(1) Rochester Resources Ltd (2) Viktor F Vekselberg (3) Leaonard v Blavatnik v (1) Leonid L Lebedev (2) Coral Petroleum Ltd

This decision is a helpful reminder that parties should draft arbitration clauses as clearly as possible. Here, the arbitration clause was not drafted clearly enough, resulting in a key party not being bound by it.

Messrs Vekselberg, Blavatnik and Lebedev all held shares in OGIP, which in turn held shares in an oil company, TNK. OGIP issued a promissory note to Coral Petroleum Ltd, for USD 200 million which Mr Lebedev claimed was security for his 15% interest in OGIP. Messrs Blavatnik and Vekselberg sought to buy out his 15% interest in OGIP (and thereby his indirect interest in TNK). In light of this, OGIP’s subsidiary, Rochester Resources Ltd, entered an agreement in 2003 with Coral that Rochester would buy the promissory note and pay USD 600 million to Mr Lebedev. This agreement required the arbitration of disputes in England.

A dispute subsequently arose between the parties. Mr Lebedev commenced proceedings in the Supreme Court of New York against Mr Vekselberg and Mr Blavatnik, who applied to the Commercial Court for an injunction to prevent Mr. Lebedev from pursuing those proceedings on the basis that he was bound by the arbitration clause in the 2003 agreement. Their application was under section 37 of the Senior Courts Act 1981 or section 44 of the Arbitration Act 1996.

The Commercial Court declined their application for an anti-suit injunction, deciding that Mr Lebedev was not bound by the arbitration agreement since he was not a party to it. The Court found that the parties had made it clear that the arbitration clause covered disputes arising “between the parties” and held that had they not included these words, it might have been easier to conclude that the arbitration clause was also intended to apply to Mr Lebedev.”

The Court remarked that it would have been much neater  if the arbitration clause had been drafted to include disputes arising between Mr Lebedev, Mr Vekselberg and Mr Blavatnik. Although the promissory note at the core of the agreement was clearly Mr Lebedev’s property and the 2003 agreement was clearly negotiated by Mr Lebedev, the Court stated that “there are limits as to what a Court can properly do to improve a carefully drafted and (at least in this respect) reasonably clear written agreement”. In light of this, the Court concluded that the defendants had failed to establish with the requisite high degree of probability that Mr Lebedev was bound by the arbitration clause.

http://www.bailii.org/ew/cases/EWHC/Comm/2014/2926. html