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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS 253 of 2019
BETWEEN:
LASCO DEVELOPMENT (15) LIMITED
Plaintiff
AND:
TOTAL E & P PNG LIMITED
First Defendant
AND:
EXXONMOBIL PNG ANTELOPE LIMITED
Second Defendant
AND:
EXXONMOBIL PNG ELK LIMITED
Third Defendant
AND:
PAC LNG ASSETS LIMITED, PAC LNG INTERNATIONAL LIMITED, PAC LNG INVESTMENTS LIMITED, PAC LNG OVERSEAS LIMITED, PAC LNG HOLDINGS LIMITED
Fourth to Eighth Defendants
AND:
EXXONMOBIL PNG LIMITED
Ninth Defendant
AND:
Hon. Dr. FABIAN POK in his capacity as Minister for Petroleum
Tenth Defendant
AND:
DAVIS STEVEN, Attorney General, as nominal defendant pursuant to s. 3 Claims By and Against The State Act for the Hon. Sir Robert Dadae, in his capacity as Governor General of Papua New Guinea
Eleventh Defendant
AND:
INDEPENDENT STATE OF PAPUA NEW GUINEA
Twelfth Defendant
Waigani: Hartshorn J.
2019: 7th June
: 19th July
Application for a stay of proceedings pending an arbitration
Cases Cited:
Delta Constructions Pty Ltd v. Administration of the Territory of Papua New Guinea [1965-66] PNGLR 381
Mauga Logging Co Pty Ltd v. Okura Trading Ltd [1978] PNGLR 259
Huon Electrical Ltd v. RD Tuna Cannery Ltd (2000) N2005
Rustproof Ltd v. Eastpac (2015) N7038
Cape Distribution Ltd v. Cape Intermediate Holdings Plc [2016] EWHC 119 Kumul Consolidated Holdings v. Kurkuramb Estates Limited (2017) N7429 Independent State of Papua New Guinea v. Independent Timbers & Stevedoring Ltd (2018) N7700
Counsel:
Mr. M. Goodwin, for the Plaintiff
Mr. A. Edo, for the First Defendant
Mr. I.R. Molloy and Mr. D. Hill, for the Second, Third and Ninth Defendants
Mr. A. Mana, for the Fourth to Eighth Defendants
19th July, 2019
1. HARTSHORN J. This is a decision on a contested application for a stay of proceedings pending an arbitration.
Background
2. The plaintiff (Lasco) submits that the facts are amongst others that:
a) Interoil Corporation (Interoil) was granted 100% ownership in several petroleum prospecting licences (PPL’s) in Papua New Guinea;
b) Under an Amended and Restated Indirect Participation Agreement dated 25th February 2005 (2005 IPI Agreement), in exchange for investment funds, Interoil gave rights in PPL’s to investor parties;
c) In November 2010 Petroleum Retention Licence 15 (PRL 15) was issued and is covered by the 2005 IPI Agreement;
d) Interoil consented to investor parties converting their interests in PRL 15 from indirect participation to direct licence interests. Lasco now holds and has the right to register a 0.5% license interest in PRL 15;
e) ExxonMobil PNG Ltd succeeded to Interoil’s rights and obligations. ExxonMobil PNG Ltd disputes this and says that ExxonMobil Canada Holdings ULC (ExxonMobil Canada) succeeded to Interoil’s rights and obligations;
f) Lasco unsuccessfully requested Interoil/ExxonMobil’s assistance to register its 0.5% interest;
g) Lasco had its interest registered on the Oil and Gas Register, but this registration has been removed.
h) Lasco commenced this proceeding by originating summons and seeks amongst others a declaration that its 0.5% interest in PRL 15 be registered on the Oil and Gas Register and that the interest of ExxonMobil PNG Antelope Limited, the second defendant, in PRL 15, be reduced. A mandatory injunction requiring Lasco to be included in certain agreements for the Papua LNG project is also sought;
i) Two weeks after this proceeding was commenced, ExxonMobil filed competing proceedings in Texas, USA and seeks to enjoin Lasco and the two antecedent Lasco entities which funded and nominated Lasco in an arbitration in Texas, USA;
j) ExxonMobil also filed a Demand for Arbitration on 22nd April 2019 with the International Center for Dispute Resolution office in Houston, Texas;
k) The second, third and ninth defendants (referred to as applicants or ExxonMobil Parties) on 23rd April 2019 filed an application to stay this proceeding until determination of legal proceedings and arbitration proceedings in Texas, USA, claiming that the parties to the 2005 IPI Agreement have agreed to the determination of one issue relevant to this matter in that jurisdiction. Lasco objects to this application.
This application
3. This application is by the ExxonMobil parties and is supported by the other defendants which made an appearance. It is for a stay of proceedings pending an arbitration proceeding commenced pursuant to section 14.10 2005 IPI Agreement. The application is principally pursuant to s.4 Arbitration Act Chapter 46.
4. Lasco opposes the application on the grounds that:
a) The United States proceedings are in direct conflict with s. 4 Compensation (Prohibition of Foreign Legal Proceedings) Act 1995 (PNG Compensation Act), which prohibits the taking or pursuing in foreign courts of legal proceedings or arbitration in relation to compensation claims arising from mining projects and petroleum projects in Papua New Guinea;
b) Papua New Guinea is not a signatory to the New York Convention under which the proceedings and arbitration in the United States is purported to be brought, and any judgment of the Court or arbitral award in the United States is unenforceable in Papua New Guinea;
c) The Houston Arbitration cannot be carried on under the Arbitration Act because that arbitration is to be carried on in Houston under Texas law and not under Papua New Guinea law. The applicant’s stay application is incorrectly brought under the Arbitration Act;
d) The appearance or notice of intention to defend of the applicants is unconditional. They have not filed a conditional appearance and sought to oust the jurisdiction. They have submitted to the jurisdiction of Papua New Guinea and this proceeding;
e) The arbitration clause in section 14.10 2005 IPI Agreement is not available to the defendants to invoke as the 2005 IPI Agreement was completely performed on registration of the transfer of the license interest of Lasco. The 2005 IPI Agreement was discharged by completion and no consideration under it remains executory;
f) Lasco is not a party to the 2005 IPI Agreement and the United States proceedings and arbitration are not properly brought against Lasco. Lasco has standing as the license interest holder to bring this proceeding in Papua New Guinea on a broader range of issues including licensing regulatory issues exclusive to Papua New Guinea;
g) The claimant in the United States proceedings and arbitration has no standing to bring an action in the United States or elsewhere. ExxonMobil Canada has suffered no loss in this matter and no longer has the right to consent to conversion and registration of any license interest in PRL 15. Any action contemplated in the United States should have been brought in the name of the current licence holders of PRL 15, and ExxonMobil Canada has no standing to claim any relief in any jurisdiction in this matter;
h) Section 14.6 2005 IPI Agreement does not give the State of Texas in the United States exclusive jurisdiction, and it is merely a non-exclusive jurisdictional provision which does not exclude the current proceedings in Papua New Guinea;
i) Based on the principles of Forum Non Conveniens, Texas, United States is not the appropriate forum to have this matter adjudicated, and the Papua New Guinea National Court is the only appropriate venue for the hearing of this matter;
j) The actions complained of are in essence executive actions of the Papua New Guinea Government at the request of the defendants.
Mandamus will follow if the Government does not recognise the rights as declared. The cancellation action, being an executive action
of the Government of Papua New Guinea is not amenable to orders of a foreign court under international conflicts of law principles.
Consideration
5. The first consideration is whether the arbitration proceeding to which the applicants refer in their application offends against the PNG Compensation Act. The application is stated to be brought pending an arbitration proceedings and not any other proceedings.
6. Lasco submits that amongst others, the arbitration is in direct conflict with s. 4 PNG Compensation Act as it fall within the definitions of “compensation claim” and “compensation proceedings” in a “foreign court”, Lasco has not submitted to the jurisdiction of the United States Court or arbitration, and any judgment of the United States Court or arbitration is unenforceable in Papua New Guinea.
7. The applicants submit that the PNG Compensation Act has no application to the arbitration proceedings commenced by ExxonMobil, the proceedings do not involve a “compensation claim” and are not brought in a “foreign court”. Alternatively, the parties have expressly agreed in writing to the forum.
8. Section 4(1) PNG Compensation Act is:
“4. Prohibition of compensation proceedings in a foreign court.
(1) Subject to this section, no compensation proceedings may be taken or pursued in a foreign court.”
9. Section 3 PNG Compensation Act provides for certain definitions, “unless the contrary intention appears-”. “compensation proceedings” is relevantly:
“means any proceedings for or in pursuance of a compensation claim before any court, forum or other tribunal ...”
10. Section 3 defines “compensation claim” as follows:
“means any claim, demand, suit or right of action (and whether based upon tort or any other wrong or liability whatsoever) in connection with or purportedly or allegedly in connection with—
(a) a mining project; or
(b) a petroleum project,
and which relates to or concerns—
(c) disposal of overburden, tailings, petroleum, produce water or other waste; or
(d) pollution; or
(e) effects upon the environment; or
(f) any effects upon or loss, taking, acquisition, forfeiture, extinction or determination of, or of possession of, any property, and whether or not that claim, demand, suit or right of action—
(g) extends to any other matter; or
(h) seeks—
(i) the payment of damages, compensation or any other form of monetary relief; or
(ii) any form of non-monetary relief; or
(iii) any combination of the forms of relief referred to in Subparagraphs (i) and (ii); or
(i) arose, was commenced or relates to circumstances existing—
(i) before the coming into operation of this Act; or
(ii) at any time after the coming into operation of this Act,
and for the purposes of this definition "pollution" and "environment" have the meaning given to them respectively in Section 3 of the Environmental Contaminants Act (Chapter 368);”
11. To fall within the definition of “compensation claim”, a claim must fall within 3(a) or 3(b) and then within one of either 3(c), 3(d), 3(e) or 3(f). When 3(f) is considered, it is to be noted that the words, “....and whether or not that claim, demand, suit or right of action-”, introduce and qualify 3(g), 3(h) and 3(i), and so 3(g), 3(h) and 3(i) are not equal alternatives to 3(c) to 3(f). That this is so is indicated by the words, “...claim, demand, suit or right of action...” in 3(f) mirroring and referring to those same words in the first line of the definition.
12. In addition, if 3(g), 3(h) and 3(i) were equal alternatives to 3(c) to 3(f), they should make sense if read separately as one sentence. For instance, 3(c) would read “relates to or concerns disposal” and 3(d) would read “relates to or concerns pollution”. If 3(g), 3(h) and 3(i) are read separately as one sentence however, they do not make sense. 3(g) would read “relates to or concerns extends”, 3(h) would read “relates to or concerns seeks” and 3(i) would read “relates to or concerns arose”. This supports 3(g), 3(h) and 3(i) not being equal alternatives to 3(c) to 3(f) and that 3(g), 3(h) and 3(i) are introduced and qualified by 3(f). Consequently, 3(g), 3(h) and 3(i) do not apply independently to a claim which falls within 3(a) or 3(b) and then within 3(c) to 3(f).
13. Sub paragraphs 3(c) to 3(f), with which the claim must “relate to or concern”, to fall within the definition of a “compensation claim”, are matters concerned with disposal of waste, pollution, environmental damage or the loss, taking or destruction of property. The dispute between Lasco and the ExxonMobil parties does not relate to or concern the subject of 3(c) to 3(f). As submitted by the ExxonMobil parties, the relief claimed in Part V of the Demand for Arbitration filed by ExxonMobil on 22nd April 2019 is declaratory relief as to contractual rights and liabilities under the 2005 IPI Agreement (annexure SA-F, S. Alopea 23/3/19).
14. I am satisfied that the Demand for Arbitration does not fall within any of 3(c), 3(d), 3(e) or 3(f) PNG Compensation Act and therefore does not fall within the definition of “compensation claim”. As it does not fall within “compensation claim”, it does not fall within the definition of “compensation proceedings” and so s. 4(1) PNG Compensation Act does not apply to the arbitration proceedings commenced by ExxonMobil. Given this finding it is not necessary to consider the other submissions concerning the PNG Compensation Act.
Section 4 Arbitration Act
15. Section 4 Arbitration Act is as follows:
4. Power to stay proceedings where there is submission.
(1) If a party to a submission, or a person claiming through or under him, commences legal proceedings in any court against another party to the submission, or a person claiming through or under him, in respect of a matter agreed to be referred, any party to the proceedings may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to that court to stay the proceedings.
(2) If the court to which application is made under Subsection (1) is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission, and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary for the proper conduct of the arbitration, it may make an order staying the proceedings.
16. The applicants submit that s. 4(1) imposes four pre-conditions which must be satisfied for the court to have jurisdiction to grant a stay. They are that:
a) the arbitration agreement be in writing (this follows from the definition of “submission” in s. 1);
b) the parties to the proceedings are parties to the arbitration agreement (or claiming through or under parties to the agreement);
c) the dispute in the proceedings is a dispute covered by the arbitration agreement; and
d) a party seeking a stay makes the stay application after appearance but before delivering pleadings or taking any other step in the proceedings.
17. Assuming jurisdiction, s. 4(2) Arbitration Act refers to two matters that the court is to consider in exercising its discretion whether to stay the proceedings, namely that:
a) “there is no sufficient reason” why the dispute “should not be” arbitrated; and
b) the applicant for the stay has been ready and willing to arbitrate over the identified period.
18. I consider whether the pre-conditions have been satisfied.
First pre-condition
19. The arbitration clause upon which the ExxonMobil parties rely is in the 2005 IPI Agreement. Section 14.6 2005 IPI Agreement provides:
“Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas U.S.A, without giving effect to any conflicts of laws provisions thereunder.”
20. Clause 14.10 (a) provides:
“Dispute Resolution
On the request of any party hereto, whether made before or after the institution of any legal proceeding, any action, dispute, claim or controversy of any kind now existing or hereafter arising between any of the parties hereto in any way arising out of, pertaining to or in connection with this Agreement (a “Dispute”) shall be resolved by binding arbitration in accordance with the terms hereof. Any party may, by summary proceedings, bring an action in court to compel arbitration of any Dispute.”
21. As submitted by the ExxonMobil parties, clause 14.10 (b), (c), (d) and (e) 2005 IPI Agreement provide, amongst others, for the arbitration to be administered by the American Arbitration Association (“AAA”), for the arbitration to be conducted in Houston, Texas and to the maximum extent practicable, for the arbitration to be concluded within 180 days of the filing of the Dispute with the AAA.
22. I am satisfied that the first pre-condition is satisfied.
Second pre-condition
23. The ExxonMobil parties submit that the parties to this proceeding, specifically Lasco and the ExxonMobil parties, claim or defend through or under parties to the arbitration agreement. The evidence to this effect is contained in the affidavit of Mr. Mulacek and in the two affidavits of Ms. Alopea. Further, it is submitted that it is not necessary that every party to the proceeding be a party to the arbitration agreement before the court will grant a stay. The case of Brazis v. Rosati [2014] VSC 385 is cited in this regard.
24. From a perusal of the evidence and specifically the affidavits of Mr. Mulacek and Ms. Alopea I am satisfied that the parties to this substance of the dispute and Lasco’s principal claim in this proceeding are parties to the arbitration agreement or claim or defend through or under parties to the arbitration agreement.
Third pre-condition
25. As to whether the dispute in this proceeding is a dispute covered by the arbitration agreement, the ExxonMobil parties submit that the Demand for Arbitration made by ExxonMobil Canada, disputes that the Lasco parties have rightfully converted their IPI percentage to a registered legal interest in PRL 15, or have a participation interest under the relevant Joint Venture Agreement. Further, section 14.10 2005 IPI Agreement is in wide terms, and it plainly covers the dispute which is at the heart of this court proceeding. I concur with this submission and from a perusal of the affidavit evidence of Mr. Mulacek and Ms. Alopea, I am satisfied that the dispute relates to the rights of Lasco under the 2005 IPI Agreement.
Fourth pre-condition
26. I am satisfied that the ExxonMobil parties have brought their application for a stay without delay and before taking any other step in the proceeding other than entering an appearance.
27. Consequently, having found that the four pre-conditions have been satisfied, I now consider the two matters which s. 4(2) Arbitration Act requires the court to consider in exercising its discretion whether to stay the proceeding.
No sufficient reason
28. Two earlier cases in this jurisdiction recognised the tendency of the courts to stay a proceeding once a dispute fell within an arbitration clause. In Delta Constructions Pty Ltd v. Administration of the Territory of Papua New Guinea [1965-66] PNGLR 381, referred to in Rustproof Ltd v. Eastpac (2015) N7038 at [23], it was held that once an applicant has established that the dispute falls within an arbitration clause, the tendency of the courts is to stay the proceeding unless the party opposing the stay can show cause to the contrary.
29. Then in Mauga Logging Co Pty Ltd v. Okura Trading Ltd [1978] PNGLR 259, Kearney J said:
“The conditions precedent being satisfied, I come to the question of the exercise of discretion to stay. Prima facie, in the circumstances
which here obtain, the Court tends to stay an action, and leave the plaintiff to the tribunal he chose by his contract: Willesford
v. Watson per Lord Selborne L.C. This prima facie position is strengthened, as the submission contemplated appears to be to a foreign
arbitral tribunal: Radio Publicity (Universal) Ltd. v. Compagnie Luxembourgeoise de Radiodifusion. The burden for showing cause why
effect should not be given to the agreement to submit, is upon the plaintiff: Vawdrey v. Simpson. I can see no reason why the action
should not be stayed.”
30. In Huon Electrical Ltd v. RD Tuna Cannery Ltd (2000) N2005, Sakora J stated:
“The second point to make is that Contract containing the Arbitration Clause (supra) is an agreement, a mutual agreement at that, between the parties. It is, therefore, no function of the Court to write up new contracts for the parties, as it were. The Court's function is only to interpret the contract, according to law, to determine what was it that the parties intended and entered into, and with what legal consequences, if any. Thus, to accede to the plaintiff's application would be to, in the first place interfere with the parties contract...”
31. Following on from the statement that the court’s function is amongst others, to determine what the parties intended, I reproduce the following persuasive passage from Cape Distribution Ltd v. Cape Intermediate Holdings Plc [2016] EWHC 119:
“Where the parties have expressed their agreement in a written document, the primary source of information about the agreement and
the parties’ intention is the document itself. What the parties meant is most obviously to be gleaned from the language of
the provision because, unlike commercial common sense and the surrounding circumstances, the parties have control over the language
they use in a contract. Again save perhaps in a very unusual case, the parties must have been specifically focusing on the issue
covered by the provision when agreeing the wording of that provision: Arnold at [17] per Lord Neuberger. Thus, where the parties
have used unambiguous language, the court has to apply it (Rainy Sky at [23] per Lord Clarke) and if the words used yield a fairly
clear solution, then a court should pause long before concluding that the draftsman has used words with a meaning that do not fit
the objective he was seeking to attain ...”
32. The above passage was reproduced in Kumul Consolidated Holdings v. Kurkuramb Estates Limited (2017) N7429 at [12] and Independent State of Papua New Guinea v. Independent Timbers & Stevedoring Ltd (2018) N7700 at [19].
33. I am satisfied that the dispute the subject of the proceeding falls within the arbitration clause and it is the intention of the parties to the 2005 IPI Agreement that in the event of a dispute, that they are to arbitrate pursuant to clause 14.10 (a) to (e) 2005 IPI Agreement. This intention to my mind, overcomes and is a sufficient answer to the various grounds of objection raised by Lasco, apart from the PNG Compensation Act ground which has already been considered, I am satisfied that there is no sufficient reason why this matter should not be arbitrated in accordance with clause 14.10 (a) to (e). Further, upon a consideration of the evidence, I am satisfied that the ExxonMobil parties and the party through whom they derive their rights, were and remain ready and willing to do all things necessary for the conduct of the arbitration.
34. Consequently, I am satisfied that the applicants are entitled to the relief sought.
Orders
35. The court orders that:
a) Pursuant to s. 4(2) Arbitration Act Chapter 46, Order 10A Rule 16 and Order 12 Rule 1 National Court Rules, it is ordered that this proceeding, being Originating Summons No. 253 of 2019 (Comm) filed 16th April 2019, is stayed pending the outcome of any arbitral proceedings commenced pursuant to Section 14.10 of the Amended and Restated Indirect Participation Interest Agreement (as amended);
b) The plaintiff shall pay the costs of the defendants which made appearance at the hearing of the application of and incidental to this application;
c) Time is abridged.
__________________________________________________________________
O’Briens: Lawyers for the Plaintiff
Ashurst: Lawyers for the First Defendant
Allens: Lawyers for the Second, Third and Ninth Defendants
Corrs Chambers Westgarth: Lawyers for the Fourth to Eighth Defendants
Solicitor General: Lawyers for the Tenth to Twelfth Defendants
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URL: http://www.paclii.org/pg/cases/PGNC/2019/200.html