C v D1 and Others

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMrs Justice Carr DBE,The Hon.
Judgment Date22 July 2015
Neutral Citation[2015] EWHC 2126 (Comm)
Docket NumberCase No: 2014 Folio 1391
Date22 July 2015

Neutral Citation Number: [2015] EWHC 2126 (Comm)




Royal Courts of Justice

Strand, London, WC2A 2LL


THE HON. Mrs Justice Carr DBE

Case No: 2014 Folio 1391

(1) D1
(2) D2
(3) D3

Mr David Wolfson Q.C. and Mr Simon Gilson (instructed by Hogan Lovells International LLP) for the Claimant

Mr Toby Landau Q.C. and Mr Siddharth Dhar (instructed by Stephenson Harwood LLP) for the Defendants

Hearing dates: 29th and 30th June 2015

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HON. Mrs Justice Carr DBE

Mrs Justice Carr DBE Mrs Justice Carr DBE The Hon.

A. Introduction


This is a claim by the Claimant, C, challenging certain findings in a Partial Award dated 21 st October 2014 (“the Award”) under s.67 and/or 68 of the Arbitration Act 1996 (“the 1996 Act”).


The Award was delivered in the context of a hearing of preliminary issues in arbitral proceedings brought by C against D1 and D2 relating to debt and guarantee claims under three English law contracts with LCIA London arbitration clauses. The arbitral panel consisted of Mr Thomas Webster (President), Mr Anthony Boswood QC and Professor Julian Lew QC (together “the Tribunal”).


The Tribunal made five findings, of which two are under challenge. Those two are majority findings (Mr Boswood QC dissenting), as follows:

a) that the Tribunal had jurisdiction over disputes concerning breaches of a Production Sharing Contract (“the PSC”) (see paragraph 241(1) of the Award); and

b) that the Tribunal had jurisdiction to join D3 to the arbitration without the consent of all existing parties (see paragraph 241(3) of the Award).


C challenges paragraph 241(1) of the Award under s.67 of the 1996 Act and paragraph 241(3) of the Award under s.67, and in the alternative s.68 of the 1996 Act. It seeks orders varying and/or setting aside those parts of the Award.

B. The 1996 Act


Sections 67 and 68 of the 1996 Act provide materially as follows:

67(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court

(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.

A party may lose the right to object (see s.73) and the right to apply is subject to the restrictions in s.70(2) and (3)

(3) On an application under this section…the court may by order

a) confirm the award,

b) vary the award, or

c) set aside the award in whole or in part

68(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see s.73)…

(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant

b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see s.67)…


Section 73 of the 1996 Act provides materially as follows:

73(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection

a) that the tribunal lacks substantive jurisdiction,

b) that the proceedings have been improperly conducted,

c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or

d) that there has been any other irregularity affecting the tribunal or the proceedings,

he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.

(2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling

a) by any available arbitral process of appeal or review, or

b) by challenging the award,

does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of this Part, he may not object later to the tribunal's substantive jurisdiction on any ground which was the subject of that ruling.


By s.70(3) of the 1996 Act any application or appeal must be brought within 28 days of the date of the award.


The 1996 Act introduced radical changes to English arbitration law, as Lord Mustill and Stewart Boyd QC put it in the preface to Commercial Arbitration: 2001 Companion Volume to the Second Edition, giving it an entirely new face, a new policy and new foundations. As Lord Steyn commented in Lesotho Development v Impregilo SpA [2006] 1 AC 221 (“ Lesotho”) (at paragraph 18), the ethos of the 1996 Act is to give to the court only those essential powers which it should have, namely to render assistance when arbitrators cannot act in the way of enforcement or procedural steps, or alternatively in the direction of correcting very fundamental errors. Arbitration, as far as possible, and subject to statutory guidelines, should be regarded as a freestanding system, free to settle its own procedure and it own substantive law. A major legislative purpose of the 1996 Act was to reduce drastically the extent of intervention of courts in the arbitral purpose (see paragraph 26) and to promote “ one-stop adjudication” (see paragraph 34).

C. An overview of the facts and relevant contractual instruments


C is a Nigerian incorporated subsidiary of Z. Its ultimate parent company is an oil and gas major. D1 and D3 are affiliated companies, both incorporated in Nigeria, engaged in the exploration, drilling and production of crude oil. D2 is a company incorporated in the Cayman Islands and is the ultimate parent company of D1 and D3.


On 3 rd June 1992 D1 was awarded an oil prospecting licence for block X (“Licence 1”) offshore Nigeria by the Nigerian government. On 30 th September 1992 D1 assigned a 2.5% participating interest to D3. From 1992 D1 and D3 undertook the exploration of Licence 1.


On 28th August 2002 Licence 1 was converted into two oil mining leases (“Lease 1” and “Lease 2”, together “the Leases”). These leases relate to oil mining blocks located offshore Nigeria and are for a 20-year term commencing February 2001. The main producing asset was a deep-water oilfield.


In 2005, following the departure of the previous operator some years before, D1 and D3 sought a new operator to continue exploration of the Leases.



On 22 nd July 2005 D1, D3 and C entered into the PSC in respect of the Leases. The PSC set out the principal terms of the joint petroleum operations. C was appointed Operating Contractor of the Leases for a term of 20 years and received a 40% participating interest in the Leases. The majority 60% interest was retained by D1 (57.5%) and D3 (2.5%).


Article 7 set out the rights and obligations of the parties. Article 7.1 provided:

In accordance with this Contract, [C] shall:

a) prepare Work Programmes and Budgets and carry out approved Work Programmes in accordance with internationally acceptable petroleum industry practices and standards with the objective of avoiding waste and obtaining maximum ultimate recovery of Crude Oil at minimum costs;…

It is alleged breaches of Article 7 that found the counterclaims brought by D1 and D3 referred to below.


The PSC was governed by Nigerian law. Article 20 provided:

This Contract shall be governed by and construed in accordance with the Laws of the Federation of Nigeria.”


There is a dominant Nigerian flavour to the contractual relationship. Thus, for example, there was a preference to be given to the employment of Nigerian citizens (see Article 7.1(g)), preference to be given to the use of goods available in Nigeria and of services that could be rendered by Nigerian nationals (see Article 7.1(h)). All insurance policies that C was obliged to procure under Article 15 were to be “ taken out in the Nigerian insurance market” where possible (see Article 15.4).


Article 23 then contained an arbitration agreement in the following terms:

23.2 If a difference or dispute arises between the Parties, concerning the interpretation or performance of this Contract, and if the Parties fail to settle such difference or dispute by amicable agreement, then any Party may serve on the other a demand for arbitration.

23.3 Within thirty (30) days of such demand being served, each of [D1 and D3] and [C] shall appoint an arbitrator and the two arbitrators thus appointed shall within a further thirty (30) days appoint a third arbitrator. If the arbitrators do not agree on the appointment of such third arbitrator, or if either [D1 and D3] or [C] fails to appoint the arbitrator to be appointed by it, such arbitrator or third arbitrator shall be appointed by the President of the Court of Arbitration of the International Chamber of Commerce (ICC) in Paris on the application of any other Party (notice of the intention to apply having been duly given in writing by the applicant Party to the other Parties). The third arbitrator when appointed shall convene meetings of the arbitration panel and act as chairman. If an arbitrator refuses or neglects to act or is incapable of acting or...

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