Texas hold ’em?

Should the English courts interfere with an arbitration that began outside its jurisdiction?

That was the question Mrs Justice Gloster was forced to answer when she was appointed as judge in the Texas Keystone trial.

It is rare for the court to interfere with arbitrations in their own jurisdiction let alone those that began in the International Chamber of Commerce (ICC) in New York.

Yet that is exactly what Gloster J did when she granted an anti-arbitration injunction to restrain claimant company Excalibur Ventures from launching arbitration proceedings in New York, while at the same time attempting to bring a similar case against the same defendants through London’s Commercial Court.

In dispute was whether Excalibur, described on its website as offering advisory services related to Iraq, was entitled to an interest in rights to exploit and develop petroleum fields in Iraqi Kurdistan.

Those rights were granted by the Kurdistan Regional Government to the defendants named in the case; Texas Keystone; Gulf Keystone Petroleum; Gulf Keystone Petroleum International; and Gulf Keystone Petroleum UK. Collectively the four are known as the Gulf defendants.

Excalibur claimed 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 company brought in Clifford Chance partner Alex Panayides to lead its claim against the Gulf defendants.

The defendants denied any agreement ever existed.  Texas Keystone instructed Jones Day partner Stephen Pearson while the Gulf  defendants instructed Memery Crystal partner Harvey Rands.

Commercial Court proceedings were launched by Excalibur on 17 December 2010 alleging breaches of the collaboration agreement and contending that it had been wrongfully shut out from the production sharing contract (PSC).

On the same day, Excalibur kick-started arbitration proceedings in New York in which it sought, according to Gloster J’s ruling, “similar, but not identical, relief against TKI and the Gulf defendants”.

A senior litigation partner commented: “[Excalibur] was trying to have it both ways and the defendants wanted an anti-arbitration clause to stop it. It’s extremely rare for the UK court to interfere with foreign jurisdictions, but in this case it did.”

A witness statement submitted to the court by Panayides stated that Excalibur only commenced Commercial Court proceedings “to protect time and to ensure that there would be an appropriate forum seized [sic] of the claimant’s non-contractual claims, in the event that a tribunal constituted under the ICC rules concluded that it did not have jurisdiction over one or more of the defendants and/or claims.”

Gloster J rejected the assertion, upholding the defendants’ argument that there was nothing in the claim form to suggest the London court proceedings should be subsidiary to the New York arbitration; neither had it “adequately articulated” the limitation issues it had concerns about. 

The judge added that the High Court would show restraint when it comes to interfering with foreign arbitration  save in “exceptional cases”. In this matter, she added, it was clear that the substantive proceedings were being pursued in London and therefore the London court held jurisdiction.

Furthermore, whether the defendants were party to the collaboration agreement that contains the arbitration clause, as Excalibur contends but the defendants deny, should also be decided by the High Court. “None of the Gulf defendants have any connection with New York, or the ICC,” Gloster J said.

This case will now go to a further hearing later this month.

Meanwhile, litigators will study the judgment closely to understand what behaviour would compel the High Court to reach outside its jurisdiction.

The counsel:
Clifford Chance partner Alex Panayides instructed 7KBW’s Simon Picken QC to lead Timothy Kenefick and Benjamin Parker, both of the same set.

Jones Day partner Stephen Pearson instructed Fountain Court’s Michael Crane QC to lead Tamara Oppenheimer also of Fountain Court for Texas Keystone.
Memery Crystal partner Harvey Rands instructed Brick Court Chambers’ Jonathan Hirst QC to lead Harry Matovu QC and Richard Eschwege, also of Brick Court.