Court declines to grant anti-anti-arbitration injunction in oil storage dispute

Court declines to grant anti-anti-arbitration injunction in oil storage dispute

Euronav Shipping NV -v- Black Swan Petroleum DMCC (Oceania) [2024] EWHC 896 (Comm)

This recent decision arose out of an agreement to store a cargo of crude oil on board Euronav’s vessel that was anchored at a port in Malaysia. Euronav subsequently surrendered the cargo to the US Department of Justice pursuant to a US court seizure warrant issued on the ground that this was a sanctioned cargo. 

The issue was whether the resulting claims as between Euronav and the cargo owners were to be resolved in London arbitration or Malaysian court proceedings. The English Court decided that while it was probable that there was an arbitration agreement between the parties, nonetheless it should not exercise its discretion at this stage to grant injunctive relief directed at the Malaysian court proceedings brought by the cargo owners for, among other reasons, issues of comity.  

The dispute is a sobering reminder of the difficulties of successfully obtaining an anti-suit injunction or similar relief from the English Court where jurisdiction under the applicable contract(s) is not necessarily clear and where both parties’ conduct suggests a voluntary submission to a foreign jurisdiction.

The background facts

The case involved an inter partes application by Euronav for an anti-anti-arbitration injunction made in support of existing English LMAA proceedings.

Euronav’s case was that the claims by it against the defendants, Black Swan Petroleum (BSP), and conversely by BSP against Euronav – which concerned a cargo of crude oil that was stored on board a vessel owned by Euronav - were subject to LMAA arbitration under an arbitration agreement applicable to the parties’ relationship by reason of a sub-bailment on terms concerning the consignment of the subject crude oil. 

Euronav relied on the following: 

1. A storage contract dated 20 March 2023 between Euronav and Silk Straits SDN BHD, an addendum to which included the London seated arbitration agreement;
2. A further agreement between Silk Straits and BSP dated 23 March 2023, whereby BSP was to be permitted to store fuel or crude oil on the vessel; and
3. The relationship of sub-bailment in relation to the cargo which therefore arose between Euronav and BSP on the terms of the applicable agreement between Euronav and Silk Straits referred to at (1) above. 

BSP opposed Euronav’s application on the grounds that its claims were to be resolved by the High Court of Malaysia; that there was no relevant arbitration agreement that applied between the parties; and that BSP’s conduct in respect of those proceedings in Malaysia were neither vexatious nor oppressive so as to entitle Euronav to the injunction. 

BSP also argued that the injunction should not be granted as a matter of discretion because of its impact on the comity of the English High Court with the High Court of Malaysia and/or because Euronav had voluntarily submitted to the jurisdiction of the High Court of Malaysia and/or Euronav’s delay in commencing these proceedings.

In terms of the sub-bailment relationship between BSP and Euronav, BSP argued that the relationship was for reward, not ‘on terms’ per se, and therefore it was not bound by the arbitration agreement which existed in the storage contract dated 20 March 2023. 

Procedural history 

On 14 September 2023, BSP commenced proceedings against Euronav before the High Court of Malaysia by obtaining an arrest warrant for the vessel.

On 19 September 2023, Euronav commenced its claims against BSP in London arbitration on the basis that its inability to deliver the cargo to Silk Straits or BSP was caused by BSP’s breach of the terms of the sub-bailment. Among other arguments relied on was the fact that the storage agreement prohibited the client from presenting cargo that they knew or ought to have known was sanctioned.

On 26 October 2023, Euronav applied to the High Court of Malaysia for an order staying or striking out the claim in the Malaysian proceedings or, alternatively, for a stay under the Malaysian Arbitration Act on the basis that any dispute concerning the cargo had to be resolved in the LMAA arbitration. That application was dismissed, with the Court concluding that by applying to strike out the Malaysian proceedings, Euronav had voluntarily taken a step in the proceedings and so was precluded from seeking a stay in favour of arbitration under the Malaysian Arbitration Act. That decision would remain binding on the parties unless it was overturned by the Malaysian Court of Appeal.

Nevertheless, Euronav sought to pursue the London arbitration. BSP then sought and obtained an anti-arbitration injunction order (AAI) from the High Court of Malaysia to restrain Euronav’s pursuance of the London arbitration.

In turn, Euronav then sought the subject anti-anti-arbitration injunction (AAAI) from the  English Court, seeking the discontinuance of the AAI Order in Malaysia, on the basis that BSP’s procurement of the AAI Order was a breach of the arbitration agreement in the storage contract dated 20 March 2023. 

BSP argued that it was not a breach but, even if it was, the Court should in its discretion decline to grant an AAAI on the grounds of comity, voluntary submission and delay.

The Commercial Court decision 

On the evidence, the Court thought that there was a high degree of probability that Euronav would establish in the LMAA proceedings that there was a binding arbitration agreement and also a sub-bailment on terms as between Euronav and BSP. On the face of it, therefore, there was a breach of the arbitration agreement.

However, the Court found that it was not appropriate to grant the order sought by Euronav at this stage because this would result in duplicative proceedings. In addition, Euronav had voluntarily submitted to the jurisdiction of the Malaysian Court and it was, therefore, vexatious and oppressive for Euronav to seek the AAAI from the English Court and to pursue the London arbitration. Rather than engaging substantively with the Malaysian proceedings, Euronav should simply have applied promptly to the English Court for the AAAI.

In those circumstances, BSP was fully entitled to seek and obtain the AAI from the Malaysian Court and to rely on it unless and until the Malaysian Court of Appeal overturned the decision of the High Court of Malaysia on the voluntary submission issue. Therefore, the AAAI application was adjourned, pending the Malaysian Court of Appeal decision.

Comment

The decision offers compelling guidance to those dealing with anti-suit/anti-arbitration injunctions generally and in particular where there is a ‘conflict’ between arbitration and court proceedings in separate jurisdictions. 

It also highlights the importance of not taking any steps in court proceedings that can amount to voluntary submission to the jurisdiction of that court and that impact on the availability of an anti-suit injunction from the English Court. What may or may not amount to a voluntary submission for these purposes may differ from jurisdiction to jurisdiction and from case to case. 

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