Consolidated Contractors (Oil and Gas) Company Sal (Acting By Mr Lee Manning As Receiver) v And:

On an application to discharge or vary interim orders supporting arbitration, the court should preserve the position pending arbitration and avoid determining issues properly reserved for the arbitrators unless there is no serious issue to be tried. Where the underlying contractual relationship is subject to English law, English arbitration and English supervisory jurisdiction, the English court may exercise subject-matter and personal jurisdiction over an overseas respondent and grant in personam relief affecting conduct abroad. The absence of a foreign-assets proviso does not make the injunctions exorbitant, although the court retains a flexible discretion to include such protection where appropriate. Applying the American Cyanamid balance, the injunctions were maintained because the judgment creditor faced potentially irreparable loss, while the respondent’s asserted prejudice was insufficiently established. The cross-undertaking in damages was increased to $1 million.

The judgment concerned an application by the respondents, Canadian Nexen Petroleum Yemen and related companies, to discharge or vary receivership and asset-preservation orders made in aid of enforcement of a judgment against Consolidated Contractors (Oil and Gas) Company SAL. The orders required the court-appointed receiver to commence arbitration under the joint operating agreement concerning entitlement to oil from the Masila concession.

The respondents argued that the orders were exorbitant, that the arbitration had no reasonable prospect of effectiveness, that the orders created risks of double jeopardy and commercial prejudice, and that the arbitration seat was Geneva rather than England. The central issues were whether the court had jurisdiction, whether the issues should be determined by the court or arbitrators, and whether the interim relief should be maintained pending the arbitration.

1. Application and jurisdiction. The application to discharge or vary the receivership and asset-preservation orders was refused, subject to increased fortification of the cross-undertaking in damages. The arbitration seat under the joint operating agreement was England. Geneva was merely the geographically convenient place for hearings. The English court therefore retained supervisory jurisdiction.
2. Issues reserved for arbitration. Under section 44 of the Arbitration Act 1996, relief should be granted only so far as necessary to preserve the position pending arbitration. The court should not decide issues properly arising in the arbitration unless satisfied that there was no serious issue to be tried. There were serious issues concerning the contractual basis of the oil entitlement, the receiver’s ability to give a good receipt, enforceability against the operator, and the arbitrators’ jurisdiction.
3. Extraterritorial effect. The English court had subject-matter jurisdiction because the relationship under the joint operating agreement was governed by English law and London arbitration. Personal jurisdiction followed where the respondent could be served under Part 6 of the CPR. The injunctions were in personam orders concerning private contractual rights and were not an exorbitant exercise of jurisdiction, even though compliance might affect assets or conduct abroad. This followed the reasoning in Mackinnon v Donaldson Lufkin and Jenrette Corporation and Masri (No 2).
4. Discretion and balance of justice. The court retained a flexible discretion to include a foreign-assets proviso or otherwise protect the respondent. Applying the American Cyanamid principles, the judgment creditor faced a real risk of irreparable loss because the oil entitlement was the only identifiable asset available to satisfy the judgment debt. The respondent’s alleged double jeopardy, terminal difficulties and commercial prejudice were not shown to be serious, substantial or irremediable. The balance therefore favoured maintaining the injunctions.
5. Fortification and order. The cross-undertaking was increased from $500,000 to $1 million. The orders remained in force in their previously amended form, subject to provision of the further fortification within the period directed by the court.