Petroleum Exploration (PVT) Limited v Frontier Holdings Ltd & Anor

An arbitration clause in a sophisticated settlement agreement should ordinarily be construed as providing a one-stop forum for disputes arising from the settlement, including disputes about remedies for breach. Very clear language is required before remedial issues are allocated to a different tribunal under an earlier or related agreement. The court should characterise the dispute by reference to the cause of action and the relief sought. Relief awarded for breach of the settlement agreement remains within the settlement arbitration clause even if similar relief might also be available under a joint operating agreement or gas sales agreement.

Petroleum Exploration (PVT) Limited challenged under sections 67 and 68 of the Arbitration Act 1996 the jurisdiction of an ICC arbitrator to grant declarations and damages in favour of Frontier Holdings Limited and Spud Energy Pty Limited. The parties’ disputes concerned Badin IV oil and gas interests governed by joint operating agreements, but earlier disputes had been compromised by a Settlement Agreement containing a London-seated ICC arbitration clause.

The challenge concerned whether the disputed relief arose under the Settlement Agreement or instead had to be determined under arbitration clauses in the joint operating agreements or a gas sales agreement. The related claim sought damages and a final anti-suit injunction under section 37 of the Senior Courts Act 1981.

1. The jurisdictional challenge in the 13 Claim failed, and the claim was dismissed. The court also granted final anti-suit injunctive relief in the 307 Claim, restraining proceedings brought in breach of the Settlement Agreement arbitration clause. The agreed damages in that claim were £50,000.

2. A full judicial determination on evidence was required for the jurisdiction challenge: the court was conducting a rehearing rather than an appeal from the arbitrator’s jurisdictional conclusions. The award could nevertheless be considered to the limited extent that unchallenged findings were relevant to jurisdiction.

3. The arbitration clause had to be construed using ordinary contractual principles. Unambiguous language had to be applied according to its natural meaning. The sophistication and complexity of the Settlement Agreement meant that textual analysis was particularly important.

4. The one-stop presumption in Fiona Trust and Holding Corp v Privalov [2007] UKHL 40, as reinforced in settlement-agreement cases, applied. The parties were presumed to have intended one tribunal to determine all aspects of disputes arising from their relationship unless the language clearly excluded particular questions.

5. That presumption was especially strong because the Settlement Agreement resolved earlier disputes while restructuring the parties’ relationship. It was highly improbable that breach and causation would be determined under the Settlement Agreement but the consequences and remedies would be sent to another tribunal. The phrase “any matter arising under” the Settlement Agreement was sufficiently wide to include remedial issues.

6. The disputed declarations and damages were remedies for PEL’s breach of the Settlement Agreement. They were not claims under the joint operating agreements or the gas sales agreement merely because those agreements formed part of the factual and commercial background, or because similar remedies might have been available under them.

7. The late reliance on the gas sales agreement point was permitted. The requirement under section 73 of the Arbitration Act 1996 that the substance of a jurisdictional objection be distinctly communicated was considered, but the pleaded generic challenge was sufficient in the circumstances. The point nevertheless failed on its merits because the arbitrator had awarded damages for breach of the Settlement Agreement, not under the gas sales agreement. The complaint concerned quantification of damages rather than jurisdiction.

8. The court was satisfied that the requirements for a final anti-suit injunction were met.

First-instance determination of two arbitration claims. No earlier appellate decision was stated in the judgment.