Union of India v Reliance Industries Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 09 June 2022 |
| Neutral Citation | [2022] EWHC 1407 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2021-000100 |
[2022] EWHC 1407 (Comm)
Sir Ross Cranston
Sitting as a High Court Judge
Case No: CL-2021-000100
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND & WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Louis Flannery QC and A. K. Ganguli SC (instructed by DENTONS) for the APPLICANT
Harish Salve QC, Matthew Gearing QC and Sheila Ahuja (instructed by ALLEN & OVERY) for the RESPONDENTS
Hearing dates: 17 and 18 May 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Sir Ross Cranston SITTING AS A JUDGE OF THE HIGH COURT
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Thursday 09 June 2022 at 10:30am.
INTRODUCTION
This is a challenge under sections 68 and 69 of the Arbitration Act 1996 (referred to in the judgment as the 1996 Act) to an award in long-running arbitration proceedings between the parties. The supervisory jurisdiction of this court is available because the seat of the arbitration is London, although the arbitration concerns two production sharing contracts governed by Indian law relating to offshore oil and gas fields in India.
The main question of law raised in the application under section 69 is whether the arbitration tribunal was correct to decide an issue of res judicata according to English law because the seat of the arbitration is in London. Specifically at issue is the application of the well-known English law principle in Henderson v Henderson (1843) 3 Hare 100, 67 ER 313 (“ Henderson v Henderson”), that a party is precluded from raising in subsequent proceedings matters which were not but could and should have been raised in the earlier proceedings. The matters which the Government were precluded from raising through the application of Henderson v Henderson are what were called its threshold matters/objections concerning, in the main, Indian constitutional law principles.
The essence of the challenge under section 68 of the 1996 Act is that there is a serious irregularity causing substantial injustice in the award through the failure of the arbitration tribunal to apply these principles of Indian constitutional law. These are in Articles 297 and 299 of the Indian Constitution. Article 297 provides, in summary, that natural resources in Indian waters vest in the Union and are held for the purposes of the Union. Article 299(1) provides for formalities in the execution of Government contracts. 1
BACKGROUND
Reliance Industries Limited (“Reliance”) and BG Exploration and Production India Limited (formerly Enron Oil & Gas India Ltd) (“BG”) are the claimants in the underlying arbitration. In this judgment they are described as “Reliance/BG”. The Union of India (“the Government”), acting by its Joint Secretary (Exploration) of the Ministry of Petroleum and Natural Gas, is the respondent in the underlying arbitration. The arbitration proceedings are being undertaken under the 1976 UNCITRAL Rules. The arbitration tribunal (“the Tribunal”) is currently constituted by Christopher Lau SC of Singapore (presiding), Mr Peter Leaver QC, and Justice B. Sudershan Reddy of India (who replaced Justice B.P. Jeevan Reddy).
The background to these applications involves two production sharing contracts (“PSCs”) concerning a gas field and an oil/natural gas field off the west coast of India. The fields are known as Tapti and Panna Mukta respectively, and the associated PSCs as the Tapti PSC and the Panna Mukta PSC. The PSCs were entered into on 22 December 1994 between the Government, Oil & Natural Gas Corporation Ltd, an entity controlled by the Government, Reliance, and BG. Collectively Oil & Natural Gas
Corporation Ltd, Reliance and BG are called “the Contractor” under the PSCs. Pursuant to the PSCs, the Government granted exclusive rights to the Contractor to exploit the fields for a period of 25 years.The PSCs
The PSCs are in similar, but not identical, terms. I gratefully adopt the outline of PSC terms in the judgment of Popplewell J (as he then was) (“the Popplewell judgment”) in Reliance Industries Ltd & Anor v Union of India [2018] EWHC 822 (Comm), [2018] 1 Lloyd's Rep. 562, [2018] 2 All E.R. (Comm) 1090, [2018] 1 C.L.C. 648:
“The PSC terms in outline
3. Article 7.3 of the PSCs obliges the Contractor to carry out the exploitation of the fields at its sole risk, cost and expense, expeditiously and in accordance with good international petroleum industry practice. The work programmes to be carried out under the PSCs are to be approved by the Management Committee (Article 5.6(a)), a body consisting of representatives of each of the four parties (Article 5.2) with the Government representative having an effective power of veto (Articles 5.7 and 5.13). The initial programme for development (as opposed to exploration or production) was to follow the indicative plan annexed as Appendix G. Appendix G sets out a non-exclusive list of matters which were to be included in the development plan. Article 13.1.2 provides that those plans for development would be revised, subject to Management Committee approval, by the Contractor in a ‘Development Plan first submitted pursuant to this Contract’. That initial development plan is also referred to as the ‘Initial Plan of Development’, or ‘IPOD’. Subsequent plans, including variations to previous plans, might then be approved by the Management Committee.
4. Article 13 of the PSCs entitles the Contractor to recover its costs from the total volume of petroleum produced and saved from the fields in each financial year. Article 13.1.2 limits the extent to which Development Costs may be recovered in this way. It provides that the recovery of ‘Development Costs’ is to be capped by the Cost Recovery Limit or ‘CRL’. The CRL is US$545 million for Tapti and US$577.5 million for Panna Mukta. Development Costs incurred by the Contractor in excess of these limits fall to be borne by the Contractor. If, in certain specified circumstances, the CRL is exceeded, it can be increased to reflect those circumstances, either by the Management Committee or, in default of agreement by the Management Committee, by an arbitral tribunal (Articles 13.1.4(c) and 13.1.5)…
6. The PSCs are governed by Indian law (Article 32.1), save that the arbitration agreement in each of them, found in Article 33, is governed by English law (Article 33.12). The PSCs also state at Article 33.9 that arbitration proceedings are to be conducted in accordance with ‘the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL) of 1985’; it is common ground that the date was a mistake, and the reference was intended to be to the 1976 UNCITRAL Arbitration Rules. In the event of any conflict between the UNCITRAL Rules and the provisions of Article 33, the provisions of Article 33 are to prevail (Article 33.9). The seat of arbitration was agreed to be London: Article 33.12 originally provided as much, and although the seat was changed to Paris when the Second Claimant became part of the BG Group, it was then changed back to London on an ad hoc basis for the purposes of the present arbitral proceedings.”
For present purposes Article 34.2 should also be noted:
“This Contract shall not be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the Parties, which shall state the date upon which the amendment or modification shall become effective.”
The Awards
There are long running arbitration proceedings in relation to the PSCs which are still ongoing. Reliance/BG commenced the arbitration by a Notice of Arbitration dated 16 December 2010. The only point to note is that under “Relief claimed”, Reliance/BG sought an order that the CRL in respect of the Tapti PSC be increased pursuant to Article 13.1.4(c).
So far, the Tribunal has issued eight substantive partial awards. The position up to 2018 was helpfully summarised in 2018 in the Popplewell J judgment, at [9]):
“(a) A “Final Partial Consent Award” dated 29 July 2011 (the “Consent Award”). This recorded in particular the ad hoc agreement of the parties that London was to be the seat of the arbitration.
(b) A “Final Partial Award on Arbitrability” dated 12 September 2012 (the “Arbitrability Award”). In this award the Tribunal determined that certain specific matters whose arbitrability had been challenged were arbitrable…
(c) A “Final Partial Award on Issues B, C and D of the May 2012 Issues” dated 10 December 2012 (the “CRL Award”). The CRL Award concerned, among other things, how the CRL cap was to operate on recovery of Development Costs by [Reliance/BG] as a matter of the true construction of Article 13.1 of the PSCs…
(d) A “Final Partial Award” dated 12 October 2016…The Award was issued after four hearings, in November 2013, September 2014, November 2014 and October 2015.
(e) A “Final Partial Award” dated 11 January 2018, disposing of disputes relating to certain audit exceptions.”
Subsequent to the Popplewell judgment there have been other awards:
(f) A “Final Partial Award” dated 1 October 2018, in this judgment called the ‘Agreements Case Award’. It followed the Popplewell judgment in 2018 remitting matters to the Tribunal. Reliance/BG's Agreements Case was that at Management Committee meetings the Government had agreed that the Contractor could recover Development Costs in respect of certain works in any event, whether by way of either an increase...
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