Sui Northern Gas Pipelines Ltd v National Power Parks Management Company (Private) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bright |
| Judgment Date | 15 February 2023 |
| Neutral Citation | [2023] EWHC 316 (Comm) |
| Docket Number | Case No: CL-2022-000006 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 316 (Comm)
Mr Justice Bright
Case No: CL-2022-000006
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, WC4A 1NL
Khawar Qureshi KC (instructed by Collyer Bristow LLP) for the Claimants
Toby Landau KC and Peter Webster (instructed by Linklaters LLP) for the Defendants
Hearing dates: 6 February 2023
Approved Judgment
This judgment was handed down remotely at 10am on 15 February 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This judgment concerns an application by the Claimant (“SNGPL”) under Section 68 (2)(a), (b) and (d) of the Arbitration Act 1996 (but primarily Section 68(2)(a)), challenging two Awards in related LCIA arbitrations, both dated 12 December 2021. SNGPL seeks to have the Awards set aside, alternatively remitted to a differently constituted Tribunal. The application is resisted by the Defendant (“NPPMCL”), which was the counterparty to both references.
The application was supported by the witness statement of Shala Abdul Ghani, dated 6 January 2022. NPPMCL relied on the responsive witness statement of Waleed Khalid dated 29 June 2022.
SNGPL was represented by Mr Khawar Qureshi KC, NPPMCL by Mr Toby Landau KC. I am grateful to them both for the considerable assistance that they provided.
Background
The disputes arose out of two Gas Supply Agreements dated 29 October 2016 (“the GSAs”), by which SNGPL agreed to supply and NPPMCL agreed to take or pay for gas to be used at two power plants operated by NPPMCL (known as the Balloki plant and the Haveli plant). The GSAs are in materially identical terms. Each had a term of 15 years, extendable for a further 15 years upon NPPMCL's notice.
The GSAs were “take or pay” agreements, meaning that NPPMCL was obliged either to (a) take a specified quantity of gas during every month, in which case it would pay the contractual price, or (b) not take gas but pay anyway, in which case SNGPL could divert the gas not taken to other customers, with NPPMCL being entitled to be reimbursed the sums received by SNGPL from those other customers (less certain costs).
The critical provisions in each GSA are Sections 3.6 and 9.1, plus a definition relevant to interest. These provide as follows:
“Section 1.1 Definitions…
Delayed Payment Rate” – One month KIBOR plus two percent (2% per annum), compounded semi-annually, calculated for the actual number of Days which the relevant amount remains unpaid…”
…
“Section 3.6 Diversion of Gas and Take or Pay
(a) From and after the Commercial Operations Date GT1 and during a Month in the Delivery Period, the Buyer shall take and if not taken pay for the portion of the Firm Gas Allocation pertaining to that Month (the “Monthly Take-or- Pay Quantity”) divided by number of days in that Month multiplied by the difference between the number of the days in that Month and (i) the number of days (or fractions thereof) of Force Majeure Events declared by the Seller or the Buyer, (ii) the number of days (or fractions thereof) of non-delivery of Gas by the Seller in that Month for any reason, including a breach or default by the Seller or maintenance undertaken by the Seller pursuant to Section 12.1, and (iii) the number of days of Scheduled Outages in that Month notified to the Seller pursuant to Section 12.2 (in relation to the maintenance and scheduled outages, each to the extent not already catered for under the Firm Gas Order).
(b) In case Monthly Take-or-Pay Quantity is not fully utilized by the Buyer in the Complex, the Buyer may request the Seller to divert any unutilized Monthly Take-or-Pay Quantity to any other power plants (after seeking their consent) and the Seller shall arrange for such diversion at the cost and risk of Buyer subject to available capacity in its pipelines. Any amounts received by the Seller from the other power plants in consideration of supply of the diverted Gas shall, after making deduction of any additional charges incurred by the Seller in arranging the sale, be paid by the Seller to the Buyer within 3 Business Days of receipt of such amounts (along with a copy of the invoice evidencing the selling price of the unutilized Monthly Take-or-Pay Quantity). If other power plants refuse or the Seller due to technical constraints or any other reasons is unable to supply the diverted Gas to the other power plants, the Seller shall have the right to supply such Gas to any of its consumers and the amounts recovered from those consumers shall, after making deduction of any additional charges incurred by the Seller in arranging the sale, be paid by the Seller to the Buyer within 3 Business Days of receipt of such amounts (along with a copy of the invoice or any other document evidencing the selling price of the unutilized Monthly Take-or-Pay Quantity).”
…
“Section 9.1 Billing
The Seller's bills for the supply of Gas during a Billing Cycle, including any adjustments under Section 9.7, shall be furnished to Buyer on the first Business Day following each Billing Cycle. Invoices for Monthly Take or Pay Quantity shall be billed monthly.”
Both plants commenced operations on different dates in 2017. NPPMCL did not take the specified quantity of gas in every month. SNGPL did not issue any invoices in relation to the gas not taken until May 2018, when, for each plant, a single invoice was issued in relation to several months in 2017 and 2018. These invoices did not seek payment of the full price of the quantities of gas not taken. Instead, each invoice sought an amount calculated by SNGPL as reflecting the difference between the full price and the sum realised by diverting the gas to other customers who paid on a different (lower) tariff. This was referred to in the arbitrations as the “Tariff Differential Loss”.
The Tariff Differential Loss was, in effect, the inverse of the sum that Section 3.6(b) provides should be paid back to NPPMCL. Section 3.6 provides that NPPMCL should pay up-front for gas not taken, then be reimbursed if and when SNGPL sells such gas to other customers. In the event, SNGPL did not invoice in full and then reimburse. Instead, it invoiced only for what it contended was the net difference between the full price and the sum that would otherwise have been reimbursed. Furthermore, it did so some months later and by way of a single invoice for each plant, covering November 2017 to March 2018.
NPPMCL did not pay these invoices. On 7 June 2018, SNGPL encashed a Gas Supply Deposit, which NPPMCL had given under the terms of the GSA.
The references to arbitration and the Award
The dispute was referred to LCIA arbitration on 11 October 2019. There being two GSAs, there were two references, the same Tribunal being appointed in each. In each, the Claimant was NPPMCL, which sought a declaration that SNGPL had not been entitled to issue the May 2018 invoices (and others) and an order that SNGPL should repay the monies drawn encashed from the Gas Supply Deposit. It also claimed interest on those monies, at the Delayed Payment Rate of KIBOR +2%.
SNGPL resisted this claim and brought its own counterclaim. That counterclaim was not merely the mirror-image of NPPMCL's claim. As well as pleading its case as to the May 2018 invoices, SNGPL also set out a case on various further invoices, relating to months after March 2018, up to and including August 2020. I was not shown all these later invoices, but it is apparent from those that were shown to me that many of them covered only one month, and were issued within days of the end of the relevant month – sometimes on the very first day of the next month. In this respect they differed significantly from the May 2018 invoices, each of which covered multiple months and was issued a substantial period after the event.
SNGPL counterclaimed for payment in respect of the aggregate arrears under both the May 2018 invoices and these further invoices (having taken into account the sums realised by diverting gas to other customers). It also sought declaratory relief, to the effect that NPPMCL was obliged to pay future invoices in accordance with the GSA.
The parties exchanged extensive pleadings and pre- and post-hearing submissions and the Tribunal heard evidence from numerous witnesses and oral opening and closing submissions over 6 days, in September 2021. I was taken through the pleadings and written submissions with some care both by Mr Qureshi and by Mr Landau. It is striking that, even though the Defence and Counterclaim had dealt with numerous invoices, the only invoices that received any real attention in the other pleadings and in the written submissions were those of May 2018. I was not taken through the evidence in the same detail, but my impression is that this was also the case with the evidence.
The Tribunal issued Awards in each reference on 12 December 2021. The two Awards were materially identical, so I focus on the Award relating to the Balloki plant.
In the Award, after the usual introductions, the Tribunal summarised the issues identified by the parties. The Tribunal then set out a detailed summary of the position taken by NPPMCL on each issue (running over 8 pages), followed by a similarly detailed summary of the position taken by SNGPL (running over 9 pages).
Many of the points being run by both parties are not relevant to this application, but it is relevant that NPPMCL advanced a case that the May 2018 invoices were not consistent with the GSA, and that, having delayed for a substantial period before issuing the invoices, SNGPL was estopped from relying on them....
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