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You are here: BAILII >> Databases >> United Kingdom Supreme Court >> IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation (Rev 1) [2017] UKSC 16 (1 March 2017) URL: http://www.bailii.org/uk/cases/UKSC/2017/16.html Cite as: [2018] 1 All ER 738, [2017] 1 CLC 195, [2017] UKSC 16, [2018] 1 All ER (Comm) 191, [2017] 1 Lloyd's Rep 508, [2017] 1 WLR 970 |
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[2017] UKSC 16
On appeals from: [2015] EWCA Civ 1144 and [2015] EWCA Civ 1145
JUDGMENT
IPCO
(
Nigeria)
Limited (Respondent) v
Nigerian
National Petroleum Corporation (Appellant)
before
Lord Mance
Lord Clarke
Lord Sumption
Lord Hodge
Lord Toulson
JUDGMENT GIVEN ON
1 March 2017
Heard on 2 February 2017
Appellant Toby Landau QC James Willan (Instructed by Stephenson Harwood LLP) |
|
Respondent Michael Black QC Edward Knight (Instructed by Goodman Derrick LLP) |
LORD MANCE: (with whom Lord Clarke, Lord Sumption, Lord Hodge and Lord Toulson agree)
1.
This appeal is about whether the appellant, Nigerian
National Petroleum
Corporation (“NNPC”), should have to put up a further USD 100m security (in
addition to USD 80m already provided) in respect of a
Nigerian
arbitration
award which the respondent,
IPCO
(
Nigeria)
Ltd (“
IPCO”),
has been seeking since
November 2004 to enforce in this jurisdiction. The enforcement proceedings
have, therefore, a long history and it is necessary to set some of it out, to
understand the context.
2.
The arbitration award has an even longer history. It is dated 28 October
2004 and is for USD152,195,971 plus Naira 5m plus interest at 14% per annum.
The arbitration took place under a contract dated 14 March 1994 whereby IPCO
undertook to design and construct a petroleum export terminal for NNPC. The
contract was subject to
Nigerian
law and contained an agreement to arbitrate
disputes in accordance with the
Nigerian
Arbitration and Conciliation Act 1988.
3.
The award once made was challenged by NNPC before the Nigerian
Federal
High Court. Initially, the challenge was for what have been called “non-fraud”
reasons. As from 27 March 2009, NNPC, relying on evidence supplied by a former
IPCO
employee, Mr Wogu, has also challenged the whole award on the basis that
IPCO
procured it in substantial part by fraudulent inflation of the quantum of
its claim using fraudulently created documentation. Both Field J [2014] EWHC 576 (Comm) and the Court of Appeal (Christopher Clarke, Burnett and Sales LJJ) [2015] EWCA Civ 1144 concluded that the fraud challenge was made bona fide, that NNPC
has a good prima facie case that
IPCO
practised a fraud on the tribunal and
that NNPC has a realistic prospect on that basis of proving that the whole
award should be set aside.
4.
It is unnecessary to describe the vicissitudes which befell the
challenges before the Nigerian
courts. Suffice it to say that they have been
closely examined in the English courts on more than one occasion; and that the
Court of Appeal has concluded (para 164, per Christopher Clarke LJ) that it
would not be “profitable to seek to determine which party (if either) is more
to blame for the delay, which appears, to me in large measure, to result from
the workings of the
Nigerian
legal system”. At the outset of the English
proceedings, Steel J made an ex parte order for enforcement dated 29 November
2004. This led in turn to an application by NNPC for the ex parte order to be
set aside under sections 103(2)(f) and 103(3) of the Arbitration Act 1996 (the
“1996 Act”), or alternatively for its enforcement to be adjourned under section
103(5), pending the resolution of the non-fraud challenges in the
Nigerian
courts. After an inter partes hearing, Gross J held on 27 April 2005 [2005] EWHC 726 (Comm) that NNPC should pay
IPCO
a sum of just over USD 13m (which, at
that stage, when only the non-fraud challenge had been raised, appeared
indisputably due), and that NNPC should provide security in the sum of USD 50m
in respect of the adjournment. The USD 13m ordered was duly paid, and the
security was also provided.
5.
At that stage, it was envisaged that the non-fraud challenge in Nigeria
might be resolved with relative despatch. This was not to be, and on 17 July
2007
IPCO
applied to have Gross J’s order reconsidered on the basis that the
Nigerian
challenge appeared now to be unlikely to be determined for several
years. Tomlinson J in a judgment dated 17 April 2008 concluded that “the change
of circumstances, catastrophic though it is” did not justify a complete
re-opening of the exercise undertaken by Gross J. Nevertheless, he ordered NNPC
to pay a further net sum of around USD 52m (after taking account of USD 7.7m
already paid), plus USD 26m by way of interest. He gave permission to appeal
and ordered a stay pending appeal, conditional upon NNPC providing additional
security to the value of USD 30m. This additional security was also provided.
Tomlinson J adjourned any decision regarding enforcement of the balance of the
award under section 103(5). The Court of Appeal upheld Tomlinson J’s order, but
it was further stayed pending the outcome of a petition to appeal to the House
of Lords.
“so as to provide that recognition or enforcement of the Award dated 28 October 2004 be refused pursuant to section 103(3) of the Arbitration Act 1996 because it would be contrary to public policy to do so; alternatively, the decision on whether to enforce the Award be adjourned pursuant to section 103(5) of the Arbitration Act 1996 with liberty to apply.”
The grounds given for refusal of recognition or
enforcement were that there had been a material change of circumstances and/or
Tomlinson J had been misled into believing that the Award had been properly
obtained and/or public policy. The ground given for the alternative of adjournment
was that the Nigerian
courts would or might set aside the Award for fraud,
false evidence or forgery.
7.
On 27 March 2009 NNPC applied to amend its pleadings in the Nigerian
proceedings to raise the fraud challenge (an application adjourned by consent
and never determined). In this light, a consent order dated 17 June 2009 was
made in the English proceedings, whereby inter alia, upon NNPC undertaking to
maintain the USD 80m security until further order of the court, those parts of
Tomlinson J’s order dated 17 April 2008 ordering payment of sums were set aside
(para 1), and “the decision on enforcement of the Award” was “adjourned
pursuant to section 103(5) of the Arbitration Act 1996” (para 2).
8.
Delay continued to dog the Nigerian
proceedings, and on 24 July 2012
IPCO
renewed its application to enforce the Award in England, again on the
ground that there had been a sufficient change of circumstances to justify this.
By order dated 1 April 2014 made after a six day hearing in October 2013 Field
J dismissed this application, but added that, even if it had been appropriate
to reconsider enforcement in England afresh, he would have refused it, on the
ground that NNPC had a good prima facie case of fraud, and that this case
should continue to trial in
Nigeria.
The security, which NNPC had undertaken by
the consent order to maintain, in these circumstances continued.
9.
The Court of Appeal took a different view. It held that there had been a
material change of circumstances, and decided to cut the Gordian knot caused by
the “sclerotic” process of the proceedings in Nigeria
(paras 172-173). By order
dated 10 November 2015 it therefore allowed
IPCO’s
appeal, set aside Field J’s
order (by para 1) and ordered as follows (by paras 2 and 3):
“2. Upon condition that the respondent provides security as set out at paragraph 5 below:
(a) the proceedings shall be remitted to the Commercial Court for determination, pursuant to section 103(3) of the Act, as to whether the arbitral award dated 28 October 2004 (‘the Award’) should not be enforced in whole or in part because it would be against English public policy so to do (‘the Section 103(3) Proceedings’);
(b) any further enforcement of the Award shall be adjourned, pursuant to section 103(5) of the Arbitration Act 1996, pending determination of the Section 103(3) Proceedings.
3. Upon any failure of the respondent to comply with the said condition the adjournment shall lapse and the appellant may enforce the Award in the same manner as a judgment or order of the court to the same effect and the appellant shall immediately be entitled to demand payment under the Guarantee and Further Guarantee (as defined in the Order of Mr Justice Tomlinson dated 17 April 2008) [ie the two existing guarantees totalling USD 80m].
…
5. The security to be provided by the respondent must be provided by 4 pm on 4 December 2015 by way of first class bank guarantee issued in London in similar form to the Guarantee and the Further Guarantee in the sum of US$ 100,000,000. This security is to be in addition to that provided by those Guarantees.”
The parties have subsequently agreed that not only the fraud issue, but also the non-fraud issues should be decided should be decided in the English enforcement proceedings.
10. The order dated 10 November 2015 did not reflect the Court of Appeal’s initial conclusions as to the appropriate disposition. They were set out in a draft, circulated on 4 September 2015 in the usual way, by para 175 of which the Court proposed to require NNPC to provide security for the whole of the principal and interest then claimed, around USD 300m. This led to a request by NNPC to the Court for it, exceptionally, to reconsider the position, on the ground that the order for security was made without jurisdiction or was alternatively wrong in principle and/or manifestly wrong. On the former point, NNPC referred to Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208 and Dardana Ltd v Yukos Oil Co (“Dardana v Yukos”) [2002] EWCA Civ 543; [2002] 2 Lloyd’s Rep 326. After receiving submissions from both parties, the Court of Appeal issued two judgments, neither in precisely the same terms as the original draft. It rejected the submission of lack of jurisdiction, but acceded to the request that it reconsider the quantum of security, which it reduced to a requirement for a further USD 100m.
11. In the Court’s first, main judgment, Christopher Clarke LJ, said:
“Decision
174. In my judgment the
appropriate course to take is as follows. First, we should order that IPCO’s
application to enforce should be adjourned pending the determination by the
Commercial Court pursuant to section 103(3) of the Act as to whether the Award
should not be enforced in whole or in part because it would be against English
public policy so to do.
175. Second, we should make that order conditional upon the provision by NNPC of further security in a form and within a time period to be agreed, or if not agreed, to be determined by this Court, in the sum of $ 100m.
176. Third, we should order
that, if such security is not provided within a period which we shall specify
from the time when the form of security is agreed or determined, IPCO
shall
have permission to enforce the Award.
177. Fourth, we should order
that, if such security is provided, then, if and to the extent that it is
determined by a final order of the courts of England and Wales that the
enforcement of the Award is not contrary to the public policy of England &
Wales, IPCO
may enforce it.
178. Fifth, there shall be Permission to apply to the Commercial Court.”
12. In the Court’s shorter supplementary judgment [2015] EWCA Civ 1145 dealing more extensively with the issue of jurisdiction, Christopher Clarke LJ said:
“Discussion
18. In the present case it
seems to us that in reality it is NNPC, the Award debtor, which sought the
continuance of the adjournment in the face of IPCO’s
attempt to enforce the
Award and bring the adjournment to an end. In its respondent’s notice NNPC said
that, if the judge’s contingent exercise of his discretion was in error, he was
nevertheless correct to conclude that it was appropriate to adjourn under
section 103(5) so that the challenge could proceed in
Nigeria
inter alia
because, if the court were minded to enforce the Award, it would still have to
decide whether the enforcement of the award was contrary to English public
policy. In other words it was relying on the possibility of a later English
public policy challenge as a reason to uphold the continuance of the
adjournment, ordered by consent on 17 June 2009, pending resolution of the
fraud challenge in
Nigeria,
rather than suggesting that enforcement should only
abide a section 103(3) determination.
19. So far as the ability of
IPCO
to enforce any judgment is concerned, much will depend on whether NNPC has
sufficient assets in this country, or any other country in which an English
judgment may be enforced, to ensure that it can swiftly receive the fruits of
any judgment in its favour.
20. Although NNPC is a large business we have no details of its assets within such countries, or the form in which they are held, how long they have been held there, or how readily any trading arrangements might be changed so as to render enforcement difficult or impossible. …
21. … where there is a very
large award, delay without security is inherently likely to prejudice the award
creditor and certainly risks doing so. We regard that as a factor which should
incline us towards providing some security to ensure that if the fraud
challenge fails, IPCO
will not be faced with a further round of attempts to
avoid payment of the Award or a situation in which its prospects of recovery
have worsened.
22. Another material factor is the need in a case involving such extraordinary delay, extending over a decade, to provide a strong incentive to securing finality. NNPL [sic] says that, now that the fraud challenge is to be heard in London, the prospects of excessive delay are much reduced. Hopefully so. But the history of these proceedings, and their inordinate delay, persuades us of the need to provide an incentive, indeed something of a goad, to progress.
23. Lastly we bear in mind that the delay which has already taken place has meant that the ratio between the amount of security in place and the amount due has greatly decreased. Interest under the award is running at 14% per annum. Gross J ordered that security of $ 50m be provided 10½ years ago. $ 50m x 14% x 10 = $ 70m. The same exercise applied to the $ 30m security provided in 2008 produces about another $ 31.5m ($ 30m x 14% x 7.5).”
“103. Refusal of recognition or enforcement.
(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 -
(a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity;
(b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made;
(c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
(d) that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration (but see subsection (4));
(e) that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the law of the country in which the arbitration took place;
(f) that the award has not yet become binding on the parties, or has been set aside or 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 the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognise or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be recognised or enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted.
(5) 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.”
“(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.”
Article VI reads:
“If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.”
In this light it was common ground, and it is in any event clear, that sections 103(2)(f) and (5) are both addressing a situation where an award sought to be recognised or enforced in this jurisdiction has been or is under challenge in an overseas jurisdiction where, or under the law of which, it was made.
“Where the court makes an order, it may -
a) make it subject to conditions, including a condition to pay a sum of money into court; and
b) specify the consequences of failure to comply with the order or a condition.”
“Enforcement of the award
(1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award.
The right to raise such an objection may have been lost (see section 73).
(4) Nothing in this section affects the recognition or enforcement of an award under any other enactment or rule of law, in particular under Part II of the Arbitration Act 1950 (enforcement of awards under Geneva Convention) or the provisions of Part III of this Act relating to the recognition and enforcement of awards under the New York Convention or by an action on the award.”
18. Section 66 must be read with section 81(1), providing that:
“Saving for certain matters governed by common law.
(1) Nothing in this Part shall be construed as excluding the operation of any rule of law consistent with the provisions of this Part, in particular, any rule of law as to -
(a) matters which are not capable of settlement by arbitration;
(b) the effect of an oral arbitration agreement; or
(c) the refusal of recognition or enforcement of an arbitral award on grounds of public policy.”
“(6) The court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with. …
(7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.”
22.
I start with the relationship between the Court of Appeal’s order and
the scheme of section 103 of the Act. The order was that the fraud issue,
raised as an issue of public policy under section 103(3), should, for the
purposes of determining whether enforcement should be ordered, be decided in
the English, rather than Nigerian,
proceedings. But the decision of the fraud
issue was made conditional upon the provision by NNPC of a further USD 100m
security, failing which the Court gave leave to enforce without any decision of
the fraud issue. Upon provision of such security, on the other hand, the
Court’s order provided that any further enforcement of the award should be “adjourned”
under section 103(5) pending decision of the fraud issue.
25.
Second, the Court erred in regarding its order that the English court
should as the enforcing court decide the fraud issue as involving “adjournment”
of the decision on that issue within the terms of section 103(5). This error
has two aspects. First, as stated in para 15 above, section 103(5) concerns the
situation where an enforcing court adjourns its decision on enforcement under
section 103(2) or (3), while an application for setting aside or suspension of
the award is pending before the court of the country in, or under the law of
which, the award was made. This was the situation when orders were made by
Gross J on 12 April 2005, by Flaux J on 16 December 2008 and by consent on 17
June 2009. But it ceased to be the situation for the future, once the Court of
Appeal held that the issue whether fraud was an answer to enforcement should no
longer await the outcome of the Nigerian
proceedings, but should be decided by
the English courts. Although the literal trigger to the application of section
103(5) is that “an application … has been made to” the courts of the country
where, or under the law of which, the award was made, the adjournment which it
contemplates is pending the outcome of that application. Once it is held
that there should be no such further adjournment, there is no basis for
ordering further security under section 103(5).
“I am fully prepared to proceed on the basis that section 103(5) provides the court with jurisdiction to make such an order, in a case where it, either of its own motion (cf Soleh Boneh) or at the instance of the party seeking [sic] recognition or enforcement, decides to adjourn, pending a foreign application to set aside by the party resisting recognition or enforcement.”
Christopher Clarke LJ in his supplementary judgment, para 6, questioned “how section 103(5) was thought to provide jurisdiction to the court to act of its own motion”. It is unnecessary to consider that question here, although I shall return to para 6. What is however important to note is an evident error in the passage cited, which no one appears to have spotted. The word “seeking” after which I have inserted “sic” should clearly have read “resisting”, to reflect the actual language of section 103(5). That is also evident from the actual decision in Dardana v Yukos and its supporting reasoning.
“27. … In most cases … it would be the party resisting recognition or enforcement, who had already begun proceedings to set aside in the foreign state, who would be seeking an adjournment of the recognition or enforcement proceedings, pending resolution of the foreign application. An order for security, on the application of the party seeking recognition or enforcement, would be the price of the adjournment sought by the other party, and would protect the party seeking recognition or enforcement during the adjournment. There is no power under section 103(5) to order security except in connection with an adjournment. If no foreign application had been made to set aside, the domestic proceedings under section 103(2) would have had to be fought out to a conclusion; and there would be no power under section 103(5) to order security during the period which that took. There could of course, in an appropriate case be an application for freezing relief …
28. In a case where a party resisting enforcement applies under section 103(2), but later seeks an adjournment of its application pending resolution of foreign proceedings in which it is also challenging the award, adjournment may as a matter of general principle be ordered on condition that security be provided (failing which the order for adjournment will be vacated and the issues under section 103(2) will be determined). …
29. The reality in the present case … is that the appellants were obliged to provide the security, on the tacit basis that, if they did not do so, then enforcement would be ordered unconditionally against them, despite their outstanding application under section 103(2). The provision for security was, in other words, made a condition not of any adjournment sought by the appellants, but of avoiding immediate and final enforcement; and, failing its provision, the appellants’ outstanding application under section 103(2) would have been liable to be struck out or dismissed, without determination of its merits. I do not consider that as a legitimate sanction to attach to any order made for the provision of security in the present circumstances. It would involve overriding or fettering an outstanding application under section 103(2), in a way for which sections 100-104 provide no warrant. It is inconsistent with paragraph 31.9 of the Arbitration Practice Direction, and the concluding words of Mr Justice Steel’s order, whereby the award was not to be enforced, if the appellants applied (as they did) to set aside his order, until the application was finally disposed of. …”
Paragraph 31.9 of the Arbitration Practice Direction has now become CPR 62.18, set out in para 21 above.
30.
In the present case, the Court of Appeal’s order involves the same error
as that identified in the first and third italicised passages. It required
security, not as the price of a further adjournment falling within section
103(5), but as the price of the decision of an issue under section 103(3). The
Court was lifting the adjournments previously ordered pending the outcome of
the Nigerian
proceedings, not ordering an adjournment. It had no power under
section 103 to make a decision of the properly arguable case raised by NNPC
under section 103(3) conditional on NNPC providing further security.
33.
Mr Michael Black QC suggested that, when the matter came before Field J
and the Court of Appeal, there was no outstanding challenge by NNPC under
section 103(3). If that were so, it is difficult to understand what either
court was doing in considering and deciding, at some length, whether NNPC had
shown a good prima facie case of fraud, and, in the case of the Court of
Appeal, making an order for its decision by the English courts. Further, NNPC
had made a formal challenge by its application dated 18 December 2008; the
decision on that challenge was adjourned, pending the outcome of the Nigerian
proceedings, by the consent order dated 17 June 2009; and the whole purpose and
effect of the Court of Appeal’s decision that there had been a change of
circumstances justifying the reopening of the consent order was to lift the
adjournment and to order that the challenge be decided in the English
proceedings.
35. In support of his submission, Mr Black points to article III of the Convention, providing:
“Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”
Although article III is not itself part of English law, Mr Black submits that we can and should, on familiar principles, view sections 100-104 of the 1996 Act in its light. I also have little difficulty with that as a general proposition, although the possible differences between the meaning of the word “conditions” used twice in article III have given rise to much discussion. I am prepared for present purposes to proceed on the basis, without deciding, that the second reference to “conditions” refers in effect to principles or rules of procedure (as Mr Black submits with the weighty support of Professor Albert van den Berg’s commentary on The New York Arbitration Convention of 1958 (1981), p 239).
“It is not wholly clear to us how section 103(5) was thought to provide jurisdiction to the Court to act of its own motion but, in any event, a court which is asked to adjourn, or continue an adjournment of, enforcement is entitled to impose conditions on the exercise of its discretion to do so: CPR 3.1(3)(a); and may do so of its own initiative: CPR 3.3. Section 103(5) cannot be treated as precluding the exercise of that right.”
38. Finally, Mr Black argues that the English courts would, contrary to article III, be discriminating procedurally against foreign awards compared with awards in arbitrations where the seat is English, if they could not order security against a party who was merely mounting a challenge under section 103(2) or (3). It is in this connection that he deploys section 70(7) of the 1996 Act. He relies on reasoning of Rix LJ (supported to some extent by that of Moses LJ, but opposed by that of Buxton LJ) in Gater Assets Ltd v NAK Naftogaz Ukrainiy (“Gater”) [2007] EWCA Civ 988; [2007] 2 Lloyd’s Rep 588; [2008] Bus LR 388. Rix LJ considered that an award debtor resisting enforcement “by destroying the formal validity of the award, either as a matter of substantive jurisdiction or serious irregularity or as a matter of public policy” is in substance in a position of a claimant analogous to that of an award debtor under an English award seeking to challenge an award under sections 66 to 69 of the Act, and is liable accordingly to be made subject to an order for security for costs: see paras 77-80 (see also per Moses LJ para 93, and, to the contrary effect, per Buxton LJ paras 101-104).
39.
On Mr Black’s case, therefore, if English procedural law does not enable
an award creditor under a Nigerian
arbitration award to apply and, if the court
thinks fit, to obtain security for the award from an award debtor who is
challenging enforcement under section 103(2) or (3), then it is imposing on the
award creditor “substantially more onerous conditions”, in the sense of
procedural rules, than those applicable to English awards under section 70(7)
of the Act.
“Field J, however, was prepared to refuse enforcement, on the ground of failure to provide the security for costs ordered. That was the order that Field J made, setting aside the enforcement order if the security was not provided, and doing so on a ground not expressly within the Convention. There is no express basis in the New York Convention for that condition. Enforcement may be refused ‘only if’ one of the exceptions within article V is made good. Security is discussed in the Convention, but only security for the award itself and only in the context of an adjournment of enforcement proceedings pending an application to set aside or suspend the award to the competent authority of the country in which, or under the law of which, that award was made: article VI, reproduced in section 103(5) of the 1996 Act. That is not just an example of a circumstance in which such security might be ordered, but is the only circumstance in which it might be: see the decision of this court in Dardana Ltd v Yukos Oil Co [2002] All ER (Comm) 819, para 27.”
43. In any event, I do not regard the argument based on article III and section 70(7) as having any force. First, article III may serve as a caution against interpreting or applying English procedural provisions in a sense which discriminates against Convention awards by imposing substantially more onerous rules of procedure. But this is only so long as “the conditions laid down in” the following articles of the Convention do not otherwise provide. As I have indicated, I consider that articles V and VI constitute a code relating to security for an award when the issue is enforcement or adjournment; and that the code excludes requiring security for an award in the face of a properly arguable challenge under article V, except in so far as article VI provides. Second, even if that were not so, I would have some doubt whether an inability to order security on a challenge to an overseas award could constitute a “substantially more onerous” rule of procedure in relation to recognition or enforcement than a rule allowing such security in the case of an English award. Third, be that as it may, the fact is that the 1996 Act contains in relation to Convention awards no equivalent to section 70(7) in relation to English awards. Whatever article III might require in that respect (if anything), it is not found in the 1996 Act, and no amount of consistent interpretation can alter the Act in that respect. Fourth, there is first instance authority, which in my opinion accurately reflects what would be expected as a matter of principle in relation to the provision of security for the amount of an award in issue, that the power under section 70(7) will only be exercised if the challenge appears “flimsy or otherwise lacks substance”: A v B (Arbitration: Security) [2010] EWHC 3302 (Comm); [2011] 1 Lloyd’s Rep 363; [2011] Bus LR 1020, para 32 per Flaux J; Y v S [2015] EWHC 612 (Comm); [2015] 1 Lloyd’s Rep 703, para 33 per Eder J. That cannot by any stretch be said of NNPC’s fraud challenge in the light of the evidential material set out in the Court of Appeal’s judgment.
44.
Finally, I turn to CPR 3.1(3). In my opinion, this takes IPCO
nowhere.
It is a power, expressed in general terms, to impose conditions on orders. It
cannot authorise the imposition, on a person exercising its right to raise a
properly arguable challenge to recognition or enforcement, of a condition
requiring security for all or any part of the amount of the award in issue. Its
obvious subject matter is the imposition of a condition as the price of relief
sought as a matter of discretion or concession, not the imposition of a fetter
on a person exercising an entirely properly arguable right. The Court of Appeal
was right to underline in Huscroft v P & O Ferries Ltd (Practice Note) [2010] EWCA Civ 1483; [2011] 1 WLR 939, paras 18-19 that “rule 3.1(3) does not give
the court a general power to impose conditions on one or other party whenever
it happens to be making an order”, and that its purpose is “to enable the court
to grant relief on terms” and that the court should “focus attention on whether
the condition (and any supporting sanction) is a proper price for the party to
pay for the relief being granted”, satisfying itself also that “the condition
it has in mind represents a proportionate and effective means of achieving that
purpose”. CPR 3.1(3) may be relevant where the court only permits the pursuit
on terms of a claim or defence which in some respect is problematic: see Deutsche
Bank AG v Unitech Global Ltd [2016] EWCA Civ 119, paras 72-81 (to which the
appellant’s solicitors very properly drew the Supreme Court’s attention after
the handing down in draft of this judgment). But it is entirely clear that CPR
3.1(3) has no relevance on this appeal.
“NNPC also considers that … it
follows that NNPC can allow the guarantees given previously (in a total sum of
US$ 80m) to lapse without affecting its right to have its defence under section
103(3) of the 1996 Act determined prior to IPCO being permitted to enforce the
Award.”
I do not accept that. The security of USD 80m was the agreed price of adjournments in 2005 and 2008-2009 which have lasted in total nearly 12 years. NNPC undertook by the consent order dated 17 June 2009 to maintain the guarantees “until further order of the Court”. That the adjournment will now lapse is no reason for the Court to permit the existing security to lapse, still less for any argument that NNPC is entitled to allow it to lapse. The guarantees should continue in place until further order, pursuant to NNPC’s undertaking.