Daewoo Shipbuilding & Marine Engineering Co Ltd v INPEX Operations Australia Pty Ltd

Daewoo Shipbuilding & Marine Engineering Co Ltd, a South Korean shipbuilder, constructed a floating production and storage offloading facility in the Timor Sea for INPEX Operations Australia Pty Ltd. The shipbuilder was required to provide a bank guarantee for US$328.5 million. Disputes arose over alleged defects and liquidated damages exceeding the guarantee amount, leading to INPEX requesting arbitration and calling on the bank guarantee. Daewoo sought an ex parte injunction against INPEX calling on the guarantee, which was granted but subsequently sought to be continued due to Daewoo's financial difficulties stemming from sanctions on Russia.

The court considered whether the injunction should be continued, focusing on the nature of the bank guarantee and the principles governing the injunctive restraint of calling on such guarantees. The court held that the bank guarantee was a risk allocation device, with INPEX entitled to hold the money while the dispute was resolved. The court also examined the principles governing interim measures in international commercial arbitration, including the application of section 7 of the International Arbitration Act 1974 (Cth) and Articles 9 and 17J of the UNCITRAL Model Law. The court concluded that it was entitled to form a view on the meaning of the contract necessary to determine the application for interim measures, but this view did not bind the arbitral tribunal.

The court ultimately refused to continue the injunction, finding that INPEX was entitled to hold the bank guarantee while the dispute was resolved. The court emphasised the importance of risk allocation devices in commercial contracts and the need to balance the rights of the parties involved. The court also highlighted the limited role of the court in construing the contract for the purposes of granting interim measures, noting that its view did not bind the arbitral tribunal.