Role of English courts in Foreign Proceedings

October 2014

The oil and gas sector has seen a fair share of disputes owing to its international and multifaceted character.

Recent statistics from the International Centre for Settlement of Investment Disputes (‘ICSID’), indicate that in 2013 disputes in the Oil, Gas and Mining sector account for 25% of all newly registered cases.

Most of the disputes are complex, high value and involve numerous jurisdictions.

Many businesses operating in this sector routinely enter into contracts with entities domiciled or registered in numerous countries and are often subject to the jurisdiction of the local courts where particular projects are executed.

The reality may be that in the event of a dispute the local courts may not be fully equipped to deal with the dispute.

There are a myriad of reasons for this some of which may include local courts lacking a sophisticated legal environment in place to fully protect the interests of the parties to a dispute; difficulties in enforcing local judgments abroad; the inability to grant particular types of relief sought by the parties and so on.

By way of example, the UAE is a well established forum in which international cases are litigated. However, despite its good commercial reputation, courts do not have the arsenal of weapons available to them as those available to English courts. As such, UAE courts do not have the ability to make a worldwide freezing order or to engage a procedure to execute, for example, a UAE attachment order outside the UAE.

Similarly, French courts do not possess jurisdiction to grant a worldwide freezing order or, more importantly, a disclosure order. English courts do have the ability to make such orders.

As a result, litigants may wish to consider seeking interim relief from an English court where a wide range of interim relief measures can be applied for even if the substantive proceedings are litigated elsewhere.

The ability to seek relief from an English court can be of critical importance in the oil and gas industry given the desirability (and availability) of obtaining worldwide freezing orders in aid of commercial disputes litigated in jurisdictions where such a relief is not available.

The Law

Section 25 of the English Civil Jurisdiction and Judgments Act 1982 (as amended by the Civil Jurisdiction and Judgments Act 1982 (Interim Relief) Order 1997) grants the English court the power to grant interim relief in aid of substantive foreign proceedings.

The types of interim relief that are available to litigants include:

  • restraining orders;
  • search orders;
  • freezing orders (including worldwide freezing orders); and
  • disclosure orders.

The power of English courts to grant interim relief is not unfettered. As such, it will only be exercised once the court has carefully considered the facts of each case and has satisfied itself that on the basis of such facts, it is not “inexpedient” to grant the relief sought.

What may comprise “inexpedient” has not been defined in the 1982 Act nor does the Act provide any guidance as to what this may entail.

For such a determination, litigants will need to consider the extensive case law on this point.

This can be summarised as follows:

  1. It will generally be expedient to grant relief if the respondent is resident in England or has any other links with England (such as having an operational presence). If there is no such link then it may be necessary to establish some other compelling factor which may justify ordering the relief sought;
  2. It will generally be inexpedient to grant relief if the primary court (i.e. the court hearing the substantive proceedings) has the power to grant such relief but has elected not to exercise its power – by contrast, the fact that the primary court does not have jurisdiction or the power to grant relief will not in itself make it inexpedient for the English courts to grant such relief;
  3. It will normally be inexpedient to grant relief if it would interfere with the management of the case in the primary court or result in inconsistent orders being made across the jurisdictions;
  4. Where there is a high probability that a foreign defendant with tenuous links to the jurisdiction will disobey an order (or if there is no real sanction to enforce compliance) then it will normally be inexpedient to make far reaching orders against such a defendant

In addition to satisfying the expediency test, English courts must also consider whether the facts before it would warrant the relief sought if the substantive proceedings had been brought in England.

To this effect, an applicant is required to satisfy the requisite English legal standards. So, for example, in the case of a worldwide freezing order, an applicant will need to show that it has a good arguable case; that there are insufficient assets within the jurisdiction to satisfy the claim and that there is a real and significant risk of dissipation.

These requirements need to be met notwithstanding the fact that an applicant is able to meet the expediency test.

Our experience is that if presented with good, strong and reliable evidence that clearly spells out the need and urgency for an English court’s assistance it will consider granting relief in aid of substantive foreign proceedings.

At Quist we are able to offer expert guidance and representation based on our experience in this field.