IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field |
| Judgment Date | 14 March 2014 |
| Neutral Citation | [2014] EWHC 576 (Comm) |
| Docket Number | Claim No. 2004 Folio 1031 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 March 2014 |
[2014] EWHC 576 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF AN ARBITRATION CLAIM
The Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Justice Field
Claim No. 2004 Folio 1031
Michael Black QC and Edward Knight (instructed by Weightmans LLP) for the Claimant/Applicant
Jonathan Nash QC, James WillanandCatherine Jung (instructed by Stephenson Harwood LLP) for the Defendant/Respondent
Hearing dates: 16, 17, 21, 22, 23 & 24 October 2013
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.
Introduction
This is an application by IPCO Nigeria Limited ("IPCO") to enforce an arbitral award dated 28 October 2004 ("the Award") under s.101 (2) of the Arbitration Act 1996 ("the Act"). It is the third such application by IPCO whose first task is to satisfy the Court that there has been a sufficient change in circumstances since the Court ordered (by consent) on 13 May 2008 to adjourn enforcement of the Award under s. 103 (5) of the Act to warrant a re-exercise of the discretion vested in the Court to enforce the Award under ss. 101 and 103 of the Act.
The factual background
IPCO is a Nigerian subsidiary of a Hong Kong company. It was incorporated in 1990 to carry on business as a turnkey contractor specialising in the construction of on-shore and off-shore oil and gas facilities. It is now effectively a shell company kept in existence for the purpose of enforcing the Award. By a contract dated 14 March 1994, IPCO agreed for a lump sum price to design and construct for the Defendant ("NNPC") a petroleum export terminal in the Port Harcourt area of Nigeria to be known as the Bonny Export Terminal ("BET"). The contract was governed by Nigerian law and contained an arbitration clause under which disputes between the parties were to be referred to arbitration in accordance with the Nigerian Arbitration and Conciliation Act 1990 ("the Nigerian Act").
There were disputes between the parties, particularly over a claim by IPCO for the cost of Variations which it said were responsible for a 22 month delay in completing the project. There followed a lengthy arbitration culminating in the Award under which IPCO was awarded the following sums:
(1) Head of Claim No. 2 — Non-payment [of invoices]: US$1,641,234.00.
(2) Head of Claim No. 3 — Variations: US$58,521,249.55.
(3) Head of Claim No. 4 — Phase II Prolongation: US$53,563,352.00.
(4) Head of Claim No. 5 — Standby: US$3,870,679.00.
(5) Head of Claim No. 6 — Escalation of Contract Price: US$618,116.00.
(6) Head of Claim No. 7 — Financing Charges: US$34,514,356.00.
On 15 November 2004, NNPC issued an Originating Motion in the Federal High Court in Lagos seeking to have the Award set aside under the Nigerian Act on the grounds that the arbitral Tribunal ("the Tribunal") lacked jurisdiction and had misconducted itself. Under Nigerian law, an error on the face of the award can amount to "misconduct", although the mere fact that the supervisory Court would have decided a question of construction differently than did the Tribunal is not a ground for setting the award aside. A failure to give reasons can also amount to misconduct.
On 22 November 2004, IPCO filed a Notice of Preliminary Objection to NNPC's Motion seeking to strike it out on the ground that it was frivolous, vexatious and an abuse of process in that it was calculated to delay enforcement of the Award and to interfere with or delay the due administration of justice.
Nigeria is a New York Convention state and on 29 November 2004, on IPCO's ex parte application, David Steel J ordered, pursuant to s. 101 (2) and (3) of the Act, the payment by NNPC to IPCO of the sterling equivalent of the total of the sums awarded to IPCO under the Award (US$152,195,171+ Naira 5,000,000). NNPC then applied to have David Steel J's order set aside under ss. 103 (2) (f) and 103 (3) of the Act, alternatively to have the enforcement of that order adjourned pursuant to s. 103 (5); and IPCO cross-applied for security in the sum of US$50 million.
In relevant part ss.100 and 101 of the Act provide:
S.100 (1) In this Part a 'New York Convention award' means an award made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention. …
(3) If Her Majesty by Order in Council declares that a state specified in the Order is a party to the New York Convention, or is a party in respect of any territory so specified, the Order shall, while in force, be conclusive evidence of that fact.
(4) In this section 'the New York Convention' means the convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10 th June 1958.
S.101(1) A New York Convention award shall be recognised as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.
(2) A New York Convention award may, by leave of the Court, be enforced in the same manner as a judgment or order of the Court to the same effect.
…
(3) Where leave is so given, judgment may be entered in terms of the award.
…
103(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.
(2) Recognition or enforcement of the award may be refused if the party against whom it is invoked proves—
…
(f) that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.
(3) Recognition or enforcement of the award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognise or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be recognised or enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted.
(5) Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2)(f), the Court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award.
It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security.
NNPC's applications and IPCO's cross-application were heard by Gross J, whose judgement is reported at [2005] EWHC 726 (Comm). In short, acting under s. 101 (5) of the Act, Gross J adjourned the enforcement of the Award ordered by David Steel J on terms that NNPC: (i) pay US$13,102,361.72 to IPCO (this sum being indisputably due); and (ii) provide security in the sum of US$50 million. Both parties were given liberty to apply.
In coming to his decision, Gross J adopted the approach of the Court of Appeal in Soleh Boneh v Uganda Government [1993] 2 Lloyd's Rep 208 and considered the strength of NNPC's challenges in the Lagos Federal Court to various of the sums awarded by the Tribunal. (NNPC's Motion to set the Award aside and IPCO's Preliminary Objection thereto had yet to be heard).
In respect of the Financing Charges award, Gross J held 1 that NNPC had at least an arguable case that the Tribunal had been guilty of misconduct in: (i) wrongly calculating these charges on the basis of the claimed figure for escalation rather than on the awarded figure; and (ii) failing to appreciate that IPCO did not incur financing
charges in respect of the 25% profit mark-up. The sums involved here were respectively US$6 million (approx) and US$4 million (approx).Gross J also held 2 that NNPC had an arguable case that in awarding the sums they did for Variations, Prolongation and Financing Charges, the Tribunal was guilty of duplication and of failing to give adequate reasons for preferring IPCO's case to that of NNPC. IPCO had claimed the cost of Variations in accordance with the costs provisions in clauses 52 and 55 of the contract and it was arguable that the costs therein defined already took into account the sums claimed separately for prolongation. NNPC therefore had a realistic prospect of reducing the awarded sums by US$88 million, leaving US$58.5 million for Variations for which the Award would stand 3. NNPC also had an arguable case that the Tribunal had wrongly construed the force majeure clause by applying its payment provision in accepting IPCO's claims when that provision only applied if the contract had been terminated, which was not the case. However, it was difficult to assess the impact of this challenge on the sums awarded because the Tribunal did not quantify the impact of each period of delay.
In paragraphs 52 (i) and 53 of his judgement, Gross J said:
In the various respects already outlined, the NNPC application does have a realistic prospect of success. In particular, there is a measure of concern as to whether IPCO's recovery has been very substantially duplicated. However, as also underlined, the NNPC application faces formidable hurdles, not least in moving from well-founded criticism of the Tribunal (if such is established) to making good a case of misconduct within s.30 of the [the Nigerian Act]. Employing the...
To continue reading
Request your trial
-
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation
...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 bon......
-
His Royal Highness Emere Godwin Bebe Okpabi and Others v Royal Dutch Shell Plc (First Defendant) Shell Petroleum Development Company of Nigeria Ltd (Second Defendant)
...1157; [2009] Bus LR 5451; [2009] 1 All ER (Comm) 611; [2009] 1 Lloyd’s Rep 89, CAIPCO (Nigeria) v Nigerian National Petroleum Corpn [2014] EWHC 576 (Comm); [2015] 1 All ER (Comm) 593; [2014] 1 Lloyd’s Rep 625; [2015] EWCA Civ 1144; [2016] 1 Lloyd’s Rep 5; [2015] EWCA Civ 1145; [2016] 1 Lloy......
-
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation
...COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT MR JUSTICE FIELD [2014] EWHC 576 (Comm) Royal Courts of Justice Strand, London, WC2A 2LL Lord Justice Christopher Clarke Lord Justice Burnett and Lord Justice Sales Case No: A3/......
-
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation
...COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT MR JUSTICE FIELD [2014] EWHC 576 (Comm) Royal Courts of Justice Strand, London, WC2A 2LL Lord Justice Christopher Clarke Lord Justice Burnett and Lord Justice Sales Case No: A3/......