Review of the Decision in Gonzalo Gil White v. Oro Negro Drilling Pte Ltd and Others

THE AUTHOR:
Debolina Basu Bhatt, Doctoral Researcher in International Law at the Graduate Institute of International and Development Studies (“IHEID”)

Overview

The power of courts to grant anti-suit injunctions to restrain foreign proceedings needs no introduction: it has been upheld in several jurisdictions and has increasingly been used in the context of arbitration agreements. An anti-suit injunction is an injunction ordering a party not to commence or continue with proceedings in another jurisdiction. However, as pointed out in Oro Negro Drilling Pte Ltd and others v Integradora de Servicios Petroleros Oro Negro SAPI de CV and others and another appeal (Jesus Angel Guerra Mendez, non-party) [2019] SGCA 74, not all injunctions which have the effect of restraining proceedings in a foreign jurisdiction can be classified as anti-suit injunctions. This article reviews the decision of the Singapore Court of Appeal (“SGCA”) in Gonzalo Gil White v. Oro Negro Drilling Pte Ltd and Others [2024] SGCA 9 and explores why the CA concurred with the above opinion and upheld the permanent injunction granted to the respondents (see Oro Negro Drilling Pte Ltd and others v Integradora de Servicios Petroleros Oro Negro SAPI de CV and others [2023] SGHC 297).

Background

The underlying dispute concerns concurso proceedings (i.e., insolvency/restructuring proceedings governed by the Mexican Business Reorganisation Act) initiated by the appellant on behalf of the respondents in breach of a negative covenant. At the material time, the appellant and Mr Alonso Del Val Echeverria (“Mr Alonso”) were directors of the respondents, which were a group of six companies incorporated in Singapore. The first respondent, Oro Negro Drilling Pte Ltd (“Oro Negro”), was the holding company and sole shareholder of the other five respondents, which were special purpose vehicles each owning a single offshore jack-up drilling rig operating in Mexico (each an “SPV”). Until September 2017, when an event of default was declared, Oro Negro was a wholly owned subsidiary of Integradora de Servicios Petroleros Oro Negro, SAPI de CV (“Integradora”), the first defendant in the underlying Singapore High Court (“SGHC”) suit, HC/OS 126/2018 (“OS 126”). Petroleos Mexicanos (“Pemex”) is the ultimate holding company of Integradora. Integradora also owns 99.25% of another Mexicon-incorporated company, Perforadora Oro Negro S de RL de CV (“Perforadora”), with the remaining 0.7 5% shares owned by another subsidiary of Pemex. Perforadora was responsible for chartering each rig from each SPV under a bareboat charter, and subsequently sub-chartering each rig to a subsidiary of Pemex for deployment in offshore oil drilling operations in Mexico.

In 2014, Oro Negro issued over US$900 million in bonds to raise funds for the SPVs to purchase the rig. The terms of this issuance were contained in a bond agreement, which was governed by Norwegian law, and a Norwegian financial institution was appointed as trustee for the bondholders (the “Bond Trustee”). Clause 13.5(a) of the bond agreement required Oro Negro to amend its constitution and those of the SPVs to:

Provide for the right of the Bond Trustee to appoint a director in each respondent (the “Independent Director”); and
Require the Independent Director’s vote under all circumstances for any respondent to commence any insolvency or restructuring proceeding anywhere in the world, including a concurso.

Subsequently, a new Article 115A was inserted into the respondents’ constitutions to effect these amendments, and Mr Noel Blair Hunter Cochrane (“Mr Cochrane”) was appointed as the Independent Director of each respondent.

As a result of certain actions taken between 2015 and 2017 by Pemex, the solvency of the respondents and Perforadora were threatened, which risked triggering an event of default under the bond agreement. On 31 August 2017, the appellant and Mr Alonso granted a general power of attorney on behalf of each respondent to lawyers in a Mexican firm, Guerra González y Asociados (the “Guerra Lawyers”), to file all kinds of proceedings on each respondent’s behalf. This was done without the knowledge or approval of the Independent Director.

On 11 September 2017, the Guerra Lawyers filed a concurso petition in Mexico on behalf of Perforadora. This constituted an event of default under the bond agreement and allowed the Bond Trustee to vest ownership and control of the respondents in the bondholders’ nominee. This raised the possibility that the SPVs may, under the bondholders’ ownership and control, terminate Perforadora’s charters of the rigs and take back possession of the rigs from Perforadora. When the Bond Trustee subsequently declared the event of default, the Guerra Lawyers filed concurso petitions on behalf of Integradora and each of the six respondents to prevent the SPVs from terminating the bareboat charters and taking possession of the rigs. The appellant accepts that the respondents’ directors did not comply with Article 115A when the Guerra Lawyers filed the petitions on behalf of each of the six respondents.

Litigation Before Singapore Courts

The procedural history of this case is complex with separate strands of proceedings in Mexico and Singapore. What is material to the present analysis is that four months subsequent to the filing of the concurso petitions, the respondents commenced OS 126 in the SGHC seeking declarations that:

The petitions were invalidly filed for failure to comply with Article 115A; and
Integradora, the appellant, and Mr Alonso had no authority to maintain the petitions on behalf of the respondents or to deal with the respondents’ assets, and further sought injunctions to prevent Integradora, the appellant, and Mr Alonso from commencing, continuing, or maintaining the petitions on behalf of any of the respondents.

Pending the conclusion of OS 126, the respondents also sought and obtained ex parte, interim injunctions against Integradora, Mr Alonso and the appellant which mirrored the injunctions sought in OS 126. The interim injunctions were set aside by the SGHC, upon the application of Integradora, Mr Alonso and the appellant, but were restored by the SGCA on appeal in 2019. In March 2023, a final judgment was entered in favour of the respondents in OS 126.

The 2024 SGCA Decision

The SGCA upheld the permanent injunction granted as against the appellant in OS 126, confirming that the legal basis for granting this final relief sought against the appellant lay in an implied contract between each of the respondents and the appellant that incorporated as a term the substance of Article 115A (which was a negative convenant). In doing so, the SGCA affirmed the position in RGA Holdings International Inc v Loh Choon Phing Robin and anor [2017] SGCA 55 that where a defendant is about to breach or has already breached a negative convenant in a contract, a prohibitory injunction is usually granted as a matter of course to restrain a prospective breach or a further breach. The appellant breached the implied contract in the terms of Article 115A between himself and each respondent, and was thus liable to be restrained by an injunction from continuing his breach. This being the crux of the ratio behind the OS 126 judgment, the SGCA held that the injunctions granted, by its very nature, could not be classified either as an anti-suit or anti-enforcement injunction. The injunctions did not restrain the respondents from maintaining the concursos commenced by the respondents, but merely restrained the appellant and Integradora from purporting to act on behalf of the respondents to maintain the concursos in violation of an implied contractual requirement, even though this would have the practical effect of putting an end to the concursos. Since the true nature of the injunctive relief in OS 126 was neither an anti-suit nor an anti-enforcement injunction, the SGCA concluded that considerations of comity, which typically take centre stage in the grant of such injunctions, did not arise.

In spite of the above, the appellant also argued that judicial comity remained relevant because the Mexican courts had the opportunity to consider Article 115A and ruled that, despite an ostensible breach of this article, the concursos commenced by the respondents were valid. However, the Mexican judgment post-dated the SGCA decision that restored the interim injunctions. This meant that the Mexican court ruling had been procured in breach of the interim injunctions. Considering the circumstances of continuing breach, the SGCA held that permanent injunctive relief was necessary to give effect to the previously ordered interim injunctions. The SGCA emphasized the local courts’ duty to uphold its constitutional role to oversee the administration of justice and safeguard the rule of law within its jurisdiction. Any attempt to recognise or enforce a foreign judgment obtained in breach of local court orders would be against public policy and amount to an abuse of process.

Conclusion

Gonzalo Gil White v. Oro Negro is a significant decision in transnational corporate law and provides guidance on several key points that are bound to influence and shape future litigation strategies. It emphasizes the primacy of contractual covenants as evident in other Singapore Court judgments. The case sets an important precedent with regard to the classification of injunctions, distinguishing between its purpose and effect. While this may not be accepted by all detractors, it provides clarity on the position that the Singapore Courts will take when it comes to anti-suit injunctions. The judgment also clarifies the scope and applicability of judicial comity – a notion so elastic that it lends itself to use and abuse in equal measure.

ABOUT THE AUTHOR

Debolina Basu Bhatt is a Doctoral Researcher in International Law at the Graduate Institute of International and Development Studies (“IHEID”) in Geneva. Currently, she also serves as Teaching Assistant for the LL.M. in International Law Programme at the Graduate Institute. Before starting her doctoral programme in 2021, Debolina was an assistant professor at Jindal Global Law School (2019 to 2021), teaching Tort Law and Criminal Procedure. Debolina completed her Master’s degree in International Law and Security from the University of Glasgow in 2017. Her doctoral research, supervised by Professor Zachary Douglas KC, examines the liability regime under the United Nations Convention on the Law of the Sea for marine environmental harm that could potentially arise from commercial-scale deep seabed mining in areas beyond national jurisdiction.

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