The recent decision of the High Court in Euronav Shipping NV v Black Swan Petroleum DMCC [2024] EWHC 896 (Comm) illustrates when a party may be unable to enforce an arbitration agreement which is otherwise valid and enforceable. In the present case, Euronav succeeded in satisfying all of the elements of the test for an injunction which sought to restrain Black Swan Petroleum (BSP) from pursuing an anti-arbitration application before the Malaysian Courts. Nevertheless, in the exercising its discretion, the Court declined to award an injunction having regard to international comity and because it deemed that it would be vexatious and/or oppressive given the applicant’s earlier submission to Malaysian court jurisdiction. The case is a cautionary reminder of the need to pursue a carefully considered dispute resolution strategy.
Facts
The applicant, Euronav, a firm involved in ocean transportation and storage of oil, entered into a contract with a Malaysian registered company, Silk Straits SDN BHD (Silk Straits), by which it made available certain tanks on the Motor Tanker Oceania (the Vessell) for storage of oil. A first addendum to the agreement provided for English governing law and exclusive jurisdiction of the English High Court, and recorded Euronav’s consent to prospective assignment by Silk Straits of its rights under the agreement to any third parties. A second addendum was prepared but never signed (Addendum 2). It contained a dispute resolution provision requiring arbitration of disputes in accordance with the CEPANI Rules of Arbitration and English governing law.
Silk Straits and BSP entered into an agreement dated 23 March 2023 by which BSP was permitted to store fuel or crude oil on the Vessell (the BSP Agreement). On 28 March 2023, BSP transferred a cargo of crude oil (the Cargo) onto the Vessell. Prompted by a report from United Against Nuclear Iran (UANI), Euronav undertook an investigation which concluded that the bill of lading for the Cargo was probably forged and that the Cargo’s provenance was the National Iranian Oil Company and the Islamic Revolutionary Guard Corps Quds Force, both of which are sanctioned under US law. On 3 July 2023, the cargo was surrendered to the US Department of Justice.
In the following months, BSP commenced suit in Malaysia while Euronav started arbitration proceedings in London. Euronav sought to strike out the Malaysian proceedings. Importantly, the Malaysian High Court ruled that by seeking strike out, Euronav had taken a step in the proceedings by which it had submitted to the jurisdiction of the Malaysian Courts. Euronav appealed this ruling to the Malaysian Court of Appeal.
On 29 December 2023, BSP issued an anti-arbitration application in the High Court of Malaysia and notified the London tribunal that it had done so. On 7 February 2024, the High Court of Malaysia issued an order restraining Euronav from continuing with the London Arbitration until its appeal to the Malaysian Court of Appeal had been determined, and from commencing any new arbitration in connection with the dispute (the AAI Order).
The question before the English High Court was whether to grant Euronav’s application for an injunction requiring BSP to take steps to set aside the AAI Order and, in the meantime, not enforce it.
Determination
The threshold question was whether, to a “high degree of probability”, there was an arbitration agreement governing the dispute. This boiled down to two questions: (1) whether Addendum 2 had been contractually agreed as between Euronav and Silk Straits; and (2) whether a sub-bailment had come into effect between Euronav and BSP on the terms of Addendum 2. On both, Judge Pelling found in favour of Euronav.
With respect to the first issue, admittedly there were facts suggesting that Addendum No 2 had not been agreed: (i) the document provided that the parties were to consent to it by signing (neither did); and (ii) it was sent by Euronav to Silk Strait’s representatives who merely gave (what seemed to be) an acknowledgment of receipt (“Good day, the addendum well received”). Nevertheless, Judge Pelling looked to the wider context and conduct of the parties: there was no evidence of the parties reserving their rights or referring to ongoing negotiations and the parties had proceeded to act in accordance with the terms of Addendum 2.
However, the court declined to exercise its discretion to award Euronav an injunction for two reasons. First, that to grant the injunction would be at odds with the decision of the Malaysian High Court that Euronav had submitted to Malaysian jurisdiction: the order sought if granted would “would impact on the comity between the English and Malaysian courts in a manner that is inappropriate”. Second, granting the injunction would give rise to parallel proceedings (one, before the London Tribunal, and the other, Euronav’s appeal to the Malaysian Court of Appeal) which would give rise to a risk of inconsistent judgments and race to judgment.
A subsidiary, but still important factor was that Euronav had “voluntarily” submitted to the Malaysian courts’ jurisdiction in seeking summary dismissal of BSP’s claim. Yet, on the other hand, having failed to obtain that summary judgment it then sought to resist (and did resist) BSP’s application for the Tribunal to rule on jurisdiction as a preliminary issue. In Judge Pelling’s view, this made it “vexatious and oppressive” for Euronav to seek determination of essentially the same issues in the arbitration that it had sought determined in its favour in Malaysia.
Conclusion
At some level, Euronav had sought to ‘have its cake and eat it’: it could not seek strike out in the Malaysian Courts and at the same time claim that the London Tribunal had exclusive jurisdiction to determine its dispute with BSP. However, the primary factor in Pelling’s decision was ensuring comity between English and Malaysian courts.
This case serves as a reminder that parties engaged in contentious matters which span multiple jurisdictions should ensure that they plan appropriately and think carefully about the impact of any steps that they take which may result in them being found to have submitted to a disfavoured jurisdiction.
