ENGLISH HIGH COURT CONSIDERS SCOPE OF ARBITRATION AGREEMENT WHEN DETERMINING JURISDICTION TO GRANT INTERIM RELIEF IN SUPPORT OF ARBITRATION

In AT and others v Oil and Gas Authority [2021] EWHC 1470 (Comm), the High Court (the Court) considered an application by four claimants under s.44(3) of the Arbitration Act 1996 (the Act) for an order restraining the defendant from circulating a redacted version of a notice (the Notice) to third parties. The Court found that the underlying dispute was not within the scope of the arbitration agreement between the parties and, accordingly, that it lacked jurisdiction to grant such an interim injunction under s.44(3) of the Act. However, having determined that the claimants should pursue any claim through judicial review rather than arbitration, the Court did grant the injunction, concluding that the application was one "for interim relief in a judicial review claim".

Background

A dispute between the parties arose in relation to licences granted to the claimants (the Licensees) by the Oil and Gas Authority (the OGA). It was common ground between the parties that the relevant licences were each subject to the model clauses set out in Schedule 1 of the Petroleum Licensing (Production) (Seaward Areas) Regulations 2008. Clause 43 provided that disputes under the Licences, subject to certain exceptions in a "proviso" (underlined below), were to be resolved by arbitration (the Arbitration Agreement). The Arbitration Agreement read as follows:

"If at any time any dispute, difference or question shall arise between the Minister or the OGA and the Licensee as to any matter arising under or by virtue of this licence or as to their respective rights and liabilities…then the same shall, except where it is expressly provided by this licence that the matter or thing to which the same relates is to be determined, decided directed, approved or consented to by the Minister or the OGA, be referred to arbitration…" (emphasis added).

The OGA served a Notice on the Licensees (the contents of which were redacted in the judgment), providing them with the opportunity to make representations on that Notice before communicating its contents to "supposedly interested third parties." The Licensees applied to the Court under s44(3) of the Act for an order restraining the OGA from circulating the Notice to the third parties. Before the Court, the parties agreed that if the Arbitration Agreement did not apply, it was "appropriate [for the Court] to decide [the] application as if it were a claim for interim relief in a judicial review claim", as on the facts of this case this would be the only other available remedy for the Licensees. In support of this, the Licensees offered an undertaking to commence judicial review proceedings in the Administrative Court within a "very short" period of time if the interim relief was granted.

As discussed in our other posts on s44, the power of the Court under s44(3) is narrow and allows the Court, where there is urgency, to make such orders as it considers necessary for the preservation of evidence or assets and issue interim injunctive relief without the permission of the arbitral tribunal or the agreement of the other party (or parties) to the arbitration agreement.

Decision

Did the Arbitration Agreement apply?

The first issue for the Court to resolve was whether the Arbitration Agreement applied to the underlying dispute. If the Arbitration Agreement did not apply, the Court would not have jurisdiction under s44(3) to grant the relief sought.

The Licensees argued that, in order to determine whether the Arbitration Agreement was applicable here, the Court should apply the first of the two American Cyanamid guidelines - namely that the Arbitration Agreement would be applicable and the Court would be able to act under s44(3) if the Court considered that there was "a serious issue to be tried as to whether the dispute fell within the Arbitration Agreement". Further, the Licensees argued that the question whether an arbitral tribunal has jurisdiction to determine a particular dispute is one for the arbitral tribunal itself to decide, and is not a question for the Court to determine finally in an interim relief application.

The OGA, on the other hand, submitted that the Court should simply consider the construction of the Arbitration Agreement and determine whether the dispute fell within its scope. The OGA argued that, applying well-known principles of construction, the effect of the Arbitration Agreement was to exclude expressly the dispute that arises in this case from the scope of the arbitration provision the claimants rely on.

The Court agreed with the OGA and held that, as the applicability of the Arbitration Agreement would ultimately determine its jurisdiction under s44(3) to make the order sought by the Licensees, this was a question that it would "normally decide rather than treating it as dependent on whether there is a serious issue to be tried". In reaching this conclusion, the Court noted that the issues in this case were akin to those which would arise in respect of an application for a stay under s.9 of the Act, and considered that for applications under s.9 of the Act, it has consistently been held that the court lacks jurisdiction to order a stay unless (i) there is a valid arbitration agreement and (ii) the relevant dispute is to be referred to arbitration under that arbitration agreement.

In construing the Arbitration Agreement, the Court concluded that the underlying dispute fell within the proviso in Clause 43(1) that excluded certain types of disputes, and, as such, the dispute fell outside the scope of the Arbitration Agreement. The Court considered that it was "plain that the decision [details removed and reproduced in a confidential schedule by agreement between the parties] is a “… matter or thing …” to be decided by the OGA because the power [details removed and reproduced in a confidential schedule by agreement between the parties] is expressly conferred on the OGA by [the Licence]". As a result of this finding, the Licensees' application under s.44(3) of the Act failed.

Treating their application as one for interim relief in a judicial review claim

The Court recalled that, in judicial review proceedings, the test that must be satisfied for the granting of an interim injunction is a "modified version of the test set out in American Cyanamid", requiring the Court to determine "whether there is a serious issue to be tried and then whether the balance of convenience requires an order to be made on the terms sought".

As the OGA accepted that there was indeed a 'serious question to be tried' the Court proceeded to consider the second limb of the test i.e. whether the 'balance of convenience' required it to make the order sought by the Licensees. In the context of judicial review, he noted that this limb had to be modified in order to take "account of the interests of the public generally."

The Court accepted that the Licensees risked suffering "serious and irreparable harm" if the OGA were to publish the Notice "to the third parties identified by the OGA in the form that the OGA presently intended to publish it", highlighting that it was "not a neutrally-phrased invitation for submissions from interested parties". The Court further noted the potential unfairness of the Licensees sustaining "avoidable commercial damage" before having had the opportunity to address the issues in the Notice within the timescale which had been unilaterally set by the OGA. Weighing this against the potential harm to the public presented by the concerns expressed about the Licensees' conduct, the Court concluded that the balance of convenience lay "firmly in favour of granting the injunction". Therefore, the Court granted the injunction, subject to the Licensees undertaking to commence judicial review proceedings within three days.

Comment

The Court's decision clarifies that when considering whether it has jurisdiction to grant an order under s.44(3) of the Act, the Court will determine if the underlying dispute is within the scope of the arbitration agreement.

While the English courts may not have the jurisdiction under s44(3) to grant relief for other reasons, parties will need to be confident that the underlying dispute falls within the scope of their arbitration agreement (especially where the arbitration agreement expressly excludes certain types of dispute) as well as satisfying the other statutory requirements.

For more information, please contact Craig Tevendale, Partner, Vanessa Naish, Professional Support Consultant or your usual Herbert Smith Freehills contact.

The authors would like to thank Rahul Prakesh and Luke Hard for their assistance in preparing this blog post.