National Iranian Oil Company v Crescent Petroleum Company International Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Picken |
| Judgment Date | 30 June 2022 |
| Neutral Citation | [2022] EWHC 1645 (Comm) |
| Docket Number | Case No: CL-2021-000621 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 1645 (Comm)
Mr Justice Picken
Case No: CL-2021-000621
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
Royal Courts of Justice
Rolls Building, Fetter Lane
London, EC4A 1NL
Mark Howard QC, Simon Rainey QC, Natalie Moore and Emilie Gonin (instructed by Eversheds Sutherland (International) LLP) for the Claimant.
Constantine Partasides QC, Ricky Diwan QC and Tariq Baloch (instructed by McDermott Will & Emery UK LLP) for the Defendants.
Hearing dates: 11 and 12 May 2022.
Judgment provided in draft: 23 June 2022.
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 the Claimant, National Iranian Oil Company (‘NIOC’), for permission to appeal against an award issued on 27 September 2021 (the ‘Partial Award’) under s. 69 of the Arbitration Act 1996 (the ‘1996 Act’). As such, it is a matter which would ordinarily be dealt with on the papers. However, owing to the complexity of the application (there were over ten bundles and the arbitral awards and submissions ran to many hundreds of pages) and a jurisdictional objection which has been made by the Defendants, Crescent Petroleum Company International Limited and Crescent Gas Corporation Limited (‘Crescent Petroleum’ and ‘Crescent Gas’ respectively and together ‘Crescent’), in considering the permission application on the papers, I decided that it would be appropriate to determine that application at an oral hearing and to hear the substantive appeal on a de bene esse basis in the event that permission were to be granted.
The underlying arbitration proceedings
The dispute between the parties arises under a Gas Sales and Purchase Contract concluded by NIOC and Crescent Petroleum on 25 April 2001, as amended from time to time (the ‘GSPC’). Under the GSPC, NIOC agreed to supply and sell to Crescent Petroleum and Crescent Petroleum agreed to purchase from NIOC, specified quantities of natural gas, at the price and on the terms and conditions there provided, for a period of 25 years, commencing on 1 December 2005.
NIOC failed to deliver gas on 1 December 2005 or at any time thereafter up until 11 September 2018, on which date Crescent terminated the GSPC.
Pursuant to Article 16 of the GSPC, on 26 July 2003, Crescent Petroleum assigned its rights to Crescent Gas before the first delivery of gas was due.
Crescent commenced arbitration on 15 July 2009. Strikingly, as will appear, although the parties' arbitration agreement provides for an expedited arbitral process lasting approximately one year from commencement of the arbitration to a final award, that arbitration has been ongoing for over 12 years.
Thus, on 25 February 2010, by Procedural Order No. 1, the Tribunal as then constituted ordered the bifurcation of the proceedings between a phase covering all jurisdictional issues and all issues relevant to liability (the ‘Jurisdiction and Liability Phase’), and a phase covering remedies (the ‘Remedies Phase’) in the event that liability was established.
On 31 July 2014, a majority of the Tribunal (as then differently constituted) issued an award dealing with jurisdiction and liability (the ‘Award on Jurisdiction and Liability’). By that award, the Tribunal confirmed that it had jurisdiction over the claims; declared that NIOC had been in breach since 1 December 2005 and remained in breach of its obligation to deliver gas under the terms of the GSPC; and dismissed NIOC's defences and counterclaims.
In 2016, challenges to the Award on Jurisdiction and Liability were rejected by the Commercial Court.
Hearings during the subsequent Remedies Phase included an evidentiary hearing in November 2016, a hearing for closing submissions in October 2017 and a final hearing before the Tribunal in August 2020. As presently constituted, the Tribunal members are: The Hon Murray Gleeson AC, the former Chief Justice of Australia; The Rt. Hon. The Lord Phillips of Worth Matravers, KG, PC, the former Lord Chief Justice; and Sir Jeremy Cooke, a former High Court Judge and judge of the Commercial Court.
During the Remedies Phase, NIOC advanced arguments and led evidence relating to sanctions and various other events affecting NIOC's ability to supply and/or Crescent's ability to receive, pay for and/or benefit from gas under the GSPC in order to reduce the amount of recoverable damages. NIOC's contention, in short, was that, in assessing Crescent's loss and considering the ‘but for’ counterfactual of what would have happened had the GSPC been performed, the Tribunal must take into account the fact that sanctions (and other external events) would have reduced the amount of gas which could have been supplied and/or received under the GSPC and/or would otherwise have affected Crescent's ability to benefit from the GSPC.
In response, Crescent contended that many of those arguments were precluded by the doctrines of res judicata and abuse of process because they were an attempt to circumvent the Tribunal's findings in the Award on Jurisdiction and Liability and/or were arguments that either were advanced or, importantly in the context of the proposed appeal, could and should have been advanced during the liability phase.
The Tribunal agreed with Crescent's submissions, going on at paragraph 887 of the Partial Award to determine that NIOC was liable to pay damages to Crescent Gas for NIOC's breaches of the GSPC up to 31 July 2014: US$1,344.70 million in respect of Crescent Gas's loss of profits from on-sale of gas that should have been supplied under the GSPC; and US$1,085.27 million in respect of Crescent Gas's liability to Crescent National Gas Corporation Limited (‘Crescent National Gas’) in respect of Crescent National Gas's loss of profits from on-sale of gas and sale of products.
Crescent's jurisdictional objection
Before coming on to deal with NIOC's proposed appeal, I need, first, to address a threshold objection taken by Crescent, namely that it is not open to NIOC to appeal because the parties have agreed that the right to appeal on a point of law is excluded, the parties having “otherwise agreed” to waive their right to appeal a point of law under s. 69 of the 1996 Act, which provides as follows:
“Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.”
On behalf of Crescent, Mr Partasides QC submitted that the parties “otherwise agreed” through their incorporation of the 1998 International Chamber of Commerce rules (the ‘ICC Rules’) in their contractual agreement, specifically Article 28.6, which is in these terms:
“Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.”
Mr Partasides QC highlighted in this connection how in this respect in Lesotho Highlands Development Authority v Impregilo SpA and others [2005] UKHL 43 the House of Lords decided that the wording of Article 28.6 of the ICC Rules is sufficient to exclude the s. 69 right of appeal.
Article 22.2 of the GSPC provides that any dispute, controversy or claim is to be finally settled by arbitration in accordance with the “Procedures for Arbitration” as contained in Annex 2, which at paragraph 9 provides that in the case of a gap in the procedural rules of arbitration “the procedural rules of arbitration of the International Chamber of Commerce (ICC) shall apply”.
Specifically, Article 22.2 is in these terms:
“Arbitration
The Parties shall use all reasonable efforts to settle amicably within 60 days, through negotiations, any dispute arising out of or in connection with this Contract or the breach, termination or invalidity thereof. Any dispute, controversy or claim arising out of or relating to this Contract, or the breach, termination or invalidity thereof shall be finally settled by arbitration before three arbitrators, in accordance with a “Procedures for Arbitration” (attached hereto as Annex 2) which will survive the termination or suspension of this Contract. Any award of the arbitrators shall be final and binding upon the Parties. Either Party may seek execution of the award in any court having jurisdiction over the Party against whom execution is sought.”
Annex 2, then, states (where relevant) as follows:
“8. The following procedural rules inter alia shall in any event be taken as agreed:
(a) the language of the arbitration shall be English;
(b) the tribunal may in its discretion hold a hearing and make an award in relation to any preliminary issue at the request in writing of either Party and shall do so at the joint request in writing of both Parties;
(c) the tribunal shall hold a hearing(s), in order to determine substantive issues unless the Parties agree otherwise in writing;
(d) all hearings shall be held in private;
(e) the tribunal shall issue its final award within 60 (sixty) days of the last hearing of the substantive issues in dispute between the Parties, unless the Parties otherwise agree in writing;
(f) any award or procedural decision of the tribunal shall be made by a majority of the arbitrators;
(g) the award shall be made in writing and shall be final...
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