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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Sonatrach v Statoil [2014] EWHC 875 (Comm) (02 April 2014) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2014/875.html Cite as: [2014] 1 CLC 473, [2014] 2 Lloyd's Rep 252, [2014] EWHC 875 (Comm), [2014] 2 All ER (Comm) 857 |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
FLAUX
IN THE MATTER OF THE ARBITRATION ACT 1996
____________________
IN THE MATTER OF AN ARBITRATION CLAIM |
2013 Folio 731 |
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LA SOCIÉTÉ POUR LA RECHERCHE, LA PRODUCTION, LE TRANSPORT, LA TRANSFORMATION ET LA COMMERCIALISATION DES HYDROCARBURES S.P.A ("SONATRACH") |
Claimant |
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- and - |
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STATOIL NATURAL GAS LLC ("STATOIL") |
Defendant |
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AND |
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IN THE MATTER OF AN ARBITRATION CLAIM |
2013 Folio 935 |
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BETWEEN: |
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STATOIL |
Claimant |
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-and- |
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SONATRACH |
Defendant |
____________________
Toby Landau QC and Jessica Wells (instructed by Messrs Hogan Lovells LLP) for Statoil
Hearing date: 22nd March 2014
____________________
Crown Copyright ©
The Honourable Mr Justice Flaux:
Introduction and background
(1) A Framework Agreement dated 1 March 2008 governed by French law, and subject to ICC arbitration. It provided for, inter alia:
(a) The reservation by Statoil of a certain amount of firm transportation capacity on two of its pipeline systems in favour of Sonatrach; and
(b) The conclusion of heads of agreement ("HOAs") for the sale by Sonatrach and purchase by Statoil of liquefied natural gas ("LNG") between 1 April 2009 and 31 March 2024, including reservation of a guaranteed portion of Statoil's re-gasification capacity at Cove Point, such agreements being conditional upon the agreements reserving re-gasification and pipeline capacity. Provision was also made for a separate HOA regulating additional sales of LNG from Sonatrach to Statoil between 2009 and 2014.
(2) A HOA dated 1 March 2008 for the sale by Sonatrach and the purchase by Statoil of 72 million MMBtu of LNG per year between the first quarter of 2009 and 31 March 2024 ("HOA1"). This was also governed by French law and subject to ICC arbitration.
(3) A second HOA dated 1 March 2008, for the sale by Statoil and the purchase by Sonatrach between Q1 2009 and 31 March 2024 of a quantity of natural gas ("NG") equivalent to the quantity of LNG purchased by Statoil under HOA1 ("HOA2"). This was governed by the law of New York and subject to ICC arbitration.
(4) A third HOA dated 1 March 2008, for the sale of 36 million MMBtu of LNG per year from Sonatrach to Statoil between Q1 2009 and 31 March 2014 ("HOA3"). This was governed by French law and subject to ICC arbitration.
Section 68 and the applicable legal principles
"68 Challenging the award: serious irregularity.
(1)A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2)Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
(a)failure by the tribunal to comply with section 33 (general duty of tribunal);
"(1)The tribunal shall—
(a)act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b)adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
(2)The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it."
"On analysis, these criticisms are all directed to asserting that the arbitrators misdirected themselves on the facts or drew from the primary facts unjustified inferences. Those facts are said to be material to an "issue", namely what were the terms of the oral agreement. However, each stage of the evidential analysis directed to the resolution of that issue was not an "issue" within Section 68(2)(d). It was merely a step in the evaluation of the evidence. That the arbitrators failed to take into account evidence or a document said to be relevant to that issue is not properly to be regarded as a failure to deal with an issue. It is, in truth, a criticism which goes no further than asserting that the arbitrators made mistakes in their findings of primary fact or drew from the primary facts unsustainable inferences."
"44. Before coming to how the claim has been more fully developed, it is right to make a preliminary comment about the scope of section 68, although that ought not, by now, to be necessary. This court and higher courts have repeatedly stressed that section 68 is available only in extreme cases where the arbitral process has gone wrong in such an exceptional way that justice demands its correction. There is no need to cite authority for that proposition. The relevant authorities are, or ought to be, very well known.
45. The assertion in the claim form that the decision was contrary to the weight of the evidence does not begin to meet the requirements of section 68. If it were otherwise, then any appeal on grounds of fact could be brought under section 68. This would be contrary to the whole scheme of the Act. There may be an appeal on points of law under section 69, with the leave of the court or agreement of the parties, but there is no appeal on questions of fact. Section 68, which does not require leave, is not intended to provide a backdoor route to appeals on fact.
46. The assertion that the arbitrator failed to take any or proper consider[ation] of the evidence could, in an exceptional case, give rise to a challenge under section 68, based on the general duty of an arbitrator under section 33 if, for example, an arbitrator genuinely overlooked evidence that really mattered, or got the wrong end of the stick in misunderstanding it. But there is all the difference in the world between such cases and an arbitrator evaluating evidence but reaching factual conclusions on it (as will happen in most arbitrations) which one party does not like. That cannot be the basis of a complaint under section 68."
"(e) It will be a very rare and exceptional case for the Court to interfere pursuant to Section 68 on the grounds that the arbitrator reached the wrong findings of fact, should have reached different factual conclusions, given greater weight to some evidence or failed to explain why weight or importance was not given to some evidence. It will be an even rarer case for the Court to find that even if there was some serious irregularity with regard to a failure to take into account evidence that there was substantial injustice, which is of course a precondition to the involvement of the court under Section 68, along with the need for there to be a serious irregularity."
"If the matter were free of authority, I would not have thought that a tribunal is in breach of the duty in sub-section 33(1)(a) (or indeed that in sub-section 33(1)(b)) if it overlooks evidence (genuinely or otherwise). I would have interpreted the sub-section as being concerned with the even-handed conduct of the arbitral proceedings, and not with mistakes in evaluating the evidence by oversight or otherwise. I agree with Mr Smouha that this approach would sit comfortably with section 34 of the 1996 Act. Lord Grabiner argued that section 33(1) must be interpreted more widely in view of the description of it in sub-section 33(2) as a "general duty in conducting the arbitral proceedings", but I think that he places too much weight on these words. However, PIC's contrary view is supported by first instance decisions of Toulson J in Arduina Holdings BV v Celtic Rersources Holdings plc, [2006] EWHC 3155 at paragraph 46 and of Akenhead J in Schwebel v Schwebel [2010] EWHC 3280 (TCC) at paragraph 27. It suffices to cite what Toulson J said: [Andrew Smith J then cites the relevant passage]. In view of these precedents, at first instance I should adopt the same approach."
The arbitration hearing and the Award
"199. On the signing date, a few moments before the signing ceremony, Claimant's and Respondent's representatives met (Freberg, Transcript 10.04.12, p. 179/9-10). Apart from the correction of a typographical error in the 2008 Agreements, Gunnar Freberg asked Othmane Irain "whether everything was in place on their side" (Freberg, Transcript 10.04.12, p. 181/14-15), a question which, according to Gunnar Freberg, referred to the necessary approvals (Freberg, Transcript 10.4.12, p. 181/15-16). Likewise, Philippe Mathieu declared that he inquired of Omar Maaliou whether Respondent had obtained the governmental approval:
"Q. Did you ever ask Mr Maaliou — or anyone else in Sonatrach — whether they had obtained the governmental approval that was referred to in the HOAs as signed?
A. Yes.
Q. At what time did you ask this?
A. On the day of the signature."(Mathieu, Transcript 11.04.12, p. 115/4-9).
The Arbitral Tribunal notes that, during his testimony, Omar Maaliou did not deny having had this discussion. Consequently, the Arbitral Tribunal finds it plausible that Claimant's representatives inquired of Respondent's representatives whether the governmental approval was obtained before signing the HOAs. As, according to French law the burden of proof is incumbent upon the debtor — here Sonatrach — Omar Maaliou should have, at least, clarified Respondent's position with respect to the governmental approval following the question asked by Claimant's representative (see Legal Opinion of Professor Delebecque of 2 November 2011, no. 50 with reference to Cass. 3rd civ. 10S.2008, Bull. Civ. III, no. 132). As a result of Respondent's omission, Claimant's representatives were entitled to believe that the HOAs had been approved, which they also seem to have believed (see Exh. C-73).
Based on the above, the Arbitral Tribunal finds that the discussions between the Parties' representatives demonstrate that the HOAs of 2008 had been approved.
200. Furthermore, it is undisputed that the signing ceremony of the HOAs took place on 1 March 2008 and was reported by the media. The 2008 Agreements were characterised as "an agreement sealing a long-term partnership" (Exh. C-46). Their duration was also explicitly mentioned by the media ("capacité de regazéfication [...] pour une durée de quinze ans à partir de 2009": Exh. C-46).
As to the participants at the ceremony, the Minister for Energy and Mines had been invited to attend the signing ceremony, but declined at the last moment because of other commitments (Maaliou, Transcript 11.04.12, p. 202/4-10). In addition, in his speech at the signing ceremony, Mohamed Meziane, Sonatrach's President, stressed the following: "nous ne ménagerons aucun effort pour leur mise en oeuvre et pour assurer de notre soutien les équipes chargées de leur application" (Exh. C-8).
It appears thus, based on the above considerations, that the Algerian government, which was not only informed about the signing of the HOAs but also invited to attend the signing ceremony, did not object to them. Besides, the file does not contain any evidence to prove a refusal of the governmental approval.
201. It is true that Respondent did not formally comply with the process for obtaining governmental approval as described by Respondent's witness (see Maaliou, Transcript 11.04.12, p. 200/15-25 and p. 201/1-8). However, under the circumstances as set out above, the Arbitral Tribunal, considering the lack of legal basis or any written document describing the process of governmental approval as well as the absence of a time-frame during which the approval should have been given, finds, from a material point of view, that the Algerian government actually approved the HOAs."
Ground 1 of the application
"At your request, and in the frame of the dispute which is currently pending between SONATRACH and STATOIL NATURAL GAS LLC before an international arbitral tribunal, we officially confirm the following:
1. Although this is not prescribed by any legal provision, all of SONATRACH's export contracts for the sale of natural gas or liquefied natural gas of a duration of 5 years and more are submitted for review to the services of the Ministry in charge of Energy after their signature between SONATRACH and its clients, and do not enter into force before they have been approved in writing by the Ministry at the end of this review. The Ministry deems that no mid-term or long-term export of Algerian natural gas can validly take place in the absence of such an approval.
2. Although the Ministry is normally informed by SONATRACH of the contents of the Heads of Agreement it enters into from time to time with its clients these agreements are not submitted for review and approval to the Ministry to the extent that they do not generate themselves any export of gas.
3. Concerning the Heads of Agreement entered into between SONATRACH and STATOIL on March 1st, 2008, attached, these agreements have not been submitted for review and approval to the Ministry by SONATRACH, either before or after their signature.
4. In the case where SONATRACH would have requested the approval of these agreements by the Ministry, which would have been unprecedented, the Ministry would have conditioned this approval to the review of the contracts provided for in these agreements, after their signature, since they were mid-term or long-term export gas contracts, as it does for all the contracts of this kind.
We authorize you to produce the present letter before the aforementioned arbitral tribunal."
"Now, supposing it isn't a lie but it is true, I ask the question of both of you…the fact that the ministry states …they had to ask the ministry, they said, 'if you had submitted to us the HOAs, it isn't in conformity with Algerian practice, I would have asked you to resubmit them once you had worked out the final contract' should that element be taken into account by the ...tribunal or not?"
"Should it be taken into account? Well it's an official exhibit of the Algerian state. Of course you have to review it, obviously. Now, how should we understand the answer? Well, I read that the condition is stipulated in the HOAs, it is not stipulated in the detailed contracts. I think what prevails is the wish of the parties."
" A. On the date of the signing, I asked Mr Irain, who was basically the guy I talked to during the negotiations, exchanged emails and so forth, whether everything was in place on their side. And I also acknowledged that we had the approval from our executive committee.
THE CHAIRMAN You well remember this answer?
A. Yes, because we discussed this due to the fact that at the last minute there was a typographical error that was corrected just before the signing, at the site.
THE CHAIRMAN Tell me again the relation between the typo and the governmental approval.
A. No, there was no relation. But then we said, "Is everything ok now?" It was very clearly expressed."
"It is clearly not appropriate to use an application under section 68 to challenge the findings of fact made by the tribunal. If it were otherwise every disappointed party could say it had been treated unfairly by pointing to some piece of evidence in its favour which was not referred to in the Reasons or not given the weight it feels it should have been. That is precisely the situation in which the Court should not intervene. Matters of fact and evaluation of the evidence are for the arbitrators."
Ground 2
"The Arbitral Tribunal would be glad to count on the assistance of an Administrative Secretary. The status of the Administrative Secretary will only consist in assisting the Tribunal and its Chairman in the administrative tasks for the proceedings, the organization of the hearings and the preparation of documents that may be useful for the decision. In no way the Administrative Secretary will have the right to participate in the decision."
"Although, again, most laws do not explicitly require deliberations in international commercial arbitration to be secret, such secrecy is generally considered to be the rule."
Challenges to the Order of Cooke J
"Section 66 of the 1996 Act enables the court to embody an award made by the tribunal in a judgment of the court. But it does not empower the court to add an extra judgment for post-award interest when the arbitrators have not made such an award under s. 49(4). Any attempt by the court to add a judgment for interest would be an intervention by the court and contrary to the terms of s. 49(4) and so would infringe the principle set out in s. 1(c) of the 1996 Act."
"I pointed out that once the costs award had been made a judgment of the court, then s. 35A of the 1981 Act could not apply to the period after the judgment had been entered. If interest was payable at all after the date of the judgment, then it would be payable under the Judgment Act 1838 as modified by s. 44 of the Administration of Justice Act 1970 ."
"…the difficulty could have been avoided by a much earlier application to make the Award a judgment. Judgment Act interest would then have run on the sum awarded. There is no explanation as to why that was not done."
"23…an award may either be enforced "in the same manner as a judgment" (see sections 66(1) and 101(2) of the 1996 Act) or "judgment may be entered in terms of the award" (sections 66(2) and 101(3)). The leave of the court to enforce "in the same manner as a judgment" is a prerequisite of the power to enter judgment in terms of the award, but the two are separate. The essential difference is that the obligation to honour an award arises by virtue of the agreement of the parties, whereas in the case of a judgment it follows from the power of the court. This difference is reflected in the approach of Aikens J in two cases. He proceeded on the basis that the entering of a judgment changes the position. Walker v Rome [2000] 1 Lloyd's Rep 116 at [13]–[14], relied on by Mr Higham, in fact concerned the post award but pre-judgment phase and it appears (see [14]) that Aikens J considered that the position would be different once judgment was entered. In Pirtek v Deanswood [2005] 2 Lloyds Rep 728 his Lordship stated (at [47]) that the difficulty that arose in that case, where the award had not included interest and the arbitrator sought to do so by a retrospective order, "could have been avoided by a much earlier application to make the award a judgment. Judgment Act interest would then have run on the sum awarded".
24 In Walker v Rome Aikens J said he was driven to his conclusion by the wording of the 1996 Act. He stated [at 17(6)] that it was the combined effect of sections 1(c), 49 and 66 which had this effect but it is clear that the key provision was section 49 : see [17(1) and (4)]. There is no equivalent of section 49 applicable to New York Convention awards. Moreover, here unlike Walker v Rome the award has been entered as a judgment. Accordingly, I am not driven to a result which would have the effect of enabling a judgment debtor to delay without financial penalty paying his judgment debt and reduce the real value of the judgment."
Conclusion