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In a recent decision, Kawaley CJ, the newly appointed Chief Justice of the Supreme Court of Bermuda, stayed proceedings brought against a Bermuda Company and set aside an ex parte injunction which had been obtained by ERG claiming it was in aid of proceedings in Texas. ERG had been refused injunctive relief by the Texas Court, the court which had jurisdiction over the parties.
In discharging the injunction and staying the relief, the Court set out the parameters to be applied by a Bermuda Court in the exercise of its discretion, where it is ancillary to the court where the proceedings are being conducted.
The ERG had contracted with Nabors in respect of the sale of shares in one of its subsidiaries for US$ 35 million. The Share Purchase Agreement between the parties contained a Texas governing law clause and a Harris County venue clause. Closing Deadlines were fixed by agreement, however various problems arose with respect to meeting the deadline and closing conditions. Nabors contended that the deadline was not met and the closing conditions were not satisfied, and purported to terminate the agreement. ERG argued that the deadlines had been waived, and the terminations were therefore invalid. Nabors admittedly had secured a higher bidder and contracted to sell the shares to the higher bidder for a substantially higher sum.
ERG launched proceedings in Harris County, Texas and sought a temporary restraining order against Nabors. After argument, the Texas Court refused a temporary restraining order. Two days later, ERG issued proceedings in Bermuda claiming identical relief to that claimed in Texas. ERG sought and obtained, ex parte, an injunction in its favour against Nabors, preventing the disposal of the shares.
The following week, Nabors applied to have the injunction discharged, and sought a stay and/or dismissal of the Bermuda proceedings. The inter partes application was heard two days later.
The Supreme Court of Bermuda granted Nabors’ application, discharged the injunction and stayed the proceedings. It did so on substantive grounds and on the basis that there had been material non disclosure by ERG when it made its ex parte application to the Bermuda Court.
The Court held that the existence of parallel proceedings provided the context against which the traditional considerations as to whether to grant injunctive relief must be taken into account. It held that where interim relief is sought in one jurisdiction in support of a substantive cause of action which either arises under foreign law or is being pursued in a foreign court, the question of whether the foreign court would be willing to grant the interim relief is an important factor in determining where the balance of convenience lies in deciding how the discretion to grant injunctive relief should be exercised.
Applying the decisions of Walsh v Deloitte and Touche  UKPC 37, Credit Suisse v Cuoghi  QB 818, Refco Inc v Eastern Trading Co  1 Lloyds Rep 159 and Motorola Credit Corporation v Uzan et al  EWCA Civ 752 the Court held that the role played by the Bermuda Court in such a case was ancillary to that of the foreign court, as the Bermuda Court provides assistance to the court exercising primary jurisdiction. In a case such as this, the court must, as a practical matter, look at the where the substantive dispute is being tried and must, in the interests of comity, recognise that its role is subordinate and supportive of the primary court. In doing so, it will not grant relief either where application had been made to the primary court and refused, or where such an application, if made to the primary court, would inevitably have been refused.
In this case, the Court was satisfied that the judge in Texas was not willing to grant an interim restraining order, even though the test for whether or not an interim injunction should be granted is less onerous in Bermuda than Texas. In Bermuda, under the classic American Cyanimid formulation, the law requires only that there be an arguable case, as opposed to good prospects of success, which is the threshold under Texan law. The Court therefore granted Nabors’ application.
Narinder Hargun and Christian Luthi, Directors in the Bermuda office of Conyers Dill & Pearman, represented Nabors in the proceedings.