Loon Energy Inc & Anor v Integra Mining & Ors

An English court cannot determine the continued efficacy or application of an agreement containing a wide arbitration clause where that issue falls within the reference to arbitration. A party cannot avoid the arbitration clause by commencing proceedings before the dispute has been expressly articulated. Declarations concerning hypothetical future claims will generally be refused where the effect of releases and related contractual provisions depends on the facts and precise allegations. A declaration may nevertheless be granted to confirm the contractual position, provided it is confined to the relevant agreements.

The claimants sought declarations concerning the defendants’ alleged interests in a Brunei oil and gas project. Several agreements were governed by English law, while a confidentiality agreement was governed by Texas law and contained an arbitration clause. The defendants had commenced a Texas arbitration asserting rights under that agreement.

The claimants sought, among other relief, declarations that the English-law agreements had superseded the confidentiality agreement, that the defendants were precluded from asserting any further interests or claims, and that the relevant contractual releases applied. The court had to determine the scope of its jurisdiction, the effect of the arbitration agreement, and whether the proposed declarations were appropriate.

1. Jurisdiction and arbitration. The arbitration clause in the Confidentiality Agreement covered any dispute arising out of or relating to that agreement. Since the claimants accepted the validity and scope of the arbitration agreement, only the arbitrator could determine issues concerning the continued efficacy and application of the Confidentiality Agreement. Declaration 1.2 therefore failed.
2. Existence of a dispute. A dispute existed for the purposes of section 9 of the Arbitration Act 1996. The claim itself sought relief extending to the Confidentiality Agreement and therefore acknowledged a dispute within the arbitration clause. The clause could not be circumvented by bringing proceedings before the defendants had expressly asserted their rights. The approach in Ellerine Bros v Klinger was explained and applied to the meaning of a dispute.
3. Hypothetical claims. The court refused the broad declaration sought to preclude all possible future claims. The effect of the releases and other provisions in the English-law agreements could not sensibly be determined in the abstract. The position was comparable to Clay v Booth, although the jurisdiction to grant declarations had developed since that decision. The court also declined declarations which merely rehearsed the legal effect of the contracts or releases and would serve no useful purpose.
4. Limited declaration. The court granted relief substantially in the form of Declaration 1.1. The English-law agreements gave the defendants no interest in Block L, but the words “arising out of or” were omitted so that the declaration did not trespass on matters reserved for arbitration. The precise form of the order and ancillary matters were left to be determined.

First-instance decision. The judgment does not state any prior appellate history.