Exacting Excalibur

The longest running case of 2012 came to an end yesterday, but there are still plenty of questions to be asked of the claimant Excalibur and its lawyers

Court 15 of the Rolls Building was packed yesterday (10 September), as investors awaited the outcome of the longest-running case of the 2012 judicial year, Excalibur Ventures v Texas Keystone and Gulf Keystone.

There were cheers outside court from Gulf Keystone investors as the case was thrown out in its entirety. Excalibur, Mr Justice Christopher Clarke said, had no valid claim for an interest in various petroleum fields in Iraqi Kurdistan.

These rights were granted to Texas and one of the Gulf defendants by the Kurdistan regional government pursuant to a production sharing contract (10 September 2013).

Excalibur claimed that it had introduced management of Gulf Keystone Petroleum to opportunities for oil exploration in Iraqi Kurdistan and together they had agreed to share any plans to develop the region. The defendants denied any agreement ever existed and yesterday, the High Court agreed with them.

This was a mammoth case with some colossal sums involved. It all kicked off just a few days before Christmas 2010, when Excalibur’s lawyers, Clifford Chance partner Alex Panayides leading the team, issued a worldwide freezing injunction application at the High Court against the two defendants.

According to sources close to the case the freezing order was worth in the range of $500m, but Excalibur was prepared only to surrender a $2m bank guarantee to the courts by way of costs security.

Mrs Justice Gloster turned down the injunction, paving the way for a year of battling over jurisdiction.

At the same time the claimant launched arbitration proceedings at the International Chamber of Commerce (ICC) in the New York Court, while issuing High Court proceedings in London.

In response to the ICC proceedings, which had prompted a stay of the commercial court dispute, lawyers for Gulf Keystone, Memery Crystal partner Harvey Rands, demanded an anti-arbitration injunction from the London Court. Lawyers for Texas Keystone, Jones Day partner Stephen Pearson, joined Gulf in a second application requesting that the stay of commercial court proceedings should be halted.

The defendants argued that as the majority of shareholders were based in the UK the full dispute should be heard in London. Gloster J agreed, issuing the anti-arbitration injunction and forcing the end of the ICC arbitration (6 July 2011).

The following December the defendants made a fresh application to the court requesting security for costs. By this time the financial means of the claimant were coming under scrutiny and it was unclear how the case was being funded.

Nevertheless Excalibur did not refute the application, but did challenge the £18m figure put forward by the claimants, arguing that the two defendants should manage their cases together and reduce costs. It made no difference and the courts ordered that £18m should be handed over to be held on account.

During the course of the trial, which ran for 57 days, the defendants sought information of exactly how Excalibur had got the claim to court. How was it being funded?

Amongst the claims levelled at Gulf and Texas Keystone, Excalibur claimed ‘specific performance’, meaning that it would needed to demonstrate that it could execute the disputed contract. To do so would require financial stability and so the defendants got a look at the books.

What emerged was that in fact Excalibur had managed to secure up to $50m by way of litigation funding from from New York hedge fund Platinum and New York litigation funding specialist BlackRobe, as well as Andonis and Filippos Lemos, two brothers involved in the shipping business.

It is understood that the funders covered the security for costs. This only came to light during the course of trial because Clifford Chance did not submit a costs budget to the court in the run up to the hearing. This would have been essential if the firm wanted to be able to recover some costs in the event of a win.

What will raise eyebrows even higher is the fact that Panayides’ brother is an employee of Lemos, which put up a proportion of the funding.

The defendants will head back to court in two weeks to hammer out a deal over costs and it is understood that they will seek indemnity costs. Should the £18m held on account by the court be insufficient to cover the total claimant spend there is a possibility that the third-party funders will be drawn into the dispute.

Plenty of questions remain over the management of this litigation, only a few of which will be answered when full judgment is released sometime in the next month.

For the claimant Excalibur Ventures

7KBW’s Simon Picken QC, Timothy Kenefick, Jessica Sutherland and Keir Howie, all of the same set, for Excalibur Ventures, instructed by Clifford Chance partner Alex Panayides

For the first defendant Texas Keystone

Fountain Court’s Michael Crane QC leading Tamara Oppenheimer and Richard Power, also of Fountain Court, instructed by Jones Day partner Stephen Pearson

For the second defendant for Gulf Keystone Petroleum Ltd

7KBW’s Jonathan Gaisman QC leading Richard Waller QC also of 7KBW, instructed by Memery Crystal partners Harvey Rands and Nicholas Scott

For the third defendant Gulf Keystone Petroleum International

Brick Court’s Harry Matovu QC leading Richard Eschwege of the same set instructed by Memery Crystal partners Harvey Rands and Nicholas Scott

For the fourth defendant Gulf Keystone Petroleum (UK) Ltd

4 Stone Buildings’ Nicola Timmins instructed by Memery Crystal partners Harvey Rands and Nicholas Scott