Commercial Court grants exceptional anti-arbitration injunction

28/06/11

Excalibur Ventures LLC v. Texas Keystone Inc. & Ors [2011] EWHC 1624 (Comm.)

On 28 June 2011, Mrs Justice Gloster handed down Judgment giving reasons for an exceptional injunction which she had granted on 8 April 2011 to restrain foreign arbitration proceedings.

Gulf Keystone Petroleum Limited is an AIM-listed oil and gas exploration company. In December 2010, Excalibur Ventures LLC commenced arbitration proceedings in New York against Texas Keystone LLC ("Texas") and Gulf Keystone Petroleum Limited, Gulf Keystone Petroleum International Limited and Gulf Keystone Petroleum UK (the "Gulf Defendants"). Excalibur alleges that it is entitled to an interest in rights to exploit and develop petroleum fields in Iraqi Kurdistan. These rights were granted to Texas and one of the Gulf Defendants by the Kurdistan Regional Government pursuant to a Production Sharing Contract.

At the same time, Excalibur commenced parallel proceedings against Texas and the Gulf Defendants in the Commercial Court and it sought an unlimited worldwide freezing injunction against the Defendants. This was refused.

The Gulf Defendants applied for an injunction to restrain Excalibur from pursuing the arbitration in New York against them on the grounds that they are not party to any arbitration agreement and that any arbitral tribunal would have no jurisdiction over them. Excalibur, however, contended that the question of arbitrability should be decided by the ICC tribunal in accordance with the principle of Kompetenz-Kompetenz, and that any appeal against that decision could and should be made to the New York courts as the courts with supervisory jurisdiction over the arbitral proceedings. In addition, Excalibur made a cross-application for a stay of the parallel Commercial Court proceedings which they had commenced.

An injunction to restrain arbitrations where the seat of the arbitration is in a foreign jurisdiction is granted by the English court only in exceptional circumstances. Mrs Justice Gloster was satisfied that this was such a case. Her judgment provides a detailed examination of the principles governing issues of arbitrability and the jurisdiction of the Court to grant injunctions restraining foreign arbitrations. The Judgment considers the decisions of the Supreme Court in Dallah Real Estate and Tourism v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46 and of the Court of Appeal in AES Ust-Kamenogorsk Hydropower Plant LLC v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA 647, and the basis on which a party might be restrained from proceeding with a foreign arbitration.

Excalibur's cross-application for a stay of the Commercial Court proceedings was dismissed.

The judgment is here.