IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation
| Jurisdiction | England & Wales |
| Judge | Lord Justice Christopher Clarke,Lord Justice Burnett,Lord Justice Sales |
| Judgment Date | 10 November 2015 |
| Neutral Citation | [2015] EWCA Civ 1144 |
| Date | 10 November 2015 |
| Docket Number | Case No: A3/2014/1282 |
| Court | Court of Appeal (Civil Division) |
[2015] EWCA Civ 1144 and 1145
Court of Appeal (Civil Division).
Christopher Clarke, Burnett and Sales L JJ.
Michael Black QC and Edward Knight (instructed by Weightmans LLP) for the appellant.
Jonathan Nash QC and James Willan (instructed by Stephenson Harwood LLP) for the respondent.
The following cases were referred to in the judgment:
Continental Transfer Technique Ltd v Federal Government of NigeriaUNK (2010) 697 F Supp 2d 46.
Europcar Italia SpA v Maiellano Tours (1998) 156 F 3d 319.
Ladd v MarshallWLR [1954] 1 WLR 1489.
Soleh Boneh International v UgandaUNK [1993] 2 Ll Rep 208.
Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd [1999] CLC 1176; [2000] QB 288.
The following additional cases were referred to in the supplementary judgment:
Continental Transfert Technique Ltd v NigeriaUNK [2010] EWHC 780 (Comm).
Dardana Ltd v Yukos Oil CoUNK [2002] EWCA Civ 643; [2002] CLC 1120.
Dowans Holding SA v Tanzania Electric Supply Co LtdUNK [2011] EWHC 1957 (Comm).
Monde Petroleum SA v WesternZagros LtdUNK [2015] EWHC 67 (Comm); [2015] 1 CLC 49.
Arbitration — Enforcement — Fraud — Delay — Nigeria — Security — Enforcement of Nigerian arbitration award — Enforcement adjourned on provision of security pending challenge to award in Nigeria — Proceedings in Nigeria taking much longer than expected — Allegation that award obtained by fraud — Whether discretion to adjourn enforcement should be re-exercised — Whether fraud issue should be determined in England in enforcement proceedings — Arbitration Act 1996, s. 101, 103.
This was an appeal from a decision of Field J ([2014] EWHC 576 (Comm)) refusing to enforce an arbitration award made in Nigeria in October 2004 in favour of the appellant (IPCO), and continuing an adjournment of the enforcement proceedings.
The respondent state-owned corporation (NNPC) had engaged IPCO in 1994 to design and build a petroleum export terminal. The terminal was completed in 1998 and commissioned in 2000. In 2003 IPCO gave notice of arbitration in respect of claims under the contract. In 2004 the arbitrators awarded IPCO US$152,195,171, together with interest at 14% per annum. Nothing had been paid and the amount of the award, with interest, exceeded $340 million.
NNPC challenged the award in Nigeria and IPCO filed a notice of objection to the challenge. Meanwhile IPCO sought to enforce the award in England pursuant to s. 101 of the Arbitration Act 1996. Gross J ([2005] EWHC 726 (Comm); [2005] 1 CLC 613) adjourned enforcement of the award on payment by NNPC of $13 million which it accepted was due and the provision of $50 million by way of security.
The proceedings in Nigerian took much longer than expected and in 2007 IPCO applied in England for further consideration of the question of enforcement on the basis that its preliminary objection in Nigeria had still not been heard and was unlikely to be determined for several years. Tomlinson J ([2008] EWHC 797 (Comm); [2008] 1 CLC 738) ordered payment of a further substantial sum due under the award which NNPC had no realistic prospect of challenging, together with interest, and granted a stay pending appeal on the provision of $30 million by way of further security. The Court of Appeal dismissed an appeal by NNPC ([2008] EWCA Civ 1157; [2008] 2 CLC 550).
NNPC then applied to stay enforcement of the order of Tomlinson J on the ground that the award had been obtained by fraud. In 2009 parts of Tomlinson J's order were set aside by consent, and enforcement of the award was adjourned, on the basis that the fraud allegations should be determined by the Nigerian court.
In 2012 IPCO renewed its application to enforce the award in the sum of $100 million plus interest, as the amount of the award that was on any view due. In 2014 Field J held ([2014] EWHC 576 (Comm)) that IPCO had failed to establish any change of circumstances justifying a further application to enforce the award, and that in any event there was a prima facie case of fraud which was fit to go to trial in Nigeria. If he had been exercising the discretion afresh he would have ordered an adjournment on terms that the existing security totalling $80 million was maintained, notwithstanding the likely delay in determining NNPC's challenge to the award in Nigeria.
IPCO appealed, arguing that the validity of the award, and hence its entitlement to enforce, would not be determined in Nigeria in any commercially relevant timescale.
Held, allowing the appeal in part:
1. It would not be right to approach the case on the basis that the challenge to the award would never be determined in Nigeria. However, the likely delay was plainly a material factor. Insofar as the judge had decided that the court should only consider the re-opening of the exercise of its discretion if IPCO showed that the fraud case was hopeless or not made bona fide, he applied too strict a test. The relevant question was whether there had been a significant change in circumstances since the consent order which impinged on or related to the reason for seeking a variation. Whilst the consent order had been made on the basis that there was a sufficiently arguable challenge to the award to justify a further adjournment of the question of execution, a significant change to the plausibility of the argument for annulment of the award might justify a reconsideration of the exercise of discretion, especially if taken with other factors such as delay, even if it could not be said that the fraud case was completely hopeless. (Soleh Boneh International v UgandaUNK[1993] 2 Ll Rep 208considered.)
2. There had not been by the time of the hearing below such a change of circumstances relating to the plausibility of the fraud challenge as required the judge to decide that the discretion should be exercised again in favour of enforcement. The strength of the case was an important but by no means the only consideration. Another relevant consideration was the prospect of repayment by IPCO if, after payment by NNPC, the award was eventually set aside, in whole or in part. Since the award was IPCO's only real asset, the prospect of repayment was illusory. By the time Field J gave judgment in 2014 the fraud challenge initiated in Nigeria in 2009 had not proceeded at all. The delay appeared, in large measure, to result from the workings of the Nigerian legal system. It had become plain, from what had and had not occurred, and from the expert evidence, that the situation in respect of the delay to be expected before any resolution of NNPC's challenge to the award has gone beyond the “catastrophic” description adopted by Tomlinson J in 2008. The judge had erred in failing to give sufficient weight to the character and extent of the delay which was such that any challenge to the award was not likely to be resolved for 20 years or more, and in failing to recognise that there had been a significant change in circumstances.
3. It was necessary to exercise the discretion afresh. The appropriate course was to adjourn IPCO's application to enforce pending determination by the Commercial Court pursuant to s. 103(3) of the Act of whether the award should not be enforced in whole or in part because it would be against English public policy so to do. That was conditional on the provision by NNPC of further security of $100 million, and if such security was not provided IPCO would have permission to enforce the award. If the English court decided that enforcement was not contrary to public policy, then IPCO could enforce it. In that way the question whether the award had been obtained by fraud would be determined within a reasonable timescale and with a depth of review which was unlikely to be less than that of the courts of Nigeria. If enforcement was consistent with English public policy, the award would be enforceable in England notwithstanding the challenges to it in Nigeria. The English court was not bound to defer enforcement until the court of the seat had ruled on a challenge, however long that might take. The award should be enforced in England (unless the fraud challenge succeeded), notwithstanding the existence of a non-fraud challenge which would only finally be determined in Nigeria in a far too distant future.
(See also Supplementary Judgment [2015] EWCA Civ 1145; [2015] 2 CLC 868)
Christopher Clarke LJ:
1. The question at issue in this appeal is whether Field J was right to decline to enforce an arbitration award made in Nigeria in October 2004 and, instead, to continue an adjournment of the enforcement proceedings begun subsequently in this jurisdiction (see [2014] EWHC 576 (Comm)).
2. The background to this case extends over some 11 years. For reasons which will become apparent it is necessary to record rather a lot of it.
3. IPCO (Nigeria) Ltd (“IPCO”) is a Nigerian corporation. It is a member of a Hong Kong group of companies. It was incorporated in 1990 to carry on business as a turnkey contractor specialising in the construction of on-shore and offshore oil and gas facilities. Apart from its claim to enforce the award it has no assets to speak of. The Nigerian National Petroleum Corporation (“NNPC”) is, as its name suggests, a State owned corporation possessing extensive petroleum and petroleum related assets.
4. On 14 March 1994 IPCO entered into a contract with NNPC for the design and construction, for a lump sum, of a petroleum export terminal, which came to be called the Bonny Export Terminal (“the Terminal”), in the Port Harcourt area of Nigeria. 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”).
5. Mechanical completion occurred on 16 November 1998 and on 1 December 2000 the...
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