Excalibur Ventures LLC v Texas Keystone Inc & Ors

The court may restrain a foreign arbitration under Senior Courts Act 1981, section 37, in exceptional circumstances, including where the parties’ consent to arbitrate is genuinely disputed and continuation of the arbitration would be oppressive or unconscionable. The English court may determine whether an alleged party is bound by the arbitration agreement; the tribunal’s competence-competence does not make it the exclusive forum for that issue. A claimant who has voluntarily commenced substantive court proceedings and parallel arbitration must show special or exceptional circumstances for a stay. The court will ordinarily refuse a stay where the English proceedings are more complete, involve all parties and issues, and offer a faster and more appropriate determination.

Excalibur commenced substantive Commercial Court proceedings against Texas Keystone Inc and three Gulf Keystone companies, alleging contractual, tortious and equitable wrongdoing concerning oil exploration blocks in Iraqi Kurdistan. On the same day it commenced ICC arbitration in New York under the arbitration clause in a collaboration agreement signed only by Excalibur and Texas Keystone. The Gulf defendants denied being parties to that agreement and applied for an anti-arbitration injunction. Excalibur sought a stay of the English proceedings in favour of the arbitration. The court also considered, but did not decide, whether the position of Gulf Keystone (UK) Ltd was governed by mandatory jurisdictional consequences under Council Regulation (EC No 44/2001.

1. Jurisdiction to restrain the arbitration. The court had jurisdiction under section 37 of the Senior Courts Act 1981 to restrain a foreign-seated arbitration. The jurisdiction is exceptional and must be exercised cautiously, particularly where the parties have unquestionably agreed to arbitrate abroad. It may nevertheless be exercised where the existence of consent to arbitrate is itself disputed and continuation would be oppressive, unconscionable or an abuse of process.
2. Jurisdiction to decide arbitrability. The court could determine whether the Gulf defendants were bound by the arbitration agreement. The principle that an arbitral tribunal may rule on its own jurisdiction did not require a person who had not submitted to the tribunal to litigate that question before it. The Arbitration Act 1996 supported a broad and flexible approach, and the reasoning in Dallah Real Estate and Tourism v Ministry of Religious Affairs of the Government of Pakistan and AES Ust-Kamenogorsk Hydropower Plant LLC v Ust-Kamenogorsk Hydropower Plant JSC confirmed that the court could determine the issue where appropriate.
3. Discretion and case management. The English court was the appropriate tribunal. The Gulf defendants had a strong arguable case that they were not parties to either agreement; they had no connection with New York; they had not submitted to the ICC process; and forcing them to contest jurisdiction there risked prejudice, wasted costs and a decision against them by the back door. Excalibur had chosen to commence substantive proceedings in England, sought substantial relief there and then attempted to require the defendants to proceed elsewhere.
4. Stay refused. A claimant seeking to stay proceedings which it voluntarily commenced must show special, rare or exceptional circumstances. None existed. The English proceedings involved wider claims, all parties had submitted to the English court, serious allegations required expeditious determination, and a stay risked duplication and delay. The court therefore restrained Excalibur from pursuing the ICC arbitration against the Gulf defendants, dismissed the stay application, and directed a preliminary trial of whether those defendants were bound by clause 14.1.
5. The court declined to decide the separate argument based on Council Regulation (EC No 44/2001 concerning Gulf UK because full argument and all relevant authorities had not been provided. The point would not have affected the result.