Shell Egypt West Manzala GmbH v Dana Gas Egypt Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Gloster J. |
| Judgment Date | 07 August 2009 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 07 August 2009 |
Queen's Bench Division (Commercial Court).
Gloster J.
John McCaughran QC (instructed by Herbert Smith LLP) for the claimant.
Robert Hildyard QC and Richard Hill (instructed by Ashurst LLP) for the defendant.
The following cases were referred to in the judgment:
Al Hadha Trading Co v Tradigrain SAUNK[2002] 2 Ll Rep 512.
American Diagnostica Inc v Gradipore Ltd(1998) 44 NSWLR 312.
Corner v C and C News Pty Ltd (unreported, 17 March 1989, NSW Sup Ct).
Essex County Council v Premier Recycling LtdUNK[2006] EWHC 3594 (TCC).
Fleming & Wendeln GmbH & Co v Sanofi SA/AGUNK[2003] EWHC 561 (Comm); [2003] 2 CLC 774.
Hadleigh Castle Gold Mines Ltd, Re[1900] 2 Ch 419.
Investors Compensation Scheme Ltd v West Bromwich Building Society[1997] CLC 1243; [1998] 1 WLR 896.
LIUNA, Local 183 v Carpenters and Allied Workers Local 27(1997) 34 OR (3d) 472.
Lyon v MorrisELR(1887) 19 QBD 139.
Raguz v Sullivan[2000] NSWCA 240.
Reliance Industries Ltd v Enron Oil and Gas India LtdUNK[2002] 1 All ER (Comm) 59.
Van Laun & Co v Barings Bros & Co LtdELR[1903] 2 KB 277.
Waterhouse & Co v GilbertELR(1885) 15 QBD 569.
White Constructions (NT) Pty Ltd v MuttonFLR(1988) 91 FLR 419.
Arbitration Appeal on question of law Excluding court's jurisdiction Agreement between parties in relation to concessions for oil and gas exploration Grounds for termination Whether agreement repudiated Whether agreement affirmed Final partial award of UNCITRAL arbitration tribunal Award to be final, conclusive and binding on parties Application for permission to appeal on points of law Whether parties had agreed to exclude jurisdiction of court Arbitration Act 1996, s. 69.
These were an application by the claimants (together Shell) for permission to appeal, pursuant to s. 69 of the Arbitration Act 1996, on points of law arising out of a final partial award in an arbitration between Shell and the defendant (Centurion) under the UNCITRAL Rules, and an application by Centurion for an order that the court had no jurisdiction to hear Shell's s. 69 application or any appeal.
The dispute arose in connection with a Farm-in and LNG cooperation agreement (the FIA) between Shell and Centurion in relation to two concessions for crude oil and gas exploration in the Nile Delta in Egypt. Under the FIA Shell was to acquire a 50% interest in the concessions.
Clause 14 of the FIA provided for English law to govern and for arbitration in London under the UNCITRAL arbitration rules with a tribunal of three. The decision of the majority of the arbitrators was to be final, conclusive and binding on the parties.
Shell purported to terminate the FIA pursuant to a contractual right of termination under cl. 3.1.8 of the FIA because the closing date had not occurred within nine months following the agreement date and under cl. 3.1.9 sought the refund of all payments made by Shell. Shell subsequently served a notice of arbitration under cl. 14 of the FIA, contending that Centurion had been in repudiatory breach of the FIA. The relief sought included claims for a declaration that Shell were entitled to terminate the FIA for repudiatory breach of contract, and/or to rescind the FIA for breach of warranty and for damages.
The tribunal held that Centurion was in repudiatory breach and in breach of warranty but that Shell had not accepted Centurion's repudiatory breach, nor had it elected to rescind the FIA for breach of warranty. Instead Shell had in the circumstances affirmed the FIA. Accordingly the tribunal rejected all Shell's claims against Centurion.
Centurion submitted that cl. 14 of the FIA excluded the right of appeal under s. 69 of the 1996 Act by virtue of the use of the words final, conclusive and binding, in particular with the addition of the word conclusive.
Held, dismissing Centurion's application and giving Shell permission to appeal on points of law:
1. The phrase final, conclusive and binding, as it appeared in the context of cl. 14 of the FIA, was not to be construed as an agreement excluding the parties' rights of appeal, in relation to a question of law, under s. 69 of the 1996 Act. In order to amount to an agreement as envisaged by s. 69(1) of the 1996 Act, sufficiently clear wording was necessary, albeit that no express reference to s. 69 was required. In the context of a fairly standard governing law and arbitration clause, such as cl. 14 of the FIA, the use of the words final, conclusive and binding in isolation would not convey to a reasonable person, having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, that the parties had agreed to exclude all rights of appeal on points of law under s. 69. Although, on their face, the words final, conclusive and binding were words of considerable width, which might, in an appropriate context, appear to be sufficient to exclude a right of appeal, the reality was that the expression final and binding, in the context of arbitration, and arbitration agreements, had long been used to state the well-recognised rule in relation to arbitration, namely that an award was final and binding in the traditional sense and created a res judicata between the parties. The expression was used for such purpose in s. 16 of the Arbitration Act 1950, which was re-enacted in s. 58(1) of the 1996 Act, with the added provision contained in section 58(2), that the finality and binding nature of an award did not exclude the possibility of challenging an award, by any available arbitral process of appeal or review or otherwise in accordance with Part 1 of the 1996 Act. That provision was inserted because the reference to finality in s. 16 of the 1950 Act was sometimes wrongly assumed to exclude the possibility of challenging an award. (Investors Compensation Scheme Ltd v West Bromwich Building Society[1997] CLC 1243; [1998] 1 WLR 896 applied and Essex County Council v Premier Recycling LtdUNK[2006] EWHC 3594 (TCC) followed.)
2. By adding the word conclusive the parties had not so modified the usual provision of the UNCITRAL rules as to exclude any statutory right of appeal on a point of law under s. 69. The addition of that word did not connote, either by its normal meaning, or, if different, by the meaning it would convey to the reasonable person having all the relevant background knowledge, that the parties were agreeing to exclude their statutory right of appeal on points of law. It certainly did not do so with sufficient clarity to amount to an exclusion agreement. Some meaning had to be given to the word conclusive in the phrase final, conclusive and binding on the parties. However, all three words, in context, were apt to describe the effect of a valid arbitral award on the parties, even in the absence of any agreement excluding the right of appeal. To some extent the meanings conveyed by each of the three words overlapped; but that did not point to a conclusion that the clause, let alone the word conclusive, should be construed as an agreement to exclude rights of appeal. A phrase such as final, conclusive and binding in the context of an arbitration agreement such as cl. 14 of the FIA did no more than restate what had long been the rule in relation to arbitrations, namely that an award was final, conclusive and binding in the traditional sense, in that it created a res judicata and issue estoppel. Such words, by themselves and absent any other contextual indicators, were not sufficient to amount to an agreement to exclude rights of appeal under s. 69 of the 1996 Act. (Al Hadha Trading Co v Tradigrain SAUNK[2002] 2 Ll Rep 512 considered and Corner v C and C News Pty Ltd (unreported, 17 March 1989, NSW Sup Ct) applied.)
3. Accordingly, Centurion's jurisdiction application was dismissed. Shell's proposed appeal raised questions of law and the statutory criteria set out in s. 69(3) were satisfied. Accordingly, Shell was given permission to appeal the questions of law arising out of the award.
Gloster J:
1. This is my judgment in relation to two applications before the court in this matter:
(i) an application by the claimants (together Shell) for permission to appeal, pursuant to section 69 of the Arbitration Act 1996 (the 1996 Act), on points of law arising out of a Final Partial Award dated 11 March 2009 (the Award) in the matter of an arbitration between Shell and the defendant to the arbitration claim, Dana Gas Egypt Limited (formerly Centurion Petroleum Corporation) (Centurion), under the UNCITRAL Rules (the appeal application); and
(ii) an application by Centurion for an order that this court has no jurisdiction to hear Shell's application for permission to appeal or any substantive appeal, under section 69 of the 1996 Act (the jurisdiction application).
2. The Award was made by an UNCITRAL arbitration tribunal (the Tribunal), consisting of Ali Malek QC (Chairman), Michael Brindle QC and Stephen York, in Centurion's favour.
3. The dispute arose in connection with a Farm-In and LNG Cooperation Agreement dated 17 March 2006 between Shell and Centurion in relation to two concessions for crude oil and gas exploration in the Nile Delta in Egypt (the FIA and the Concessions). Under the FIA Shell was to acquire a 50% interest in the Concessions.
4. The FIA was subject to a mandatory arbitration provision at clause 14. That provided:
The construction, validity and performance of this Agreement shall be governed by English Law.
Any disputes arising out of or in connection with this Agreement or the application, implementation, validity, breach or termination thereof shall be settled by arbitration in London, under the UNCITRAL Arbitration Rules. The number of arbitrators shall be three. The appointing authority shall be the London Court of International Arbitration. The arbitration shall be conducted in the English language. The arbitrators shall...
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