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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation  EWHC 726 (Comm) (27 April 2005)
Cite as:  EWHC 726 (Comm),  2 Lloyd's Rep 326,  1 CLC 613
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QUEENS BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| IPCO (NIGERIA) LIMITED
|- and -
|NIGERIAN NATIONAL PETROLEUM CORPORATION
Sam Wordsworth (instructed by Hunton & Williams) for the Defendant
Hearing dates: 7th & 12th April 2005
Crown Copyright ©
MR JUSTICE GROSS :
i) An application by NNPC, to set aside the order, pursuant to ss. 103(2) (f) and 103(3) of the Arbitration Act 1996 ("the Act") ("the application to set aside");
ii) In the alternative, an application by NNPC that the enforcement of the order be adjourned, pursuant to s.103(5) of the Act ("the application to adjourn");
iii) An application by IPCO, pursuant to s.103(5) of the Act, in substance that, in the event of NNPC failing on (i) but succeeding on (ii) above, then NNPC should provide security in the sum of US$50 million (or such other sum as the Court thinks fit), failing which IPCO be permitted to enforce the award as a Judgment of the Court ("the application for security").
" (1) In this Part a 'New York Convention award' means an award made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention.
(4) In this section 'the New York Convention' means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10th June 1958."
" (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 –
(f) that the award has … been …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 it would be contrary to public policy to recognise or enforce the award."
" 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."
"….two important factors must be considered on such an application, although I do not mean to say that there may not be others. The first is the strength of the argument that the award is invalid, as perceived on a brief consideration by the Court which is asked to enforce the award while proceedings to set it aside are pending elsewhere. If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security. In between there will be various degrees of plausibility in the argument for invalidity; and the Judge must be guided by his preliminary conclusion on the point.
The second point is that the Court must consider the ease or difficulty of enforcement of the award, and whether it will be rendered more difficult…if enforcement is delayed. If that is likely to occur, the case for security is stronger; if, on the other hand, there are and always will be insufficient assets within the jurisdiction, the case for security must necessarily be weakened. "
Per Staughton LJ, at p.212. See too: Fouchard, at p.982; Dardana v Yukos  EWCA Civ 543;  2 Lloyd's Rep. 326 (CA).
THE APPLICATION TO SET ASIDE
" The order must contain a statement of –
(a) the right to make an application to set the order aside; and
(b) the restriction on enforcement under rule 62.18 (9) (b)"
In turn, CPR 62.18 (9) provides:
" Within 14 days after service of the order….
(a) the defendant may apply to set aside the order; and
(b) the award must not be enforced until after –
(i) the end of that period; or
(ii) any application made by the defendant within that period has finally been disposed of."
" In any action or suit against …[NNPC] no execution or attachment or process in the nature thereof shall be issued against …[NNPC] but any sums of money which may, by the judgment of the court, be awarded against …[NNPC] shall, subject to any directions given by the court where notice of appeal has been given by …[NNPC], be paid from the general reserve fund of …[NNPC]."
As it was expressed in argument, the intention was not to grant NNPC an immunity from satisfying the judgment; but, given NNPC's importance to the Nigerian economy, to permit an orderly process of satisfaction.
THE APPLICATIONS TO ADJOURN AND FOR SECURITY
i) The Nigerian court is here exercising a limited supervisory rather than appellate jurisdiction.
ii) The rationale was, with respect, engagingly expressed by Oguntade JCA, in Baker Marina (supra), at p.355, as follows:"When parties make a submission [to arbitration] they do so for a number of reasons. These include simplicity of the arbitral process, the speed, and sometimes an understanding or technical knowledge of the subject-matter. It is usually not because it was believed the arbitrator could not make an error of law. The parties' submission is therefore for better or for worse as in the marriage vow."
iii) An award cannot be set aside for misconduct simply because the arbitrators have made an error of fact or law. An error of law on the face of the award will, however, amount to misconduct. To constitute an error of law on the face of the award, the error must be such that can be found in the award or in a document actually incorporated with it, or in some legal proposition which is the basis of the award and which is erroneous: Baker Marina (supra), at p.353; see too, Taylor Woodrow v Etina-Werk  1 NSCC 415. Plainly, the jurisdiction is not intended to permit a disappointed party to re-run the arbitration.
iv) On questions of construction, an arbitration award cannot be set aside for misconduct simply because the court would have come to a different view.
" 67.0 Default of owner
67.3 In the event of such termination [i.e. termination by IPCO of its employment under the contract by reason of NNPC's default] the OWNER [i.e., NNPC] shall be liable to pay the CONTRACTOR [i.e., IPCO] the payments specified in clause 86 hereof. In no case shall the OWNER be liable for indirect and consequential damage."
To begin with, it must be questionable whether cl. 67.3 is applicable in a situation where it is common ground that there has been no termination of the contract. In any event, it is to be recollected that NNPC complains of misconduct. If regard is had to para. 20 of the award, it does not appear that NNPC advanced any argument in respect of cl. 67.3 of the contract or remoteness as a matter of Nigerian law. If so, it is difficult to see how it could be misconduct for the tribunal to fail to take into account points of this nature, which were not argued.
" 79.0 Force Majeure
Neither party shall be considered in default in performance of his obligations under the CONTRACT to the extent that performance of such obligations is delayed by Force Majeure…
79.3 …in the event of termination of the CONTRACT or part thereof under this Clause,……..The OWNER shall pay all payments due to the CONTRACTOR arising from FORCE Majeure…. "
i) There was no suggestion that NNPC's application to the Nigerian Court was other than bona fide. Nor had there been any delay in the initiation of that application; as already remarked, it preceded the applications in this court.
ii) In the various respects already outlined, the NNPC application does have a realistic prospect of success. In particular, there is a measure of concern as to whether IPCO's recovery has been very substantially duplicated. However, as also underlined, the NNPC application faces formidable hurdles, not least in moving from well-founded criticism of the tribunal (if such is established) to making good a case of misconduct within s.30 of the ACA. Employing the terminology of Soleh Boneh, the award is, at least to the extent discussed, neither manifestly valid nor manifestly invalid.
iii) In all the circumstances, proper deference, going beyond lip service, must be shown to the pending Nigerian proceedings.
iv) Even if NNPC's application in Nigeria is successful, it is common ground that an amount of some US$13 million is indisputably due to IPCO. Moreover, as it seems to me (see above), success for NNPC on the duplication point is, by its nature, likely to leave IPCO with an award of in excess of US$50 million.
v) Given the size of the award, it may be inferred that any delay in enforcement is likely to prejudice IPCO. Very few commercial entities would not be prejudiced by delay in the availability of US$152 million. It must be right to seek to minimise any such prejudice, so far as it is practicable and appropriate to do so.
vi) With specific regard to security, I accept on the evidence both that there is provision in Nigerian legal proceedings for ordering NNPC to furnish security and that NNPC, given its trading activities, is likely to have assets in London. On the other hand, there is in my judgment, a risk of enforcement in Nigeria becoming more complex by reason of the domestic application of s.14 of the NNPC Act (on one view as to its true construction and scope).
vii) So far as concerns IPCO and on the evidence of its financial status, were immediate enforcement ordered without the provision of cross-security, there would be a very substantial risk that the moneys thus paid out would be irrecoverable – even if NNPC succeeded in setting the award aside before the Nigerian court.