This town ain't big enough for the two of us: Eletson Gas LLC v A Limited & Ors

By: Layla Blair, Associate, and Freddy Ashe, Trainee

Eletson Gas LLC v A Limited & Ors [2025] EWHC 1855 (Comm) concerns an application made under section 32 of the Arbitration Act 1996 (the “1996 Act”) to determine the jurisdiction of an arbitral tribunal. This case holds significance for arbitration practitioners both in the UK and internationally, particularly those in New York Convention1 signatory states. It provides important clarification on key principles governing the recognition and enforcement of foreign arbitral awards in the UK, while also offering important guidance on a range of factual, procedural, and foreign law issues.

A dispute arose between the parties, broadly split into two groups - one group constituting the fourth to eighth defendants, and the second constituting the ninth and tenth defendants. Each group claimed to constitute the duly appointed officers of Eletson Gas LLC (“Eletson Gas”). The first to third defendants are the owners of three oil tankers, who had entered into a bareboat charter with Eletson Gas that included an option to purchase the tankers on the purchase option date.

Each group (i.e. the fourth to eighth defendants, and the ninth and tenth defendants) had served a purchase option notice on behalf of the Eletson Gas board to purchase each of the three oil tankers. The dispute was referred to arbitration in London (pursuant to the agreement with Eletson Gas and the first to third defendants) where both groups simultaneously appointed arbitrators on behalf of Eletson Gas. This gave rise to a further dispute regarding which group was entitled to appoint an arbitrator on behalf of Eletson Gas. The ninth and tenth defendants commenced the section 32 proceedings to determine which group was entitled to appoint an arbitrator on behalf of Eletson Gas.  

JAMS Arbitration

The hostility between the two rival groups dated back to an arbitration commenced in the US in 2022 to resolve a dispute to determine whether shares in Eletson Gas had been sold to a company associated with the fourth to eighth defendants (“Levona”) (the “JAMS arbitration”)

After commencement of the JAMS arbitration, but before it had been completed, three petitioning creditors filed Chapter 7 bankruptcy proceedings2 against Eletson Holdings Limited - the claimant in the JAMS arbitration and holder of the common shares in Eletson Gas. Levona maintained in the JAMS arbitration that the effect of this was to impose a mandatory stay on the JAMS arbitration. The JAMS arbitration was stayed to allow for the decision of the Bankruptcy Court. The Bankruptcy Court found that Levona owned the preferred shares.

The Bankruptcy Court then made an order which had the effect of lifting, in part, the statutory stay imposed so as to permit the JAMS arbitration to continue. 

The final award in the JAMS arbitration found that Eletson Holdings Limited and Eletson Corporation (controlled by the ninth and tenth defendants) succeeded; Levona had no membership interest in Eletson Gas (“JAMS award”). Eletson Holdings commenced confirmation proceedings in the US District Court. These proceedings are broadly equivalent to making an award enforceable as if it were a judgment of the Court.

Levona applied to vacate the JAMS award on the ground of fraud, based on documents that had been reluctantly disclosed by Eletson.

Bankruptcy Proceedings

The Chapter 7 proceedings were converted to Chapter 11 proceedings.3 The Bankruptcy Court then approved a Chapter 11 Plan proposed by the petitioning creditors for Eletson Holdings.

The effect of the Chapter 11 Plan was to replace the board of Eletson Holdings with a new board, made up of parties within the first group of defendants. This new board, in its first act, removed defendants nine and ten as directors of Eletson Holdings, and appointed defendant eight in their place. The ninth and tenth defendants disputed the validity of the Chapter 11 Plan.

The Eletson Gas Board

The board of Eletson Gas was therefore made up of directors appointed by the two groups of shareholders:

1. Two directors were appointed by the holders of the common shares, Eletson Holdings; and
2. Up to four directors who were to be appointed by the holders of the preferred shares.

Each group of defendants contended that their associated interests controlled all the shares and therefore they were entitled to appoint the full board of Eletson Gas, and to appoint or remove officers of the company as they saw fit.

Issues for Resolution

The two issues for resolution before the Commercial Court (in deciding who had control of Eletson Gas) were:

1. who controlled Eletson Holdings (as the agreed holder of the common shares); and
2. who controlled the preferred shares in Eletson Gas (and, crucially, whether this was the ninth and tenth defendants and their nominees).

On the first issue, Judge Pelling KC decided that the Chapter 11 Plan provided that the previous board of Eletson Holdings was deemed to have resigned and that from that date defendants seven and eight (and a Mr Matthews) were Eletson Holdings’ directors.

The real issue in these proceedings was who the Court should conclude has control of the preferred shares. The key issue on which this question turned was whether the preferred shares were transferred to the companies represented by the ninth and tenth defendants.

The fourth to eighth defendants contended that the ninth and tenth defendants were not entitled to rely upon the JAMS award. The fourth to eighth defendants challenged the reliance on the JAMS award on the basis that:

• no application had been made by the ninth and tenth defendants for an order under section 101 of the AA in the UK recognising the JAMS award;
• the ninth and tenth defendants were not parties to the JAMS award and therefore could not seek recognition of the award;
• the formal requirements for recognition had not been satisfied; and
• even if the ninth and tenth defendants were entitled to apply for recognition of the JAMS award, on a proper analysis, the JAMS award was not binding on the parties to these proceedings, had been suspended in the US and/or because recognition should be stayed pending resolution of the application to set aside the JAMS award for fraud.

The Court had to consider whether the ninth and tenth defendants were entitled to rely upon the JAMS award being binding on the fourth to eight defendants.

Decision

In considering the points raised above, the Court accepted that the rule in Hollington v Hewthorn [1943] KB 587 applies, which states that findings made in earlier proceedings (including arbitration) are inadmissible in subsequent proceedings between different parties.  

Following on from the above, Judge Pelling KC stated that if the parties to these proceedings are not the same as the JAMS award, the ninth and tenth defendants are not entitled to rely upon the JAMS award in these proceedings because, at common law, that award is not admissible between different parties.

There were no applicable exceptions to the rule, other than the alleged availability of issue estoppel. Judge Pelling KC went on to say that even if the JAMS award involved the same parties (or could be treated as such) it still could not be available to support an issue estoppel claim, as it had not been recognised under section 101 of the AA. The ninth and tenth defendants had not made such an application, and even if it had, it is probable that such an application would have been stayed until after the application setting aside the JAMS award for fraud had been determined. Judge Pelling KC noted that the potential for wasted costs, and huge commercial uncertainty, point firmly toward a Court postponing recognition until after final determination of a set-aside application.

Conclusion

This case is relevant for those practicing international arbitration, not only in the UK but also international practitioners. The decision provides clarification on points of principle regarding the recognition and enforcement of foreign arbitral awards, as well as the Court’s approach to dealing with section 32 applications. The decision makes clear that parties seeking to rely upon a foreign arbitral award in Commercial Court proceedings must first make an application for the award to be recognised under section 101 of the AA (pursuant to the New York Convention). Without recognition, a party will not be able to rely upon that decision in a claim for issue estoppel.

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• 1. The New York Convention or the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) applies to the recognition and enforcement of arbitral awards in other countries.
• 2. Chapter 7 proceedings are liquidation bankruptcy proceedings which do not anticipate a restructure or reorganisation.
• 3. Chapter 11 proceedings are restructuring bankruptcy proceedings (i.e. commenced by a company looking to reorganise its debts and continue trading).