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Commercial Court discharges interim order for specific performance of oil contract and determines the application of section 44 of the Arbitration Act 1996

VTB Commodities Trading v Antipinsky Refinery [2020] EWHC 72 (Comm)

On 31 January 2020, Lord Justice Phillips handed down judgment, discharging an interim mandatory order requiring the Defendant, Antipinsky Refinery, to supply substantial quantities of oil (worth several hundred million euros) to the Claimant, VTB.

VTB obtained the mandatory order at an ex parte hearing in April 2019, and subsequently made an application seeking the continuation of that relief.

Antipinsky submitted that the Court did not have jurisdiction to continue the relief on the basis that VTB and Antipinsky are parties to an arbitration, and the Court could only intervene in those arbitral proceedings pursuant to section 44 of the Arbitration Act 1996.  VTB contended that the Court had made the original ex parte order and so it retained jurisdiction to continue the relief.   VTB relied upon an obiter dictum of Flaux J (as he then was) in The Nicholas M [2008] 2 Lloyd’s Rep 602, where he observed that once “seised of the matter, the court clearly had jurisdiction to continue or vary the injunction at the return date”, regardless of the terms of section 44.  There was no binding decision on this point, and the Court had to decide whether section 44 had any application to the continuation of ex parte relief.

Lord Justice Phillips was persuaded that Flaux J was wrong on this issue, and held that section 44 of the Arbitration Act 1996 must be satisfied in all cases; the Court’s jurisdiction to act “cannot be dependent on whether or not the court has or has not previously made” an order (at [38]).  In the premises, he held (in October 2019) that the Court did not have jurisdiction to continue the relief as the matter was not urgent and the Tribunal had not given its permission for the Court to hear the application.

VTB subsequently sought and obtained the Tribunal’s permission for the continuation application to be heard by the court, and the matter came back to the Commercial Court in December 2019.

Antipinsky submitted that the mandatory order was an unjustified expansion of the remedy of specific performance, which should only be ordered outside section 52 of the Sale of Goods Act 1979 where the goods in question are effectively unique or where the market is not functioning.  VTB contended that specific performance could be ordered on ordinary equitable principles, in particular, where damages are not an adequate remedy.  VTB argued that it would not be able to recover damages since it had prepaid for the oil, Antipinsky was in significant financial difficulties, and there were exclusion clauses in the sale contract.

There are very few cases which have considered these principles (and none at an interim stage), and there is disagreement in the leading textbooks. Lord Justice Phillips accepted Antipinsky’s argument on the law and held that specific performance could only be granted outside section 52 where the goods are effectively unique or in “very exceptional circumstances in which the normal market is not functioning” (at [79]).  Applying this principle, he held that the factors relied upon by VTB were insufficient to take the matter out of the ordinary, “let alone justify granting an injunction which gives priority to VTB over other purchasers of Antipinsky’s goods” (at [81]).  Consequently, the mandatory order for specific performance was discharged.

This is an important judgment on both the application of section 44 of the Arbitration Act 1996, and the principles applicable to granting specific performance.

Kenneth MacLean QC and Alexander Brown appeared for Antipinsky, instructed by Candey Limited.  You can view the full judgment here.