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This is a commentary on the judgement published today by Mrs Justice Gloster in the Excaliber versus TKI and GKP case. Her judgement explains the decisions that she made on 8th April.

Background

The judgement sets out in considerable detail the background to the dispute. In essence Excaliber asserts that not only TKI but also the 3 Gulf Keystone companies owe it a share of their assets as a result of the contract between Excaliber and TKI dated 16th Feb 2006.

Excaliber further asserts that the proper forum to try this issue is the International Court of Arbitration (ICC) in New York. The ICC had said that it would hear the claim of Excaliber against both TKI and also against the 3 Gulf companies. Today’s judgement mainly concerns preliminary matters but it gives a very good insight into many of the substantive matters that the court will eventually have to decide.

Summary of the Court’s conclusions:

1) Could the Gulf companies get an injunction to stop Excaliber from forcing them to submit to arbitration in New York under the contract between Excaliber and TKI? The judge says YES and has issued an order banning Excaliber from continuing arbitration proceedings against the 3 GKP companies for the time being.

2) Which jurisdiction should try the issue of whether the Gulf companies are party to the NY arbitration proceedings between Excaliber and TKI. The Judge has decided that her own court is the appropriate tribunal and not the arbitration tribunal in New York.

3) On application from Excaliber, should the High Court stop the further proceedings initiated by Excaliber in the English courts? The Judge says NO. This means that the Court has said that it should try the substantive issues against GKP.

Now we know some more of the background.

The story seems to be that Excaliber became aware that the KRG wanted to issue licenses to explore for oil. But as it knew that it did not have the expertise to obtain a license on its own it brought in TKI and together they reached agreement to collaborate on a bid for a license (Excaliber 30%, TKI 70%). However at an early stage the KRG made it clear that any party to a license bid would have to have oil industry expertise and financial strength. This became Kurdish law in 2007.

So when it came to actually bidding for the Shaikan license, the group that bid was TKI, GKP and MOL.

Excaliber appears to be contending that it was unfairly cut out of the licences and that by virtue of its collaboration agreement with TKI it should have 30% of not only TKI’s Kurdish assets but also 30% of GKP’s Kurdish assets. Excaliber also contends that dishonesty and fraud was involved in depriving it of its rightful entitlements.

TKI and GKP contend that Excaliber could never have been a party to a PSC because it did not meet the KRG’s clearly stated criteria and that therefore the collaboration agreement between TKI and Excaliber was dissolved either by Force Majeure or by one of the other contract clauses referred to in the judgement which allowed a partner to be dropped if the partner was not able to meet the criteria for a license.

TKI says it bent over backwards to assist Excaliber by offering it a farm in deal to Shaikan but that the KRG did not agree to a farm in for Excaliber. TKI and GKP will say (I suspect) that this is proof positive that Excaliber was not an acceptable PSC party to the KRG.

So there are two separate issues. Firstly does Excaliber have a valid claim against TKI and secondly does it have a valid claim against GKP?

The main problem Excaliber has in establishing a claim against TKI is that by its own evidence it had neither the oil industry expertise nor the financial strength to become a partner in a PSC. In my view the Judge drops numerous hints that she does not think that Excaliber has a strong claim even against TKI. But this claim will be tested in arbitration in New York because TKI has agreed to ICC arbitration.