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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Euroil Ltd v Cameroon Offshore Petroleum SARL [2014] EWHC 52 (Comm) (14 January 2014) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2014/52.html Cite as: [2014] EWHC 52 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Rolls Building
		14th January 2014

See: [2014] EWHC 12 (Comm) & [2014] EWHC 215 (Comm)

MR. JUSTICE MALES:

1. On 6^th January of this year I made an order which restrained the defendant, Cameroon Offshore Petroleum SARL, from engaging in any correspondence with or making any communication to Société Nationale des Hydrobcarbures (SNH) or the Cameroon authorities generally in respect of the Etinde Permit, Offshore Cameroon, so far as these dealings relate to joint operations between the parties. But I made an exception to provide that nothing in the order should prevent the defendant attending the meetings with the Cameroon authorities on the 7^th and 8^th January 2014, that is to say the two days immediately following my order, and participating therein, provided that the defendant should do nothing to contradict or undermine the exploitation authorisation application which had been approved by the parties on 3^rd January 2014.
2. The background to that order and the reasons why I made it were contained in a judgment which I delivered orally at the conclusion of the application, which was attended by Mr. Matthew Cook of counsel, instructed by Shepherd & Wedderburn for the applicant, EurOil Limited, and by Mr. Woolnough, instructed by Clyde & Co on behalf of the defendant ("CAMOP"), although, as he made clear, he had only just been instructed and was essentially there to do no more than take a note. That was, therefore, effectively a without notice hearing, and today has been the return date.
3. I gave that judgment in public and the hearing was in public, since I was not asked to do otherwise. Today, because this has been an arbitration matter, the submissions have been in private, that being the default rule in arbitration cases. But because my initial judgment was given in public and because there has been some misrepresentation as to what the effect of my order was, I think it right to give this judgment in public.
4. I will not set out the background again. That can be taken from the judgment which I gave on 6^th January, which should be read together with this judgment. It has since been supplemented by extensive evidence which the parties have adduced, which shows not only much more detail than I was alive to on 6^th January as to the circumstances in which this dispute arose, but also what has happened since the making of my order.
5. It is clear from that evidence that the issues which have given rise to concern on the part of CAMOP are issues of some long standing, going back to at least July 2013. Those issues relate to the capability of EurOil to carry out its functions, as the Operator under the Joint Operating Agreement and the Contractor under the Production Sharing Contract; to the question whether the appropriate development strategy is to develop a single project encompassing both fertiliser and LNG plants, or whether it would be preferable to proceed in stages with a fertiliser plant, to be followed potentially at some later stage by an LNG project; and the need or otherwise for the drilling of additional wills in order to appraise the situation, that last point being closely connected with the question of whether the development phase should be concerned with one large project or two sequential projects.
6. It is also clear that that those concerns, even back in July 2013, were shared by SNH, at least to some extent. There is a question whether there was a sufficient disclosure of those matters at the without notice stage. That is in dispute. Mr. Flynn QC, who represents CAMOP today, has submitted that there was a failure to make proper disclosure in a number of respects. I will consider later whether this is a matter on which I need to rule.
7. After the making of my order, the meetings in Cameroon took place. What happened was that the order I made was served on CAMOP. CAMOP considered that the terms of the order put it in a very difficult or indeed impossible position in participating in the meeting, and it decided to prepare an opening statement, which would be read out verbatim during the meeting, and to take no further part in it. That decision was made between CAMOP and its solicitors, including Mr. Michael Wachtel, a partner in Clyde & Co, who was participating and had always been intended to participate in the meeting.
8. The statement which was read out at the beginning of the meeting read as follows:

"We thank you for inviting us to attend these tripartite meetings. We have attended today in good faith, with the sole purpose of working together with all parties to further the interests of us all, and enhance the development of the Etinde Permit. However, as a result of litigation commenced by EurOil yesterday at the High Court in London, the papers for which were served on us only 90 minutes before the hearing commenced, we regret that we are unable to participate in this meeting, other than to observe. We are providing you with a sealed order of the court, with which we must comply and which we will vigorously contest next week when the case is back before the Judge. We are unable to comment further at this stage, other than to state again that our sole objective is to make this project a success for all parties involved".

9. Mr. Cook for the claimant submits that it is not correct to say that the order prevented CAMOP from participating in the meeting. But, as I read this statement, it is not necessarily to be read as saying that the order prohibited CAMOP from doing so; rather that CAMOP had taken the view that, in the light of the order, it could not safely go further than observing.
10. The reading of this statement had a considerable impact. It was apparently regarded as unacceptable by SNH that CAMOP was precluded from speaking directly with the government. The Gas Manager of SNH, who had taken the lead for SNH in dealings over the Etinde Project, a Mr. Jean-Jacques Koum, is recorded by Mr. Wachtel as having commented that he had organised the meeting because of the misunderstandings between EurOil and CAMOP; that SNH was obliged to listen to CAMOP as a party to the Production Sharing Contract; and that it was not acceptable that a direct investor in Cameroon, such as CAMOP, a party to a contract with the government, was precluded by contract or court order from speaking directly with the government. In the light of that, it seems that the meetings did not make any significant progress.
11. The other matter to which the reading of that statement led was accusations by EurOil that, merely by reading out the statement, CAMOP was itself in breach of the order and, therefore, in contempt of this court. That would (I assume) be on the basis that reading out the order itself constituted contradicting or undermining the exploitation authorisation application which had been approved. Those allegations of contempt have not been withdrawn, and EurOil is considering whether to bring contempt proceedings. They are, therefore, not directly before me today.
12. A further point which I should mention is that, in the course of the meeting, after the statement had been made, Chief Tabetando, who is the Executive Chairman of EurOil, stated that the fact that the High Court issued the injunction was conclusive proof that CAMOP was in breach of the Joint Operating Agreement. That, of course, is a clear misrepresentation of the position. I decided no such thing but made it clear, and make it clear again, that that question is for decision by the arbitral tribunal in due course.
13. In my judgment it is completely unacceptable that the effect of the injunction should have been misrepresented to SNH in this way. I regard that, in effect, as an abuse of the court's process, which is itself sufficient to discharge this injunction, although there are other grounds on which I also propose to do so.
14. Mr. Cook accepted that it was a misrepresentation of the position. He indicated that EurOil would be willing to give undertakings that it would not repeat that misrepresentation and would withdraw the representation that was made. But it seems to me that the damage has been done. Leaving that point aside, however, there are, on further reflection and with the benefit of adversarial argument, problems with the injunction which I ordered, which subsequent events (that is to say events subsequent to my order on 6^th January) have made clear.
15. This is an application which is made under s.44(3) of the Arbitration Act 1996, which provides that, if the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets. The asset which the claimant seeks to preserve by means of this injunction is its right under clause 6.6 of the Joint Operating Agreement to be (as it says) the sole representative of the parties in written communications with the government relating to the joint operations in the Etinde Field, and to be the primary or lead representative of the parties in relation to communications taking place at meetings. But the precise nature of those rights is the very issue which the arbitrators will have to determine in the arbitration.
16. Mr. Cook explained that EurOil's case is that the effect of the provision in clause 6.6 that EurOil shall, as Operator, lead the discussions with the government in any meetings means that it is up to EurOil to decide what matters should be discussed in any meeting; that EurOil will respond to any questions or concerns that may be raised by the government; that it is for EurOil to decide the nature and extent of any contribution from the other party (that is to say from CAMOP); and that the effect of that is that if, for example, the government were to ask a question of CAMOP representatives present at the meeting, those representatives would only be able to respond to that question with EurOil's permission. The contractual structure, he says, is that it is for the Operator to determine who shall answer.
17. Whether that is indeed the correct construction of those provisions is in dispute. That is not, it seems to me, something which it is for me to decide. It is for the arbitrators to decide, and is the central issue in the arbitration which has now been begun. No doubt CAMOP will have to live with the fact that it has voted for a resolution which gives unconditional approval to the exploitation authorisation plan, but the extent to which CAMOP is now constrained from expressing to SNH the concerns which apparently it continues to have, notwithstanding its vote for the unconditional approval of that resolution, is a matter to be determined in the arbitration. What that means, in terms of s.44, is that the "asset" which it is the purpose of this application to preserve is an asset whose existence and scope is disputed.
18. Mr. Flynn accepts on the authority of the Cetelem case [2005] EWCA Civ 618, [2005] 1 WLR 3555, at any rate for the purpose of the argument before me, that there would be jurisdiction in the court to make an order for the preservation of such a disputed asset, but he relies on the qualification expressed by the Singapore Court of Appeal in the case of Maldives Airports Company Limited v. GMR Malé International Airport Pte Ltd. [2013] SGCA 16, as to the true scope of the equivalent Singapore provision to s.44(3), and also on the approach which I adopted in the case of ZIM Integrated Shipping Services Ltd v. European Containers KS [2013] EWHC 3581 (Comm).
19. The Singapore case was to the effect that the only type of contractual rights which would come within the meaning of assets under s.12(1)(4) of the Singapore International Arbitration Act were assets which lend themselves to being preserved by way of an order for specific performance or a final injunction, and that the section does not extend to rights where damages would be an adequate remedy for breach. Thus, in Singapore at any rate, the jurisdiction to grant an injunction under the equivalent of our s.44(3) is limited. This appears to be more limited than the Court of Appeal in Cetelem held to represent English law. I adhere to the position as I sought to explain it in the ZIM case, to the effect that, even assuming that there is jurisdiction, it is a factor to be taken into account as a matter of discretion that s.44(3) is more readily to be invoked in the typical case where preservation of assets is being used in a more conventional way, such as in the case of a freezing order, for example, and that, the closer any injunction comes to determining a matter which it is for the arbitrators to decide, the more wary the court should be as a matter of discretion.
20. In view of the nature of the issue in the present case, it seems to me that this is a case where the court does need to be very cautious before stepping in with an injunction and, on further reflection, I have been persuaded that my initial decision to do so was wrong. If the way in which the injunction is formulated goes too far in protecting EurOil's position, the effect is that it prevents CAMOP from exercising rights which it would have. But the extent of the parties' rights is a matter for the arbitrators. So this is a case where considerable caution would be needed as a matter of discretion.
21. The question of the formulation of the injunction is also a very important one. My expectation when the injunction was granted was that it defined with sufficient clarity what CAMOP was prevented from doing. As I made clear in the course of argument at the 6^th January hearing, I would not have been prepared to make an order which did not achieve that clarity. It is always important that a defendant who is to be restrained from doing something by injunction (and who therefore faces the sanction of contempt proceedings) must be able to determine, without undue difficulty, exactly what it is that he can and cannot do or say.
22. But the dispute which has arisen whether even telling SNH about the order was itself a breach of the order and the threat of contempt proceedings to which that has given rise is a matter for concern. It is not for me to decide today (and I do not do so) whether any allegations of contempt are well founded, although I add in passing that I see no reason to doubt what is said about the CAMOP representatives' good faith in believing that they were entitled to do and say what they did, and to read out their statement. But the existence of such a dispute seems to me to be, in itself, a powerful reason why the injunction should not continue. It clearly does not have, now that it has been, as it were, tested in the fire of a real meeting, the clarity and certainty which an injunction would require.
23. Further, the fact that the concerns which have been ventilated as to the way in which the project should go forward are of long standing, going back to the middle of last year, is itself a significant factor. The fact that, notwithstanding the agreed vote in favour of the resolution, these have existed and still do exist is already clear to SNH. It seems, if reports of what SNH has said to the parties in the past are correct, that the existence of this arbitration and litigation between the parties to the Joint Operating Agreement may itself be a factor which weighs with SNH in deciding how to proceed, and what, if any, approvals to give.
24. However, in terms of s.44(3), it seems to me that a position has now been reached where an injunction would really serve very little purpose. It would be too late to shut the stable door, to repeat the rather hackneyed metaphor that I used before, and it is also clear that, in the past, both parties have been prepared to write to SNH in terms which have to some extent denigrated the other party to the JOA. For the court to intervene at this stage, by restraining one party only from making any communication with SNH, would be striking the wrong balance.
25. That being so, I have reached the firm conclusion that this injunction should not continue. It is unnecessary to decide whether, as an independent ground, it should be set aside for failure to make the disclosures to which Mr. Flynn has pointed, and I do not propose to embark on that exercise, particularly at what is now a rather late hour.
26. The position, therefore, is that the injunction will not continue. I set aside my original order, on the grounds that, if the position had appeared to me then as fully as it appears now, I would not have granted the order. I emphasise that this does not mean that CAMOP is entitled to say whatever it likes to the government. It merely means that there is no injunction from the court to restrain it.
27. Whether what CAMOP has said in the past constitutes a breach of the Joint Operating Agreement and, if so, what are the appropriate remedies is not a matter which I decide, or which I have decided. It will be open to EurOil to seek to persuade the arbitrators, when they are appointed, that CAMOP is in breach of clause 6.6, or indeed of any other provision of the Joint Operating Agreement, and to seek appropriate remedies from them.
28. Likewise, if what CAMOP says or does in the future constitutes a breach of the Joint Operating Agreement, that will be a matter which EurOil can bring before the arbitrators. It will be open to EurOil, therefore, to seek a final injunction from the tribunal, when it is appointed, and indeed, to ask the tribunal to exercise the powers which the tribunal will have under the LCIA rules to order provisional relief. I am neither encouraging nor discouraging any such application. I am merely saying that my decision does not prevent such an application being made. If it is made, whether to exercise those powers will be a matter for the tribunal.
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