UK: International Arbitration: The Supreme Court Has A Rare Opportunity To Comment

IPCO v Nigerian National Petroleum Corporation: A recent UK Supreme Court decision on security for costs orders when seeking enforcement of arbitral awards in England

The Supreme Court has recently had a rare opportunity to comment on the provisions in the Arbitration Act 1996 by which Articles V and VI of the New York Convention were enacted. In particular it has looked at the appropriate circumstances for making an order of security for costs when there is an application for enforcement of an arbitral award.

This case relates to an arbitration award dated 28 October 2004 issued following an arbitration seated in Nigeria in favour of IPCO for USD 152,195,971 plus 5 million Nigerian Naira plus interest at 14% pa.

The arbitration proceedings related to a contract dated 14 March 1994 by which IPCO undertook to design and construct a petroleum export terminal for NNPC.

NNPC has been challenging the award since 2004. Initially it challenged the award for 'non-fraud' reasons in the Nigerian Courts. Then from March 2009 NNPC challenged the award on the basis that there was a fraudulent inflation of the quantum of IPCO's claim using fraudulently created documentation on the basis of evidence of ex IPCO employee Mr Wogu.

IPCO has been trying to enforce the award in England since 2004. In numerous hearings before an array of High court judges, enforcement has been refused but security eventually totalling USD 80 million has been ordered to be paid whilst the Nigerian challenges continued. By 2014, the value of the award, including interest accrued was USD 340 million.

Most recently the case was before Mr Justice Field who dismissed in April 2014 yet another application for enforcement made by IPCO and said that NNPC had a good prima facie case that IPCO had practised a fraud on the arbitral tribunal and that NNPC had a realistic prospect of proving that the whole award should be set aside. Field J ordered that this case should continue to trial in Nigeria (the Nigerian pleading had been amended as of 2009 to raise the fraud allegations). The security of USD 80 million ordered previously was maintained by consent.

The Court of Appeal agreed that NNPC had a good prima facie case of fraud but overturned Field J on his direction that the case should go to trial in Nigeria, instead deciding 'to cut the Gordian knot caused by the sclerotic process of the proceedings in Nigeria'. It remitted the proceedings and in particular the fraud issue to the English Commercial Court for determination as part of an issue of public policy per s103(3) of the Arbitration Act (the 'Act').

At the same time, it adjourned enforcement under s103(5) of the Act pending the above s103(3) determination and ordered a further security of USD 100,000,000. Failing this payment the Court of Appeal gave leave to enforce without any decision on the fraud issue. Alternatively if security were to be paid any further enforcement was to be adjourned.

It is the latter part of the Court of Appeal Order, for further security, which was under appeal to the Supreme Court. The Supreme Court overturned the Court of Appeal's order of further security though it held that the previous security of USD 80 million should be maintained 'until further order of the Court'.

The Supreme Court found 2 errors in the Court of Appeal's approach to s103(5) of the Act:

1. It said that ss103(2) and (3) do not allow an enforcing court to make the decision of an issue raised under either subsection conditional on the provision of security in respect of the award. This is in contrast with s103(5) of the Act which expressly provides that security can be ordered where there is an adjournment of enforcement within its terms. The Court of Appeal's decision to remit the case to the English Commercial Court is not an adjournment within the terms of s103(5) of the Act because that section requires the courts of the country in which the award was made to reach a decision.

2. The order for security has to be given on the application of the party claiming recognition or enforcement of the award. Security pending the outcome of foreign proceedings is, in effect, the price of an adjournment which an award debtor is seeking. It is not to be imposed on an award debtor who is resisting enforcement on properly arguable grounds. There is no power under s103(5) of the Act to order security except in connection with an adjournment of enforcement. The words 'adjourn the decision' in s 103(5) of the Act do not extend to delays in the decision making process while a decision per ss103(2) and (3) is made. The provision for security by the Court of Appeal was made a condition not of any adjournment but of avoiding immediate and final enforcement.

The Supreme Court also dismissed IPCO's claim that the order for security for costs was properly made in accordance with discretion given to the Court by the English procedural rules. It found that there was no justification within the English procedural rules to order security for costs when dealing with enforcement of arbitral awards in accordance with the New York Convention. The English procedural rules have other methods which award creditors can use. The Supreme Court said: 'The conditions for recognition and enforcement in the NY Convention constitute a complete code intended to establish a common international approach. The Convention reflects a balancing of interests. Its provisions were not aimed at improving award creditors' prospects of laying hands on assets to satisfy awards.'

General comment

It is a rare occasion when the Supreme Court has had opportunity to analyse the parts of the Arbitration Act which relate to enforcement of arbitral awards and so this analysis of section 103 of the Act will be helpful in future as arbitration continues to grow. But the decision whether to order security for costs will turn on the facts of each case and the facts of this case are quite unique. Perhaps the Court would have gone a different way if the fraud allegations had not been found to be bona fide by Field J and by the Court of Appeal. It will be interesting to see what the Commercial Court finally decides; one thing is for sure, this case deserves finality!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.