Excalibur Ventures LLC v Texas Keystone Inc and others [2011] EWHC 1624 (Comm)

The Claimant, a US company, entered into a collaboration agreement with the First Defendant (also a US company) in relation to bidding to develop petroleum blocks in Iraqi Kurdistan. That agreement referred to the Second Defendant, the First Defendant’s parent company, and envisaged that it might become a party to the agreement and/or a participant in any consortium bid. In due course, the First Defendant and others entered into a product sharing contract (the “PSC”).

The Claimant brought proceedings alleging breaches of the collaboration agreement, on the basis that it had been wrongfully shut out of the PSC. The Defendants argued that the Claimant did not, and could not, meet the statutory requirements of Kurdistan law for participation in a PSC, and so it could not comply with its part of the bargain under the collaboration agreement. The Claimant also commenced ICC arbitration proceedings in New York, under the collaboration agreement, against the Defendants, arguing that the Second Defendant and its subsidiaries were parties to that agreement, even though they had not signed it.

The Second, Third and Fourth Defendants applied for an injunction restraining the Claimant from pursuing the New York arbitration. The Claimant, in turn, applied for the English court proceedings to be stayed pending the determination of jurisdictional challenges in the New York arbitration proceedings.

The Court held that under s.37 of the Senior Courts Act 1981, it has the power to grant an injunction restraining arbitration proceedings even where the seat of that arbitration is in a foreign jurisdiction. The Second Defendant had not submitted to the jurisdiction of the arbitrators in New York, and indeed had made it clear that it challenged the ICC’s jurisdiction to determine the dispute. The English court had jurisdiction to decide whether it should resolve the issue of whether an arbitration agreement existed.

In this case, the circumstances (including the chronology of the litigation, the conduct of the Claimant, and cost and case management considerations) pointed to the English court as being the correct forum for determination of whether the First Defendant was a party to the arbitration agreement contained in the collaboration agreement. The continuation of the arbitration proceedings by the Claimant would be unconscionable, oppressive, vexatious, or otherwise an abuse of process. Further, the granting of an injunction was necessary to protect the First Defendant’s legitimate interest in continuing the proceedings in England, which was the natural forum for the litigation.

As regards the Claimant’s application for a stay, as it had voluntarily commenced two sets of proceedings, the Court could only grant a stay in exceptional circumstances. The burden of proof was on the Claimant to show that such circumstances existed, and it was unable to do so. If a stay were granted, the First Defendant would be required to contest both the issue of arbitrability and the substantive claim. It would have to do this before a tribunal whose jurisdiction it did not accept and/or before the New York courts with which it had no connection and to whose jurisdiction it did not wish to submit. The burden that this would place on the First Defendant outweighed any benefit which the Claimant might obtain from a stay