Australian Court highlights need to prove objective urgency when relying on “urgent relief” exception to arbitration clause

Dispute arises in relation to the inspection of records

The plaintiff, Power and Water Corporation (PWC), is a corporation owned by the Northern Territory Government. PWC was party to a Gas Sale Agreement (GSA) with the defendant, Eni Australia B.V. (Eni), a registered foreign company conducting business in Australia.  

Under the GSA, Eni agreed to sell gas to PWC in the amounts nominated by PWC. Where the supply of gas was subject to a curtailment, interruption or suspension (defined as a “Curtailment”), PWC had the right to inspect certain of Eni’s records to confirm the accuracy of information provided in relation to the Curtailment.

The GSA contained dispute resolution procedures that required the parties to submit any dispute to either arbitration or expert determination. However, the GSA also allowed either party to seek “urgent interlocutory or declaratory relief from a court of competent jurisdiction where, in that Party’s reasonable opinion, that action is necessary to protect that Party’s rights.”  

In April 2021, Eni gave PWC notice of a Curtailment. In June 2022, PWC sought to exercise its right to inspect Eni’s records, but Eni refused on the basis that the request was overbroad and sought access to records unrelated to the Curtailment. In August 2022, PWC commenced proceedings against Eni in the Supreme Court of Western Australia.

Before the Court, PWC sought a declaration (and related orders) that Eni had breached the GSA in its response to PWC’s request to inspect documents. In response, Eni sought to have the proceedings stayed and referred to arbitration. PWC argued that the proceedings fell within the exception to the arbitration clause in the GSA.

Lack of urgency leads to the stay of Court proceedings

The Court allowed Eni’s application, and ordered that the proceedings be stayed and referred to arbitration. There were four factors relevant to the Court’s decision. 

First, PWC argued that the proceedings were “urgent” because the Curtailment could lead to blackouts in the Northern Territory, and it needed access to Eni’s records to make contingency plans. However, Eni argued that the declaration sought by PWC would not assist in avoiding any blackouts, and so there was no link between the alleged urgency and the relief sought. As to the further orders giving effect to the declaration, such orders could not be characterised as “interlocutory or declaratory relief”. Further, Eni also argued that it had already provided PWC with sufficient information to inform PWC’s contingency planning.

The Court agreed with Eni, noting that the question of urgency needed to be tied to the relief sought, and that PWC needed to prove that there was an objectively urgent need for declaratory relief. Unusually for an interlocutory application, Eni was granted leave to cross-examine one of PWC’s witnesses, highlighting the emphasis the Court placed on the need for questions of fact to be proven to the requisite standard.

Secondly, the Court determined that other factors demonstrated that the relief claimed was not urgent. In particular, the Court noted that PWC had waited two months after Eni’s refusal, and more than 18 months after the beginning of the Curtailment, before bringing proceedings. The Court rejected PWC’s submission that the urgency of the matter had grown over time as the relationship between PWC and Eni had deteriorated.

Thirdly, the Court had regard to the relative ability of a court and an arbitrator to resolve a dispute quickly. The Court found that there would not be a significant time difference between resolution by the Court or by an arbitrator, and that an arbitrator would have greater flexibility in resolving the dispute. To the extent that there was any time difference, PWC had not proven that it would be affected by that time difference.

Fourthly, Eni argued that PWC had failed to prove that it held a reasonable opinion that the proceedings were “necessary to protect [its] rights”. PWC had tendered evidence from the manager of its gas operations but this was not enough to satisfy the specific requirements of the clause. PWC had tendered no evidence from its board of directors or CEO.  

Comment

The decision reinforces Australia’s position as an arbitration-friendly jurisdiction, in which courts consistently seek to give effect to parties’ agreements to have proceedings referred to arbitration unless there is a clear and compelling reason not to do so. The decision also reflects the Australian courts’ respect for the ability of arbitration to provide resolutions in a timely and flexible manner. 

In that context, the decision provides useful guidance on what to do, and what not to do, when seeking to rely on an “urgent relief” exception to an arbitration clause. In particular, the decision highlights the need for clear and specific evidence and reasoning to show that the exception applies, and that the relief would provide relief to an objectively urgent problem. It also highlights the need to carefully consider and address all aspects of an exception clause – in this case, PWC needed to provide evidence that individuals with the requisite authority held the opinion required by the contract. 

Similarly, the decision provides a clear example of the importance of acting promptly to protect your rights through urgent relief. Although there may be strategic or commercial reasons for delaying the commencement of court action, any such delay will need to be adequately explained to a Court, and squared against any assertion that a dispute is sufficiently “urgent” to go against the parties’ agreed method of resolving disputes.

Judgment: Power and Water Corporation v Eni Australia B.V [2022] WASC 376

Allen & Overy acted for Eni, who was successful on its application.