IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Mance,Lord Clarke,Lord Sumption,Lord Hodge,Lord Toulson
Judgment Date01 March 2017
Neutral Citation[2017] UKSC 16
Date01 March 2017

[2017] UKSC 16

THE SUPREME COURT

Hilary Term

On appeals from: [2015] EWCA Civ 1144 and 1145

before

Lord Mance

Lord Clarke

Lord Sumption

Lord Hodge

Lord Toulson

IPCO (Nigeria) Limited
(Respondent)
and
Nigerian National Petroleum Corporation
(Appellant)

Appellant

Toby Landau QC

James Willan

(Instructed by Stephenson Harwood LLP)

Respondent

Michael Black QC

Edward Knight

(Instructed by Goodman Derrick LLP)

Heard on 2 February 2017

Lord Mance

(with whom Lord Clarke, Lord Sumption, Lord HodgeandLord Toulsonagree)

1

This appeal is about whether the appellant, Nigerian National Petroleum Corporation ("NNPC"), should have to put up a further USD 100m security (in addition to USD 80m already provided) in respect of a Nigerian arbitration award which the respondent, IPCO (Nigeria) Ltd ("IPCO"), has been seeking since November 2004 to enforce in this jurisdiction. The enforcement proceedings have, therefore, a long history and it is necessary to set some of it out, to understand the context.

2

The arbitration award has an even longer history. It is dated 28 October 2004 and is for USD152,195,971 plus Naira 5m plus interest at 14% per annum. The arbitration took place under a contract dated 14 March 1994 whereby IPCO undertook to design and construct a petroleum export terminal for NNPC. The contract was subject to Nigerian law and contained an agreement to arbitrate disputes in accordance with the Nigerian Arbitration and Conciliation Act 1988.

3

The award once made was challenged by NNPC before the Nigerian Federal High Court. Initially, the challenge was for what have been called "non-fraud" reasons. As from 27 March 2009, NNPC, relying on evidence supplied by a former IPCO employee, Mr Wogu, has also challenged the whole award on the basis that NNPC procured it in substantial part by fraudulent inflation of the quantum of its claim using fraudulently created documentation. Both Field J [2014] EWHC 576 (Comm) and the Court of Appeal (Christopher Clarke, Burnett and Sales LJJ) [2015] EWCA Civ 1144 concluded that the fraud challenge was made bona fide, that NNPC has a good prima facie case that IPCO practised a fraud on the tribunal and that NNPC has a realistic prospect on that basis of proving that the whole award should be set aside.

4

It is unnecessary to describe the vicissitudes which befell the challenges before the Nigerian courts. Suffice it to say that they have been closely examined in the English courts on more than one occasion; and that the Court of Appeal has concluded (para 164, per Christopher Clarke LJ) that it would not be "profitable to seek to determine which party (if either) is more to blame for the delay, which appears, to me in large measure, to result from the workings of the Nigerian legal system". At the outset of the English proceedings, Steel J made an ex parte order for enforcement dated 29 November 2004. This led in turn to an application by NNPC for the ex parte order to be set aside under sections 103(2)(f) and 103(3) of the Arbitration Act 1996 (the "1996 Act"), or alternatively for its enforcement to be adjourned under section 103(5), pending the resolution of the non-fraud challenges in the Nigerian courts. After an inter partes hearing, Gross J held on 27 April 2005 [2005] EWHC 726 (Comm) that NNPC should pay IPCO a sum of just over USD 13m (which, at that stage, when only the non-fraud challenge had been raised, appeared indisputably due), and that NNPC should provide security in the sum of USD 50m in respect of the adjournment. The USD 13m ordered was duly paid, and the security was also provided.

5

At that stage, it was envisaged that the non-fraud challenge in Nigeria might be resolved with relative despatch. This was not to be, and on 17 July 2007 IPCO applied to have Gross J's order reconsidered on the basis that the Nigerian challenge appeared now to be unlikely to be determined for several years. Tomlinson J in a judgment dated 17 April 2008 concluded that "the change of circumstances, catastrophic though it is" did not justify a complete re-opening of the exercise undertaken by Gross J. Nevertheless, he ordered NNPC to pay a further net sum of around USD 52m (after taking account of USD 7.7m already paid), plus USD 26m by way of interest. He gave permission to appeal and ordered a stay pending appeal, conditional upon NNPC providing additional security to the value of USD 30m. This additional security was also provided. Tomlinson J adjourned any decision regarding enforcement of the balance of the award under section 103(5). The Court of Appeal upheld Tomlinson J's order, but it was further stayed pending the outcome of a petition to appeal to the House of Lords.

6

Before this petition was determined (by refusal of leave), NNPC on 2 December 2008 moved to stay Tomlinson J's order on the ground that it had now obtained evidence of fraud. Flaux J on 16 December 2008 stayed Tomlinson J's order to enable NNPC to make an application under section 103(3) based on this new evidence and/or under section 103(5) for a further adjournment of enforcement. He ordered that NNPC maintain the security totalling USD 80m which had been ordered by Gross J and Tomlinson J. By application dated 18 December 2008 NNPC applied to vary Tomlinson J's order

"so as to provide that recognition or enforcement of the Award dated 28 October 2004 be refused pursuant to section 103(3) of the Arbitration Act 1996 because it would be contrary to public policy to do so; alternatively, the decision on whether to enforce the Award be adjourned pursuant to section 103(5) of the Arbitration Act 1996 with liberty to apply."

The grounds given for refusal of recognition or enforcement were that there had been a material change of circumstances and/or Tomlinson J had been misled into believing that the Award had been properly obtained and/or public policy. The ground given for the alternative of adjournment was that the Nigerian courts would or might set aside the Award for fraud, false evidence or forgery.

7

On 27 March 2009 NNPC applied to amend its pleadings in the Nigerian proceedings to raise the fraud challenge (an application adjourned by consent and never determined). In this light, a consent order dated 17 June 2009 was made in the English proceedings, whereby inter alia, upon NNPC undertaking to maintain the USD 80m security until further order of the court, those parts of Tomlinson J's order dated 17 April 2008 ordering payment of sums were set aside (para 1), and "the decision on enforcement of the Award" was "adjourned pursuant to section 103(5) of the Arbitration Act 1996" (para 2).

8

Delay continued to dog the Nigerian proceedings, and on 24 July 2012 IPCO renewed its application to enforce the Award in England, again on the ground that there had been a sufficient change of circumstances to justify this. By order dated 1 April 2014 made after a six day hearing in October 2013 Field J dismissed this application, but added that, even if it had been appropriate to reconsider enforcement in England afresh, he would have refused it, on the ground that NNPC had a good prima facie case of fraud, and that this case should continue to trial in Nigeria. The security, which NNPC had undertaken by the consent order to maintain, in these circumstances continued.

9

The Court of Appeal took a different view. It held that there had been a material change of circumstances, and decided to cut the Gordian knot caused by the "sclerotic" process of the proceedings in Nigeria (paras 172–173). By order dated 10 November 2015 it therefore allowed IPCO's appeal, set aside Field J's order (by para 1) and ordered as follows (by paras 2 and 3):

"2. Upon condition that the respondent provides security as set out at paragraph 5 below:

(a) the proceedings shall be remitted to the Commercial Court for determination, pursuant to section 103(3) of the Act, as to whether the arbitral award dated 28 October 2004 ('the Award') should not be enforced in whole or in part because it would be against English public policy so to do ('the Section 103(3) Proceedings');

(b) any further enforcement of the Award shall be adjourned, pursuant to section 103(5) of the Arbitration Act 1996, pending determination of the Section 103(3) Proceedings.

3. Upon any failure of the respondent to comply with the said condition the adjournment shall lapse and the appellant may enforce the Award in the same manner as a judgment or order of the court to the same effect and the appellant shall immediately be entitled to demand payment under the Guarantee and Further Guarantee (as defined in the Order of Mr Justice Tomlinson dated 17 April 2008) [ie the two existing guarantees totalling USD 80m].

5. The security to be provided by the respondent must be provided by 4 pm on 4 December 2015 by way of first class bank guarantee issued in London in similar form to the Guarantee and the Further Guarantee in the sum of US$ 100,000,000. This security is to be in addition to that provided by those Guarantees."

The parties have subsequently agreed that not only the fraud issue, but also the non-fraud issues should be decided should be decided in the English enforcement proceedings.

10

The order dated 10 November 2015 did not reflect the Court of Appeal's initial conclusions as to the appropriate disposition. They were set out in a draft, circulated on 4 September 2015 in the usual way, by para 175 of which the Court proposed to require NNPC to provide security for the whole of the principal and interest then claimed, around USD 300m. This led to a request by NNPC to the Court for it, exceptionally, to reconsider the position, on the ground that the order for security was made without jurisdiction or was alternatively wrong in principle and/or manifestly wrong. On the former point, NNPC referred to Soleh Boneh International Ltd v Government of the...

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