Not necessary to keep the lights on: court rejects application for urgent relief and gives green light to arbitration

In Power and Water Corporation v ENI Australia B.V [2022] WASC 376 the Supreme Court of Western Australia has provided clarification on the use of ‘urgent relief’ clauses, which permit parties to an arbitration agreement to obtain urgent relief from a court.

A key takeaway of general application is that parties seeking urgent relief from a court, must establish that the relief sought is, in fact, urgent, and that there is a need to have the matter dealt with immediately by a court rather than proceeding to arbitration.

Background

Power and Water Corporation (PWC) is a statutory corporation which provides electricity and gas to consumers in the Northern Territory. PWC was party to a gas sale agreement with ENI Australia B.V (Eni). The agreement contained an arbitration clause, and also provided that either party could seek “urgent interlocutory or declaratory relief” from a court where “in that Party’s reasonable opinion, that action is necessary to protect that Party’s rights”.

Under the agreement, in the event of an issue affecting the supply of gas, PWC had a right to inspect Eni’s records relating to the disruption of supply. It was not in dispute that such a disruption had occurred. What was disputed was the scope of PWC’s right to access Eni’s records. PWC argued that it had been prevented from exercising its contractual rights by Eni. Eni’s argument was that the requests made by PWC were impermissibly broad.

PWC brought proceedings seeking urgent declaratory relief from the Court to the effect that Eni had breached the agreement, and orders “giving effect to that declaration” to enable access to the records it sought. Eni entered a conditional appearance to PWC’s proceedings and applied for a stay pursuant to s 8(1) of the Commercial Arbitration Act 2012 (WA).

Decision

PWC submitted that access to Eni’s records was urgent because, among other things, the disruption of gas supply could cause blackouts, or the imposition of other restrictive measures in the Northern Territory electricity market.

Eni argued that it was unclear how any inability to access Eni’s documentary records could lead to blackouts or the other consequences feared by PWC. While it accepted that the resolution of the gas supply issue may be urgent, the resolution of the access issue (and the need for declaratory relief) was not urgent.

The Court observed that in order to grant urgent relief, it had to be satisfied, among other things, that the relief sought was, in fact, urgent, and that must be determined objectively.

The Court agreed with Eni’s submissions. It was not satisfied that the right to inspect documents under the Agreement (ie the relief sought) was immediately and urgently needed.

To the extent that PWC’s case for urgent relief hinged on the threat to the electricity and gas markets in the Northern Territory and the uncertainty of PWC’s gas supply, the Court determined that the evidence fell short of demonstrating that making the declarations sought would (or could) provide PWC with any relief. The Court was not satisfied that PWC required further access to Eni’s records on an urgent basis.

The disconnect between the relief sought and the urgent circumstances relied on was a major difficulty with PWC’s application. However, there were additional factors relevant to the determination some of which are of more general application:

• the Court noted that PWC had delayed making the application (which tended to suggest its resolution was not urgent); and
• the Court determined that it was not certain that it could grant the requested relief faster than an arbitral tribunal since the application was not in the nature of a simple legal question that the Court could resolve quickly.

Ultimately, the Court refused PWC’s application, granted Eni’s stay and referred the parties to arbitration.

Comment

The decision exemplifies the deference given by Australian courts to the arbitral process, and the exceptional nature of requests needed to side-step arbitration agreements. The Court was clear that an ‘urgent relief’ clause could only be relied upon where there was substantive and unambiguous evidence of genuine urgency, and a connection between that urgency and the relief sought.

Further, the decision gave short shrift to the submission that arbitration is necessarily a more lengthy process than traditional court litigation. While there may be circumstances in which a court can determine a question more quickly than an arbitral tribunal, in this case the Court found that there was no material difference between the expected speed of the Court vs an arbitral tribunal.

For more information, please contact Elizabeth Macknay, Partner, Timothy Goyder, Senior Associate, Inigo Kwan-Parsons, Solicitor, Samara Cassar, Solicitor, or your usual Herbert Smith Freehills contact.

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