Damning Judgment from Commercial Court in US$1.6bn Energy Dispute

06/01/14

On 13 December 2013, Christopher Clarke LJ handed down his full judgment in Excalibur Ventures v. Texas Keystone & Ors [2013] EWHC 2767 (Comm), a US$1.6 billion dispute concerning oil rights in Iraqi Kurdistan which was tried in the Commercial Court over 5 months. He had previously given a summary of his decision on 10 September 2013.

The claimant Excalibur had alleged that it was entitled to a 30% share of the rights in four oil fields in Kurdistan that were held through a subsidiary by Gulf Keystone Petroleum Limited, an AIM-listed oil and gas exploration company, and it had advanced 16 causes of action against the Defendants under two different systems of law.  The Court dismissed each and every claim.

At the handing down, the Judge dealt with costs and other consequential matters.  His further Judgment on these matters was an indictment of the claimant’s case and its conduct.

The Judge ordered Excalibur to pay the Defendants’ costs on an indemnity basis.  He reviewed the principles on which the Court makes an order for indemnity costs, noting that there must be something, whether it be the conduct of the claimant or the circumstances of the case, which takes the case outside the norm; and that if a claimant chooses to pursue a speculative, weak, opportunistic or thin claim, he takes a high risk and can expect to pay indemnity costs if it fails. 

The Judge held that Excalibur’s claim had been “essentially speculative and opportunistic”, advanced at “great length and by the assertion of a plethora of causes of action”; that the case had been pursued by the claimant “as if it was an act of war”, but that “it was based on no sound foundation in fact or law and it has met with a resounding, indeed catastrophic defeat”. The claims were described as “an elaborate and artificial construct... replete with defects, illogicalities and inherent improbabilities”.  The Judge further held that a deceit claim should not have been advanced by Excalibur and that it should have been withdrawn when it became apparent in cross-examination that it could not succeed, noting that “the making of deceit claims, even in the alternative and even if of a subsidiary character, is a strategy which has important consequences for those against whom they are made”. 

The Judge was highly critical of Excalibur’s factual witnesses, whom he found to have lied and to have made misleading statements from the outset and in their evidence at trial, and to have fabricated a dishonest case which was persisted in at trial. He was also highly critical of Excalibur’s principal expert, whose lack of independence and relevant expertise was held to be such as to take the case outside the norm. He also commented adversely on the way the litigation had been conducted by the Claimant, saying that some of the correspondence had been “voluminous and interminable, in some circumstances highly aggressive and in others unacceptable in content”; that the approach had led to extravagant demands for disclosure, some of which were wholly disproportionate; and that the trial bundles originally prepared by the Claimant were “unworkable and, so far as the trial was concerned, largely unread”.  The Judge stated that “Whilst interminable and heavy-handed correspondence is becoming a perverse feature in some commercial litigation, it is not in any way to be accepted as a norm and parties whose solicitors engage in it should not be surprised if, in a case such as this, they end up paying the costs on an indemnity scale.”

The Judge ordered an interim payment on account of costs in the sum of £18 million that Excalibur had previously paid into court as security for costs. He also ordered Excalibur to provide additional security for costs in respect of the shortfall between that amount and the Defendants’ likely recoverable costs after assessment on an indemnity basis.

Excalibur is funded by a number of third-party funders. In the event that Excalibur fails to provide additional security for costs, the Defendants have permission to seek a non-party costs order against those funders. Any hearing in respect of such an order will take place at a later date.

The main judgment is here.

The costs judgment is here.