceptional circumstances) only if there was an application under s9 for a stay could the court determine whether there was an agreement to arbitrate; otherwise, the party which challenges the jurisdiction of the arbitral panel has to do so in the courts of the arbitral seat or resist enforcement in the court before which the award is brought for enforcement. I do not consider that Lord Collins intended so to constrain the powers of the court. There is no reason why the power to grant such an injunction should not be available under s37 in appropriate circumstances, even if s9 of the Act is not engaged.
  76. In the present case, Excalibur has clearly submitted to the jurisdiction of the English court by starting the substantive Commercial Court Proceedings and seeking extensive injunctive relief. Excalibur itself has emphasised that "… the circumstances of this case are substantially connected to England and Wales" (see Mr. Panayides' first witness statement, paragraph 11.2). Excalibur is therefore clearly amenable to the English court's personal and territorial jurisdiction.
  77. In those circumstances, I am satisfied that I have jurisdiction to grant an anti-suit injunction should it be appropriate to do so.
  78. In coming to this conclusion, I reject Excalibur's argument that by making plain their jurisdictional objections to the ICC, the Gulf Defendants have in some way submitted to the jurisdiction of the ICC, or that Article 6(2) of the ICC Rules in some way precludes this application. The question of submission to the jurisdiction of the arbitrators depends on whether, on an objective analysis, the Gulf Defendants intended to take part in any part of the ICC process: Caparo Group Ltd v Fagor Arrasate Sociedad Co-operative [2000] ADRLJ 254. From the evidence before me, I am satisfied that the Gulf Defendants have made it clear that they do not recognise the jurisdiction of the ICC. There is nothing in the Gulf Defendants' communications with the ICC which shows that the Gulf Defendants have unequivocally participated in the Arbitration Proceedings.
  79. I also reject Excalibur's argument that, as a matter of jurisdiction, it is for the Tribunal, and not the English court to determine the arbitrability of Excalibur's claims against the Gulf Defendants. The scheme set out in the Act shows that the court undoubtedly has jurisdiction to determine the issue of arbitrability in circumstances very similar to the present case.
  80. In the case of an English arbitration, s72 of the Act expressly provides that the court may determine whether there is an arbitration agreement binding on a person alleged to be a party to arbitral proceedings, so long as that person has not taken part in the arbitral proceedings.
  81. The fact that s30 of the Act (on which Excalibur relies) permits, in the case of an English arbitration (but does not require), an arbitral tribunal to decide questions of jurisdiction is of no consequence. The Act does not require a party who maintains that there is no arbitration agreement to have that question decided by an arbitral tribunal: Birse Construction Ltd v St David's Ltd [1999] BLR 194 as approved in Al-Naimi v Islamic Press [2000] 1 Lloyd's Rep. 522 at 525. Mr. Panayides' contention that "… the English court would, pursuant to s30 of the Arbitration Act 1996, defer to the tribunal on questions of jurisdiction in first instance" is wrong as a matter of law. In Dallah the Supreme Court quoted with approval Fouchard, Gaillard, Goldman: International Commercial Arbitration to the following effect:
  82. "Even today, the competence-competence principle is all too often interpreted as empowering the arbitrators to be the sole judges of their jurisdiction. That would be neither logical nor acceptable. In fact, the real purpose of the rule is in no way to leave the question of the arbitrators' jurisdiction in the hands of the arbitrators alone. Their jurisdiction must instead be reviewed by the courts if an action is brought to set aside or to enforce the award". See Lord Mance JSC at paragraph 22.

    Lord Mance went on to say at paragraph 26:

    "An arbitral tribunal's decision as to the existence of its own jurisdiction cannot therefore bind a party who has not submitted the question of arbitrability to the tribunal. .. Domestically, there is no doubt that, whether or not a party's challenge to the jurisdiction has been raised, argued and decided before the arbitrator, a party who has not submitted to the arbitrator's jurisdiction is entitled to a full judicial determination on evidence of an issue of jurisdiction before the English court, on an application made in time for that purpose under section 67 of the Arbitration Act 1996, just as he would be entitled under section 72 if he had taken no part before the arbitrator: see e.g. Azov Shipping Co v Baltic Shipping Co [1999] 1 All ER 476."

    Similarly at paragraph 30:

    "The nature of the present exercise is, in my opinion, also unaffected where an arbitral tribunal has either assumed or, after full deliberation, concluded that it had jurisdiction. There is in law no distinction between these situations. The tribunal's own view of its jurisdiction has no legal or evidential value, when the issue is whether the tribunal had any legitimate authority in relation to the Government at all. This is so however full was the evidence before it and however carefully deliberated was its conclusion. It is also so whatever the composition of the tribunal - a comment made in view of Dallah's repeated (but no more attractive for that) submission that weight should be given to the tribunal's 'eminence', 'high standing and great experience'".
  83. This broad and flexible approach is supported by the recent judgment of Rix LJ in AES Ust-Kamenogorsk Hydropower Plant LLC v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA 647, where there was an English arbitration clause and the Court of Appeal upheld an injunction restraining the court proceedings in Kazakhstan. After referring to paragraphs 96-97 of Lord Collins' judgment in Dallah (supra) Rix LJ says, at paragraphs 81-85 and paragraphs 98-100:
  84. "81. This analysis, in my respectful opinion, usefully underscores the wider picture about the autonomy of the parties and the jurisdiction of arbitrators with power to investigate their own jurisdiction: namely that, sooner or later, the question of substantive jurisdiction is likely to come before the court. Where parties differ as to a matter as fundamental as whether they have agreed any contract, or any contract containing an arbitration clause, it is most unlikely that one or other of them will rest content with the decision of arbitrators as to either their jurisdiction or as to the parties' rights. For one or other party is saying that there is simply no agreement that arbitrators can resolve their disputes. In such circumstances, the issue of jurisdiction is likely to come before the courts sooner or later, and when it does, it will have to be decided by the court from first principles and in the light of facts which, whatever the investigation by the arbitrators, are yet to be determined on the evidence by the court. That is the learning of Azov Shipping, approved by the Supreme Court in Dallah, where I said this:
    'This was perhaps a case where the parties might well have come to Court, either by agreement or upon the application by one side or the other for the Court to determine the issues of jurisdiction, on the ground that it was likely to produce substantial savings in cost and that there was good reason why the matter should be decided by the Court. With hindsight it seems to me that even if the parties could not agree on that course, the Court would be persuaded to allow such a determination if, of course, the tribunal had given its own permission, which is a sine qua non in the absence of the agreement of the parties. It might be assumed that the arbitrator may have been the more willing to give his agreement inasmuch as the question of jurisdiction in this case involved the prior question of whether Azov had ever become a party to the agreement as a whole
    I can quite see that there is an interest in encouraging parties to put their arguments on jurisdiction before the arbitrator himself under s. 30. In many cases, and perhaps in the ordinary and normal case of such a challenge, where, for instance, there is simply an issue as to the width of an arbitration clause and no issue as to whether a party is bound to the relevant contract in the first place, the arbitrator's view may be accepted. If it is not, a challenge to the court is likely to be a limited affair raising, essentially, a point of construction on the clause and thus no problem arises. Where, however, there are substantial issues of fact as to whether a party has made the relevant agreement in the first place, then it seems to me that, even if there has been a full hearing before the arbitrators the Court, upon a challenge under s. 67, should not be placed in a worse position than the arbitrator for the purpose of determining that challenge …"
    82. Thus, a question of jurisdiction may come before the court in a number of different situations. It might arise where one party goes to court with a claim and the defendant seeks a stay for arbitration: the claimant may say there is no contract or no arbitration agreement, and the court will have to investigate that question for the purpose of dealing with the application to stay. Or a party may commence an arbitration, and the other party may say there is no agreement or no agreement to arbitrate, in which case the matter is prima facie for the arbitrators to decide in the first instance pursuant to section 30. In a plain case, the arbitrators may proceed to determine their own jurisdiction, but equally the parties may agree to come straight to court to determine the question, or the arbitrators may give permission for the issue to be taken to court and the court may agree to accept the issue at that stage. Or the respondent in the arbitration may stand aloof, and come to court under section 72, or, following an award, under section 67. Or, a party may start proceedings in another country and the defendant there then comes to the English court to ask it to uphold their arbitration agreement by granting an anti-suit injunction. That is the equivalent of a party seeking a stay where an action is begun in England. Where the action in breach or alleged breach of an arbitration agreement is begun in a foreign country, the respondent may or may not seek a stay there, but here he may ask for an anti-suit injunction.
    83. There are further variations thrown up by the cases. In some cases, it is reasonably plain that an arbitration agreement has been made, but there may be an issue as to its scope, or as to whether there has been a repudiation of it, or, as here, as to its surviving effectiveness. In other cases, there is a factual dispute as to whether any agreement has ever been made in the first place, or a legal dispute as to whether an arbitration clause has been incorporated into the parties' contract. Moreover in some cases, what is sought from the court is an interim injunction, which is among the subject-matters of section 44, and in other cases what is sought is a final injunction, which is not within section 44 but, subject to contrary agreement by the parties, may be within the powers of an arbitral tribunal in a final award (see section 48 of the AA 1996).
    84. Moreover, a distinction may have to be made between a declaration as to the existence or effectiveness of an arbitration agreement about which parties are in dispute, which is a form of final relief as to the parties' legal rights, and an anti-suit injunction which, at any rate in its interim form, is only intended to hold the ring until some tribunal, whether it is the court itself at some later date, or an arbitral tribunal, can grapple with the merits of the parties' dispute.
    85. This variety of situations suggests to my mind that it is not possible to be dogmatic about where the principle in section 1(c) of the AA 1996 leads. It is also relevant to observe that the Saville Report has nothing to say about anti-suit injunctions, even though it was written in February 1996, which is comfortably after The Angelic Grace had been decided in this court, and even though the Report's discussion of section 44 (see at para 214) includes a reference to Mareva or Anton Piller relief.
    98. Fourthly, it seems to me to be going too far to say that because an arbitral tribunal 'may rule on its own substantive jurisdiction' (emphasis added), therefore the court ought always to regard the position as though there is an obligation on the parties and/or on the arbitrators for the arbitrators to rule on any dispute about their substantive jurisdiction. Anything may happen. The potential dispute may not be pressed. The disputing party may stand aloof and come to court. The parties may join issue in the arbitration, but agree to go to court for a preliminary issue on jurisdiction. The parties may not be able to agree on such a preliminary issue, but an application may be made to the court with the permission of the arbitrators for such a preliminary issue. The court may or may not accept such an application.
    99. In such circumstances, I do not with respect agree with an interpretation of Vale do Rio which regards it as laying down a rule of jurisdiction that it is in all circumstances necessary for a party who wishes to raise with the court an issue of the effectiveness of an arbitration clause first to commence an arbitration and go through the procedures and provisions of sections 30-32 and/or section 67 and/or section 72. If, however, that is what Thomas J was saying in Vale do Rio, then I would not with respect agree with that view. In any event, since the alleged party to the charter and the arbitration agreement in that case was not as yet a party to the court proceedings (not having been served) and only a non-party (the brokers) were involved in the court proceedings, I would not regard any view expressed there as other than obiter. Thomas J did not in any event there consider the role of section 37 of the SCA 1981. In my judgment, at any rate in a case where no arbitration has been commenced and none is intended to be commenced, but a party goes to court to ask it to protect its interest in a right to have its disputes settled in accordance with its arbitration agreement, it is open to the court to consider whether, and how best, if at all, to protect such a right to arbitrate. Whether it will assist a claimant at all, and if so, how, is a matter for its discretion: but it would to my mind be an error of principle and good sense for the court to rule that as a matter of jurisdiction, or even as a matter of the principled exercise of its discretion, it has no possible role in the protection and support of arbitration agreements in such a context.
    100. Thus I do not consider that section 1(c) of the AA 1996, which in any event is a general principle intended to assist in the construction of the Act (see the opening words of section 1) rather than a legal rule which binds the court even in terms of another statute, assists much in answering the question which is before the court in this case. First, the principle in section 1(c) necessitates the asking of the question: '[S]hould not intervene' in what? In the conduct of an arbitration? That would seem to be the essential purpose of such a principle. In the conduct of litigation, here or abroad, which threatens the safety of an arbitration agreement or any possible arbitration pursuant to it? There seems no reason in principle why the court might not want to intervene in such a case, so as to support arbitration and not to interfere in it. Therefore it seems to me that section 1(c) does not drive the answer to the issue in our case. Secondly, section 1(c) is only one of three principles stated in section 1. The first two principles are (a) that "the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense" and (b) that "the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest". As for the first of these (section 1(a)), it is not really concerned with a dispute of substantive jurisdiction which arises from a fundamental disagreement as to whether the parties have ever agreed to arbitrate at all. For if they have not agreed to arbitrate, then the arbitral tribunal can have no proper, and certainly no definitive role in resolving their disputes; and whether they have agreed to arbitrate or not, that issue of substantive jurisdiction can only ultimately (if the issue is alive, and taken and not lost by any procedural bar) be resolved by the court, and not by any arbitral tribunal. Moreover, I have already explored above (at para 81) the issue of 'unnecessary delay and expense' in this context, which may well push in favour of a preliminary issue in the courts even where an arbitration reference is itself up and running. As for the second of these principles (section 1(b)), where parties may have agreed an arbitration agreement but are in dispute as to whether they have done so, the principle of party autonomy suggests that the court should be prepared to assist in finding ways for that dispute to be resolved. Thus a consideration of all three of these principles may well suggest that a balancing exercise has to be performed in which the private and public interests involved, and the purposes of the AA 1996, might well weigh in favour of the court playing a necessary role."
  85. Of course, in the AES case, Rix LJ was not dealing with a foreign arbitration, but his analysis clearly supports the proposition that in circumstances such as the present the court has jurisdiction to decide whether itself to resolve the issue as to whether an arbitration agreement exists.
  86. Moreover, in a situation converse to the one before the court, i.e. where a defendant in proceedings before the court applies for a stay in favour of foreign arbitration proceedings pursuant to s9 of the Arbitration Act, if the issue is whether an arbitration agreement was ever concluded, then the court can clearly determine such an issue, if it considers it appropriate to do so: see Al-Naimi (supra) at 524. Indeed, if the stay is sought pursuant to s9, the court has to be satisfied, in order to exercise its powers under the section to grant a stay, that an arbitration agreement has in fact been concluded. If the court decides that the arbitrators should decide the issue, and therefore, ex hypothesi, is not satisfied as to the existence of such an agreement, then the stay is granted pursuant to the inherent jurisdiction as now set out in CPR 3.1(2)(f): see ibid, pp 525 and 527. The court looks for the most economical way to decide where the real dispute should be resolved. That seems to me to be the correct approach here. But that is a matter of discretion, not jurisdiction.
  87. Issue iii): Should the court exercise its inherent jurisdiction to stay the Commercial Court Proceedings on the application of Excalibur?

  88. In my judgment, the circumstance of this case conclusively point to this court being the appropriate tribunal to decide whether or not the Gulf Defendants are party to the arbitration agreement contained in the Collaboration Agreement, rather than the ICC arbitral tribunal. Such circumstances include not only the chronology of the litigation and the conduct of Excalibur, but also cost and case management considerations.
  89. Having decided that it is appropriate for the court to determine the issue of arbitrability, I also conclude that it is appropriate to grant an anti-suit injunction restraining Excalibur from pursuing the arbitration proceedings. I am satisfied, in the exercise of my discretion, that the continuation of such proceedings by Excalibur would be unconscionable, oppressive, vexatious or otherwise an abuse of the due process of the court, and that the grant of such an injunction is necessary to protect the Gulf Defendants' legitimate interest in continuing the proceedings in England which is the natural forum for the litigation: see per Rix LJ in Glencore International AG v Exter Shipping Ltd [2002] 2 All ER Comm 1; per Longmore LJ in Albon v Naza Motor Trading Sdn Bhd (supra) at paragraph 7; and per Aikens J in Elektrim (supra) at paragraphs 74 and 75.
  90. My reasons for concluding that this court is the appropriate court to determine the issue as to whether the Gulf Defendants are parties to the arbitration agreement and that this is indeed an exceptional case, where the court's jurisdiction to injunct a party from proceeding with a foreign arbitration should be invoked, may be summarised as follows.
  91. i) First, there is, on the evidence before me, a strong arguable case that the Gulf Defendants are not party either to the Collaboration Agreement or to the arbitration agreement contained within it. The grounds put forward by Excalibur to assert the contrary are not (at least at this stage) legally or evidentially convincing, although this is, of course, not an issue which I have to decide. It is relevant to note that at the without notice hearing before me, Excalibur's skeleton conceded that "… the claimant may well not have good contractual claims against all of the Respondent/Defendants".

    ii) Moreover, none of the Gulf Defendants have any connection with New York, or the ICC. To force them to participate in a jurisdiction dispute before New York arbitrators (which would be the effect of a refusal of the Anti-Arbitration Injunction and the grant of a stay of the Commercial Court Proceedings) would involve, in practical terms, determining the issue against the Gulf Defendants "by the back door", and thus be likely to lead to a "gross injustice"; see per Gross J (as he then was) in Anglia Oils Ltd v Owners of the Vessel "Marie Champion" [2002] EWHC 2407 at paragraph 16; per Clarke LJ (as he then was) in Caparo Group Ltd v Fagor Arrasate Sociedad Cooperative [2000] ADRLJ 254, quoting with approval paragraph 295 of the Departmental Advisory Committee on Arbitration Law in relation to what became s72 of the Act; and paragraph 35 of the judgment of Mann J in Law Debenture Trust Corporation plc v Elektrim Finance BV [2005] 2 AER Comm 476.

    iii) Excalibur, the party pursuing the arbitration, has unequivocally elected to commence substantive proceedings before this court and it has already made and still has pending substantive applications before the court. By contrast, no substantive applications have been made in the Arbitration Proceedings. In circumstances where Excalibur has: a) previously urged the court to intervene in support of the Commercial Court Proceedings by granting ancillary relief in relation to it; and b) issued and pursued a substantive action in this court, requiring all Defendants to engage with the proceedings, it would be an abuse of process for it now to require the other parties to change course and proceed with the arbitration. That is particularly so in circumstances where all the Defendants, including TKI, have now voluntarily submitted to the jurisdiction.

    iv) It is perhaps ironic that, if Excalibur had not commenced the Commercial Court Proceedings, and instead the Gulf Defendants had commenced proceedings in the English court for a declaration of non-liability, and if Excalibur had then applied for a stay pursuant to s9 of the Act, it would have been required to establish that it was "virtually certain" that there was an agreement to arbitrate: see Al-Naimi v Islamic Press (supra) at 525. Otherwise the court would most likely have ordered a trial as to the validity of the arbitration agreement. See also per Mr. Julian Flaux QC (as he then was) in El Nasharty v J Sainsbury plc [2004] 1 Lloyd's Rep 309 at paragraph 29:

    ".. it would require the case to be an exceptional [case] before the Court would leave it to the arbitrator if the Court were uncertain on the material before it whether or not there was an arbitration agreement."
    In fact, even when s9 is not in issue (as a matter of jurisdiction) and a stay is sought under the court's inherent jurisdiction, it will only "very exceptionally order such a stay, e.g. if virtually certain that the arbitration agreement was concluded": Albon v Naza Motor Trading (No. 3) [2007] 2 Lloyd's Rep 1 at paragraphs 13-14 and 23-24 per Lightman J.

    v) 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. Excalibur's suggestion that, so far as the Gulf Defendants are concerned, this is "self-induced", because they object to the jurisdiction of an arbitral tribunal is not, in my view, well-founded. Apart from the fact that, having been joined as defendants to the Commercial Court Proceedings the Gulf Defendants were prima facie entitled to a judicial determination by this court as to whether they are parties to the arbitration agreement, it would, in my judgment, be oppressive for them (as Excalibur suggests they should) to have to apply to the New York courts, as the putative supervisory court for the ICC arbitration, to determine the question whether they were parties to the Collaboration Agreement. That is because the evidence of New York law shows that, if the Gulf Defendants were forced to apply to the courts in New York for an injunction to restrain Excalibur from pursuing the arbitration against them, there is a risk that they would thereby be taken to have submitted to the jurisdiction of those courts for the purposes of any claim which Excalibur might then make, despite the fact that: a) the Gulf Defendants would otherwise have no connection at all with New York and would not be subject to the jurisdiction of those courts; and b) as Excalibur itself contends, the case has "numerous links with England and Wales".

    vi) Similarly, if the Gulf Defendants were to contest jurisdiction before the arbitral tribunal and appeal any adverse award to a court in New York, they would risk a decision that they have submitted to the jurisdiction of the court in relation to the substantive claim. I also accept Mr. Hirst's submission that, in addition, the Gulf Defendants would suffer serious prejudice in terms of wasted time and costs if they were forced by Excalibur's actions to contest the jurisdiction of the arbitral tribunal and then appeal to the courts in a jurisdiction (New York) with which they have no connection. As the Supreme Court held in Dallah (supra), the Gulf Defendants should not be compelled to go before an arbitral tribunal against whose jurisdiction they vigorously protest. This is particularly so where all the parties have voluntarily submitted to the jurisdiction of this court in the substantive Commercial Court Proceedings.

  92. All the above factors lead me to the conclusion that it would indeed be oppressive or unfair and unconscionable if the New York arbitration proceedings were to continue against the Gulf Defendants, and that the right course is for the English court to determine the issue of arbitrability of Excalibur's claims.
  93. Issue iv) Should the court exercise its inherent jurisdiction and/or case management powers under CPR 3.1(2)(f) to stay the Commercial Court Proceedings on the application of Excalibur?

  94. Excalibur's application to stay the Commercial Court Proceedings against all Defendants is, in effect, a mirror image to the Gulf Defendants' application for an anti-suit injunction, although, of course, TKI does not itself seek an injunction to restrain the arbitration against it. However, it is worth setting out some additional reasons why I consider it would not in any event be appropriate to grant a stay of the Commercial Court Proceedings, insofar as these may be slightly different in emphasis from my reasons for granting the Anti-Arbitration Injunction. These are largely based on the submissions of Mr. Michael Crane QC, leading counsel for TKI and Mr. Hirst, for the Gulf Defendants.
  95. The Stay Application is, to say the least, unusual. It is an application by a claimant who started court proceedings in England (inter alia, in breach of an arbitration agreement with TKI) for the purposes of obtaining (without notice) certain perceived tactical and commercial advantages in this jurisdiction which would not have been available in the supervisory court of the ICC arbitration, but who, having failed in its bid to secure those advantages, now seeks to stay these proceedings in favour of arbitration. I have already rejected Excalibur's arguments that the UK proceedings were a genuinely "protective" measure, intended to secure its limitation position and to protect its rights to arbitrate.
  96. As I have already said, ordinarily the court's jurisdiction to grant a stay of proceedings in respect of a matter which is to be referred to arbitration would be governed by s9 of the Act. However, since the Stay Application is not made by "… a party to an arbitration agreement against whom legal proceedings are brought" s9 is not engaged and the Stay Application accordingly proceeds on the basis of the court's inherent jurisdiction, as reflected in CPR 3.1(2)(f).
  97. In circumstances where a claimant is applying to stay proceedings voluntarily brought by it, it needs to show that there are "special", "rare" or "exceptional" circumstances to justify a stay. As Neuberger J (as he then was) observed in Ledra Fisheries Ltd v Turner [2003] EWHC 1049 at paragraph 12:
  98. ".. it appears to me that, where a claimant has brought a claim against the same defendants for essentially the same relief arising out of the same facts in two jurisdictions, then, absent special circumstances, it would be wrong for the court to grant a stay of one set of proceedings at the instigation of the claimant, the very person who has brought both sets of proceedings."
  99. To similar effect, Mustill LJ held in Attorney-General v Arthur Andersen & Co [1989] ECC 224 at paragraph 13:
  100. ".. if a plaintiff has thought fit to commence an action, with all the hardship to the defendant which this involves in terms of expense, worry and disruption, he should in general be made to face up to the situation which he has chosen to create, and should not be permitted to conduct the action to a timetable which corresponds only to his own whimsy. Having put his hand to the plough he should continue to the end of the furrow. This is only fairness and common sense."
  101. The usual approach where a claimant is seeking a stay of proceedings brought by it is therefore to refuse the stay, but an exceptional case may be made out where the proceedings sought to be stayed were started purely to protect the claimant's limitation position: see Attorney-General v Arthur Andersen & Co. (supra). That is not this case.
  102. In Klöckner Holdings v Klöckner Beteiligungs [2005] EWHC 1453 (Comm) at paragraph 21, I set out relevant principles governing the grant of a stay of proceedings in favour of proceedings which a claimant had commenced elsewhere. These included the following:
  103. i) The court has a wide discretion to stay proceedings, but in circumstances where the claimant itself has voluntarily brought the two sets of proceedings, a stay should only be granted in very rare circumstances.

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

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

    iv) A defendant against whom a serious allegation (such as deceit) is made is 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) has no control. An action alleging fraud should come to trial quickly.

  104. As Mr. Hirst submitted, these principles are highly relevant in the present case.
  105. Since Excalibur has voluntarily commenced two sets of proceedings, the court should not grant a stay unless Excalibur can show exceptional circumstances to justify this. There are no such circumstances.
  106. Any benefits of granting a stay to Excalibur are clearly outweighed by the burden which the Gulf Defendants would suffer if they had to contest the issue of arbitrability and the substantive claim before an arbitral tribunal whose jurisdiction they do not accept and/or before the New York courts with which they have no connection and to whose jurisdiction they do not wish to submit.
  107. If the Commercial Court Proceedings are stayed, there is a real doubt as to whether the Arbitration Proceedings will be binding on the Gulf Defendants. Moreover, the Arbitration Proceedings will not necessarily or finally resolve all the issues before this court, and Excalibur has acknowledged the risk that this may be the case - it says that this is why it commenced the Commercial Court Proceedings. In addition, the Commercial Court Proceedings involve claims against TKI and the Gulf Defendants under both English and New York law, whereas the Arbitration Proceedings only involve claims under New York law.
  108. Serious allegations of fraud and conspiracy are raised against the Defendants in these proceedings. The Defendants have submitted to the jurisdiction of the English court and they are entitled to have these allegations determined by this court expeditiously in accordance with the overriding objective and Art 6 ECHR. Excalibur should not be allowed to "warehouse" its claim, given the serious questions in issue: cf. Katsouris Bros v Haitoglou SA [2011] 111 (QB) at paragraph 59.
  109. Moreover, there are other compelling reasons why, in my judgment, it would be wholly inappropriate to grant a stay.
  110. First, England is clearly the more appropriate forum for the determination of Excalibur's claim.
  111. i) First, Excalibur commenced proceedings before this court on the stated grounds that it was the "appropriate forum for the resolution of any disputes that may not be arbitrable". The evidence shows that there are many factors which connect this dispute to England, rather than to New York. These factors were relied on by Excalibur itself before me, on the application for a freezing order.

    ii) Second, the orderly and swift resolution of Excalibur's claims is likely to be best advanced in the Commercial Court Proceedings, in order to avoid duplication of proceedings and to dispose of the case efficiently. All the parties to the dispute have submitted to the jurisdiction of the English court. By contrast, the arbitral tribunal has yet to be convened and the Gulf Defendants contest its jurisdiction. If the issue of arbitrability were to be resolved in the Arbitration Proceedings, there will be a significant delay while the Gulf Defendants challenge the jurisdiction of the arbitral tribunal. By contrast, there are no jurisdictional objections from any party to the English court.

    iii) The English court is just as able as any arbitration tribunal to determine issues of New York law which may govern Excalibur's contractual claims. However, as Excalibur accepted on their application before me, the non-contractual claims may well be governed by English law. The English court is far better qualified to decide issues of English law than a New York arbitral tribunal.

  112. By contrast with the position of the Gulf Defendants, it is difficult to see what prejudice Excalibur might suffer if it were required to continue to litigate the claims which it has, of its own volition, brought against TKI and the Gulf Defendants in the English court. There is no hardship to Excalibur.
  113. TKI has never disputed the existence of the arbitration agreement as between it and Excalibur (save that it does not accept that all the claims Excalibur has brought against it are encompassed by the clause). But, once the court has determined that it is appropriate for the claims against the Gulf Defendants to proceed in this court it follows that the interrelated claims against TKI should also proceed here and be determined in the same set of proceedings. Fortunately, that desirable result is achievable in this case because both TKI and Excalibur (as the undoubted parties) to the arbitration clause have submitted to the jurisdiction of this court in relation to all causes of action.
  114. There are a number of case management considerations which, in my judgment, strongly support the refusal of the Stay Application.
  115. In the light of the claims set out in the Claim Form, it is clear that some claims will remain to be determined in the Commercial Court Proceedings whatever the outcome of the Arbitration Proceedings. This is because the Claim Form includes "further or alternative" English law claims which do not form part of the Request for Arbitration. The fact that the Commercial Court Proceedings are more "complete" than the Arbitration Proceedings is a factor which weighs against granting a stay: see Ledra Fisheries (supra) at paragraph 26. Whilst Excalibur has previously suggested that such claims have been included simply as a consequence of the applicability of different choice of law rules in the English court (rather than representing further and additional claims), that explanation is not consistent with the plea in the Claim Form of "further" claims.
  116. The likely timescale of proceedings is another factor which weighs against the granting of a stay. As indicated above, the jurisdictional challenges to the ICC in New York will be drawn out, as Excalibur acknowledges. In contrast, since all the Defendants have submitted to the jurisdiction of the English court, the claim can proceed to be determined here without delay. Speed (or lack of delay) in determining the dispute is an important consideration in circumstances where allegations of dishonesty have been levelled at the Defendants in the Commercial Court Proceedings, inter alia, in claiming that the Defendants have committed the tort of conspiracy. TKI and the Gulf Defendants are entitled to have such claims resolved expeditiously (see Klöckner Holdings GmbH v Klöckner Beteiligungs GmbH (supra)).
  117. All parties are in agreement that duplicative and parallel proceedings should be avoided. The most appropriate forum has to be that that to which all parties have voluntarily submitted, namely, the English court. A single forum is particularly important in circumstances where a conspiracy between the Defendants is being alleged, where it is obviously desirable for all parties alleged to have been involved to be present and have their evidence heard.
  118. Furthermore, Excalibur can have little objection to the English court as the appropriate forum for determination of the dispute, having advanced in the context of its application for a freezing injunction, that "the circumstances of this case are substantially connected to England and Wales." The "connecting factors" relied upon by Excalibur in that context included the following that: i) Gulf Keystone is listed on AIM; ii) the majority of acts allegedly giving rise to contractual and tortious claims were carried out at least in part in the jurisdiction; iii) certain of the torts allegedly committed by the Defendants are governed by English law; iv) any arbitral award in favour of the Claimant would be likely to be enforced against the Gulf Defendants in England; and v) "… there are, and may continue to be, Commercial Court proceedings in England arising out of the matters in dispute."
  119. For all the above reasons, I concluded that it would neither be in the interests of justice nor promote the over-riding objective to grant a stay of the Commercial Court Proceedings.
  120. Issue v): So far as Gulf UK is concerned, does this court have a discretion as to whether to permit the Commercial Court Proceedings to continue, or is it obliged to do so?

  121. Mr. Hirst, on behalf of the Gulf Defendants, advanced a free-standing argument to the effect that the court had no discretion to stay the Commercial Court Proceedings as far as Gulf UK is concerned, because it has been sued in the place of its domicile for the purposes of Council Regulation (EC No 44/2001, ("the Judgments Regulation"). Accordingly, he submitted that it followed that an anti-suit injunction should follow to restrain the Arbitration Proceedings.
  122. His argument ran as follows:
  123. i) Article 1(2)(d) excludes "arbitration" from the scope of the Judgments Regulation. However, in order to determine whether a dispute falls within the scope of the Judgments Regulation, one must look to the nature of rights which the proceedings in question serve to protect. In particular, a preliminary issue concerning the applicability and validity of an arbitration agreement falls within the scope of the Judgments Regulation: Case C-185/07 West Tankers v Allianz SpA [2009] 1 AC 1138 at paragraphs 22-27; see also Kokott A.G.'s opinion at paragraphs 54-58 and 68; Youell v La Réunion Aérienne [2009] EWCA Civ 175 at paragraphs 31-35. In any event, the Commercial Court Proceedings are not about "arbitration": the Claim Form does not mention arbitration.

    ii) It follows that both the question whether or not there is an arbitration agreement between Excalibur and Gulf UK and the substantive Commercial Court Proceedings fall within the scope of the Judgments Regulation.

    iii) Excalibur, as claimant, has commenced the Commercial Court Proceedings against a defendant in its place of domicile. It is well established that the court has no discretion to stay its proceedings on the grounds that there are parallel proceedings in a non-Member State when the court is afforded jurisdiction by virtue of the defendant's domicile pursuant to Article 2: Case C-281/02 Owusu v Jackson [2005] QB 801. This is so, even if the defendant domiciled in the jurisdiction wants to be sued elsewhere, as was the case in Owusu v Jackson. A fortiori, once a claimant has commenced proceedings against a defendant domiciled in the jurisdiction and the court is seised of those proceedings, the court cannot at the request of the claimant stay the proceedings in favour of proceedings elsewhere, if the defendant in question objects.

    iv) Accordingly, in the present case the English court has no discretion to stay the Commercial Court Proceedings against Gulf UK. It is mandatory for the court to exercise its jurisdiction and it cannot defer to the arbitrators. Nor can the court choose not to exercise that mandatory jurisdiction for case management reasons, since this would imperil the effectiveness of the Judgments Regulation: Case C-365/88 Kongress Agentur Hagen GmbH v Zeehage BV [1990] ECR I-1845 at paragraph 20.

    v) Given that Gulf UK has a right to a determination by the English court of: a) the arbitrability issue; and b) the substantive case against it in the Commercial Court Proceedings, the court should restrain the Arbitration Proceedings (at least as against Gulf UK) in order to give effect to that right: "the only choice … is between an anti-suit injunction or nothing": Samengo-Turner v J&H Marsh McLennan (Services) Ltd [2007] EWCA Civ 723 at paragraph 39.

    vi) Such a result is not surprising. A party which commences proceedings against a defendant domiciled in a Member State should not be able to "warehouse" its claim for its own tactical advantage so as to subvert the certainty of the scheme of the Judgments Regulation and endanger its effectiveness: cf. Katsouris Bros v Haitoglou SA (supra) at paragraphs 59-60.

    vii) If that is the case in relation to Gulf UK, Gulf Keystone and Gulf International are clearly necessary and proper parties to the Commercial Court Proceedings and any resolution of these issues. Indeed, Excalibur could hardly resist such a contention: it was on this basis that it sought and obtained permission from me to serve Gulf Keystone and Gulf International outside the jurisdiction or by alternative means.

    viii) Accordingly, if injunctive relief is granted in favour of Gulf UK, the court should grant the same relief to all the Gulf Defendants in order to avoid parallel proceedings and as a matter of common sense.

  124. Mr. Picken, on the other hand, submitted that there was no basis for the Gulf Defendants' "novel" argument that the court has no jurisdiction to stay the claim against Gulf UK because it is domiciled in this jurisdiction and can, therefore, be sued here as a matter of right by virtue of Article 2 of the Judgments Regulation. He submitted that the authorities relied upon by Mr. Hirst to support this contention establish that a defendant cannot prevent a claimant from exercising its right under Article 2 to sue in the courts of the defendant's place of domicile by obtaining a stay on forum non conveniens grounds. They do not establish that a defendant can insist on being sued in those courts, or require a claimant to progress proceedings (or the court to force the claimant to do so) where the claimant wishes to, and is entitled to, pursue proceedings elsewhere.
  125. Given the time constraints, I did not hear full argument on this issue at the hearings on 4 and 8 April. Nor was I referred to all the relevant authorities on the Judgments Regulation. In those circumstances, and although I was attracted to Mr. Hirst's submissions, I do not consider it appropriate to decide the point, since any decision may well have wider ramifications than the present case. Even if I had decided the point against Gulf UK, it would not have affected my decision on these applications.
  126. Conclusion

  127. The above are the reasons for the order which I made.
  128. I am grateful to all counsel for their helpful written and oral presentations. I will hear argument about any consequential matters and give any necessary further directions at the time of handing down this judgment.

Note 1    A “farm-in” is an agreement whereby a company, not at present a participant in a PSC, can acquire an interest from one of the existing participants.    [Back]

Note 2    It was common ground that this was not a case in which s9 of the Arbitration Act was engaged, since Excalibur is not “… a party to an arbitration agreement against whom legal proceedings are brought”, and that, accordingly, the Stay Application was brought either under the court’s inherent jurisdiction (the Defendants’ position) or under CPR 3.1(2)(f) (Excalibur’s position).    [Back]


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