IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation, Court of Appeal - Civil Division, November 10, 2015, [2015] EWCA Civ 1144

Issuing Organization:Civil Division
Actores:IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation
Resolution Date:November 10, 2015
 
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Case No: A3/2014/1282

Neutral Citation Number: [2015] EWCA Civ 1144

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION COMMERCIAL COURT

MR JUSTICE FIELD

[2014] EWHC 576 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 10/11/2015

Before :

LORD JUSTICE CHRISTOPHER CLARKE

LORD JUSTICE BURNETT

and

LORD JUSTICE SALES

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Between :

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Michael Black QC and Edward Knight (instructed by Weightmans LLP) for the Appellant

Jonathan Nash QC and James Willan (instructed by Stephenson Harwood LLP) for the Respondent

Hearing dates: 23rd, 24th and 25th June 2015

(Supplementary written material 24 September - 12 October)

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JudgmentSee also Supplementary Judgment

[2015] EWCA Civ 1145

Lord Justice Christopher Clarke:

  1. The question at issue in this appeal is whether Field J was right to decline to enforce an arbitration award made in Nigeria in October 2004 and, instead, to continue an adjournment of the enforcement proceedings begun subsequently in this jurisdiction.

  2. The background to this case extends over some 11 years. For reasons which will become apparent it is necessary to record rather a lot of it.

    The parties

  3. IPCO (Nigeria) Ltd (``IPCO'') is a Nigerian corporation. It is a member of a Hong Kong group of companies. It was incorporated in 1990 to carry on business as a turnkey contractor specialising in the construction of on-shore and offshore oil and gas facilities. Apart from its claim to enforce the award it has no assets to speak of. The Nigerian National Petroleum Corporation (``NNPC'') is, as its name suggests, a State owned corporation possessing extensive petroleum and petroleum related assets.

    The history

    The contract and the Award

  4. On 14 March 1994 IPCO entered into a contract with NNPC for the design and construction, for a lump sum, of a petroleum export terminal, which came to be called the Bonny Export Terminal (``the Terminal''), in the Port Harcourt area of Nigeria. The contract was governed by Nigerian law and contained an arbitration clause under which disputes between the parties were to be referred to arbitration in accordance with the Nigerian Arbitration and Conciliation Act 1990 (``the Nigerian Act'').

  5. Mechanical completion occurred on 16 November 1998 and on 1 December 2000 the Terminal was commissioned.

  6. IPCO had claims under the contract in respect of which it gave notice of arbitration on 26 February 2003. The dispute was referred to a distinguished arbitration panel consisting of the Hon Dr J Ola Orojo, Chief Richard Akinjide and Chief (Mrs) Tinuade Oyekunle.

  7. By an award dated 28 October 2004 (``the Award''), following a 10 day oral hearing with witnesses, a 2 day site visit and a final 1 day hearing, the Panel awarded IPCO US $ 152,195,171, which included costs, plus N 5,000,000, also for costs, together with interest at 14 % per annum. The current value of the award (with interest) is over $ 340 million. Save as to the rate charged by IPCO there was no challenge by NNPC to quantum at the hearing. This may have been because the claim had previously been considered by an NNPC management team (OPCT) and a special review committee (the Obialo Committee), a fact which is relied on by IPCO in challenging the allegations of fraud. Disclosure has not been given of the workings of these bodies.

  8. The award was broken down into the following component items:

    From these amounts there fell to be deducted a sum due by IPCO to NNPC.

    The challenge to the Award in Nigeria

  9. By an Originating Motion of 15 November 2004 NNPC sought to have the Award set aside under the Nigerian Act on the ground that the arbitral tribunal lacked jurisdiction and had misconducted itself. The principal grounds of challenge (``the non-fraud challenge'') were that there was an error of law on the face of the Award and an inadequacy of reasoning. Under Nigerian law an error on the face of an award can amount to ``misconduct''.

  10. On 19 November 2004 IPCO filed a notice of Preliminary Objection to NNPC's challenge to the Award seeking to strike the challenge out on the ground that it was frivolous, vexatious and an abuse of process in that it was calculated to delay enforcement of the Award and to interfere with or delay the due administration of justice. NNPC's originating motion appears to have been amended on 4 February 2004 and again on 18 March 2005 and IPCO filed an objection to the further amended Originating Motion on 25 May 2005.

    The first attempt to enforce the Award in England & Wales

  11. Nigeria is a New York Convention State. On 29 November 2004 Steel J made an ex parte order pursuant to s 101 (2) and (3) of the Arbitration Act 1996 (``the Act'') for the payment by NNPC to IPCO of the sterling equivalent of the total sums due under the Award. On 13 December 2004 NNPC applied to set that order aside. On 10 March 2005 NNPC amended its application notice so as to seek either the setting aside of the order of Steel J or the adjournment of the question of enforcement. IPCO cross applied for security in the sum of $ 50 million.

  12. Sections 100 and 101 of the Act provide as follows:

    ``S.100

    (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. ...

    (2) ...

    (3) ...

    (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.

    S.101

    (1) A New York Convention award shall be recognised as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.

    (2) A New York Convention award may, by leave of the Court, be enforced in the same manner as a judgment or order of the Court to the same effect.

    ...

    (3) Where leave is so given, judgment may be entered in terms of the award.

    ...

    S.103

    (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 party against whom it is invoked proves--

    ...

    (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.''

  13. On 7 April 2005 NNPC's application and IPCO's cross-application came before Gross J (as he then was). His judgment is reported at [2005] EWHC 726 (Comm). On 27 April 2005 he ordered that there should be an adjournment of the enforcement of the Award on condition of (i) payment of

    $ 13,102,361.72 (which NNPC then accepted to be due on the basis of the non-fraud challenge); and (ii) the provision of $ 50 million by way of security. Both parties were given liberty to apply. The $ 13.1 million was paid and the

    $ 50 million security was provided.

  14. Field J helpfully summarised the basis of the decision of Gross J as follows:

    ``9 In coming to his decision, Gross J adopted the approach of the Court of Appeal in Soleh Boneh v Uganda Government [1993] 2 Lloyd's Rep 208 and considered the strength of NNPC's challenges in the Lagos Federal Court to various of the sums awarded by the Tribunal. (NNPC's Motion to set the Award aside and IPCO's Preliminary Objection thereto had yet to be heard).

    10 In respect of the Financing Charges award, Gross J held that NNPC had at least an arguable case that the Tribunal had been guilty of misconduct in: (i) wrongly calculating these charges on the basis of the claimed figure for escalation rather than on the awarded figure; and (ii) failing to appreciate that IPCO did not incur financing charges in respect of the 25% profit mark-up. The sums involved here were respectively US$6 million (approx) and US$4 million (approx).

    11 Gross J also held that NNPC had an arguable case that in awarding the sums they did for Variations, Prolongation and Financing Charges, the Tribunal was guilty of duplication and of failing to give adequate reasons for preferring IPCO's case to that of NNPC. IPCO had claimed the cost of Variations in accordance with the costs provisions in clauses 52 and 55 of the contract and it was arguable that the costs therein defined already took into account the sums claimed separately for prolongation. NNPC therefore had a realistic prospect of reducing the awarded sums by US $ 88 million, leaving US $58.5 million for Variations for which the Award would stand. NNPC also had an arguable case that the Tribunal had wrongly construed the force majeure clause by applying its payment provision in accepting IPCO's claims when that provision only applied if the contract had been terminated, which was not the case. However, it was difficult to assess the impact of this challenge...

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