IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation

JurisdictionEngland & Wales
JudgeMR JUSTICE GROSS,THE HON. MR JUSTICE TOMLINSON
Judgment Date17 April 2008
Neutral Citation[2005] EWHC 726 (Comm),[2008] EWHC 797 (Comm)
Docket NumberCase No: 2004 Folio 1031,Case No: 2004 1031
CourtQueen's Bench Division (Commercial Court)
Date17 April 2008
Between
Ipco (Nigeria) Limited
Claimant
and
Nigerian National Petroleum Corporation
Defendant

[2005] EWHC 726 (Comm)

Before

Mr Justice Gross

Case No: 2004 1031

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

COMMERCIAL COURT

Ricky Diwan (instructed by Osborne Clarke) for the Claimant

Sam Wordsworth (instructed by Hunton & Williams) for the Defendant

Hearing dates: 7 th & 12 th April 2005

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.

MR JUSTICE GROSS MR JUSTICE GROSS

INTRODUCTION

1

On the 29 th November, 2004, David Steel J ordered, ex parte, that the Defendant ("NNPC") pay the sterling equivalent of US$152,195,171 and Naira 5,000,000 awarded to the Claimant ("IPCO") by an arbitration award of a distinguished panel of Nigerian arbitrators, dated Lagos 28 th October, 2004, together with interest to date ("the order", "the award" and "the arbitrators" or "the tribunal" respectively).

2

There are now before the Court the following applications:

i) An application by NNPC, to set aside the order, pursuant to ss. 103(2) (f) and 103(3) of the Arbitration Act 1996 ("the Act") ("the application to set aside");

ii) In the alternative, an application by NNPC that the enforcement of the order be adjourned, pursuant to s.103(5) of the Act ("the application to adjourn");

iii) An application by IPCO, pursuant to s.103(5) of the Act, in substance that, in the event of NNPC failing on (i) but succeeding on (ii) above, then NNPC should provide security in the sum of US$50 million (or such other sum as the Court thinks fit), failing which IPCO be permitted to enforce the award as a Judgment of the Court ("the application for security").

3

In a nutshell, the background is as follows. Both IPCO and NNPC are Nigerian entities. By a contract dated 14 th March, 1994 ("the contract"), IPCO, a turnkey contractor specialising in the construction of onshore and offshore oil and gas facilities, agreed to undertake works for the design and construction for NNPC of a petroleum export terminal, in the Port Harcourt area of Nigeria and known as the Bonny Export Terminal Project ("the BET Project"). The contract was to be governed by and construed in accordance with Nigerian Law. Cl. 65 of the contract provided for arbitration in Lagos, in accordance with the Nigerian Arbitration and Conciliation Act 1990 ("the ACA"). The total consideration for IPCO's services was a little over US$250 million and it was anticipated that both phases of the BET Project (i.e., design and thereafter construction) would take up to 24 months. In the event, disputes between IPCO and NNPC arose out of or in connection with the contract; the casus belli was the fact that the BET Project took some 22 months longer to complete than provided for in the contract. Ultimately, the matter proceeded to arbitration before the arbitrators, who produced the award, now the subject of the applications before this Court.

4

On the 15 th November, 2004, therefore pre-dating the order (of David Steel J), NNPC commenced proceedings before the Federal High Court in Lagos to set aside the award and for a stay of execution. NNPC's applications in the Nigerian proceedings have since been amended and expanded upon. There is also before the Federal High Court in Lagos a notice of preliminary objection, filed by IPCO, alleging that NNPC's application to set aside the award is itself frivolous, vexatious, an abuse of process and calculated to delay enforcement of the award. The Nigerian proceedings are currently pending.

5

At the conclusion of the hearing, I indicated to the parties my decision on the various applications before me. I further indicated that I would give my reasons later. I now do so. I wish at the same time to acknowledge the very considerable assistance given to the court by Mr. Wordsworth, for NNPC and Mr. Diwan, for IPCO.

THE FRAMEWORK

6

The framework for the recognition and enforcement of a New York Convention Award is found in ss. 100 and following of the Act. S.100 provides, insofar as material, as follows:

"(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.

(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."

7

As Nigeria is a state specified by Order in Council under s.100(3) of the Act as being a party to the New York Convention, there can be no doubt (and it was not in dispute before me) that the award is a New York Convention Award.

8

S.103 of the Act contains the exclusive and exhaustive grounds on which enforcement of a New York Convention Award may be refused. Insofar as material:

"(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 person against whom it is invoked proves –

(f) that the award has … been …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 it would be contrary to public policy to recognise or enforce the award."

9

S.103(5) of the Act provides as follows:

"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."

10

By the provisions of s.103 as set out above, the Act carries into English Law the substance of Arts. V.1(e), V.2(b) and VI of the New York Convention.

11

For present purposes, the relevant principles can be shortly stated. First, there can be no realistic doubt that s.103 of the Act embodies a pre-disposition to favour enforcement of New York Convention Awards, reflecting the underlying purpose of the New York Convention itself; indeed, even when a ground for refusing enforcement is established, the court retains a discretion to enforce the award: Mustill & Boyd, Commercial Arbitration, 2nd edition, 2001 Companion, at p.87.

12

Secondly, s.103(2)(f) is only applicable when there has been an order or decision suspending the award by the court in the country of origin of the award ("the country of origin"). S.103(2)(f) is not triggered automatically by a challenge brought before the court in the country of origin. This conclusion flows from the wording of s.103(2)(f) itself, it is supported by leading commentators ( Van den Berg, The New York Convention of 1958 (1981), at p.352, Fouchard, Gaillard, Goldman on International Commercial Arbitration (1999), at pp. 980–1) and it is consistent with the provisions of s.103(5) of the Act—which would be otiose, or at least curious, if an application to the court in the country of origin automatically resulted in the award being suspended.

13

Thirdly, considerations of public policy, if relied upon to resist enforcement of an award, should be approached with extreme caution: DST v Rakoil [1987] 2 Lloyd's Rep. 246, at p.254. The reference to public policy in s.103(3) was not intended to furnish an open-ended escape route for refusing enforcement of New York Convention awards. Instead, the public policy exception in s.103(3) is confined to the public policy of England (as the country in which enforcement is sought) in maintaining the fair and orderly administration of justice: Mustill & Boyd, at pp. 91–2.

14

Fourthly, s.103(5) "achieves a compromise between two equally legitimate concerns": Fouchard, at p.981. On the one hand, enforcement should not be frustrated merely by the making of an application in the country of origin; on the other hand, pending proceedings in the country of origin should not necessarily be pre-empted by rapid enforcement of the award in another jurisdiction. Pro-enforcement assumptions are sometimes outweighed by the respect due to the courts exercising jurisdiction in the country of origin—the venue chosen by the parties for their arbitration: Mustill & Boyd, at p.90.

15

Fifthly, the Act does not furnish a threshold test in respect of the grant of an adjournment and the power to order the provision of security in the exercise of the court's discretion under s.103(5). In my judgment, it would be wrong to read a fetter into this understandably wide discretion (echoing, as it does, Art. VI of the New York Convention). Ordinarily, a number of considerations are likely to be relevant: (i) whether the application before the court in the country of origin is brought bona fide and not simply by way of delaying tactics; (ii) whether the application before the court in the country of origin has at least a real (i.e., realistic) prospect of success (the test in this jurisdiction for resisting summary judgment); (iii) the extent of the delay occasioned by an adjournment and any resulting prejudice. Beyond such matters, it is probably unwise to generalise; all must depend on the circumstances of the individual case. As it seems to me, the right approach is that of a sliding scale, in any event embodied in the decision of the Court of Appeal in Soleh Boneh v Uganda Govt. [1993] 2 Lloyd's Rep. 208 in the context of the question of security:

"….two important factors must be considered on such an application,...

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