In a significant decision, the English Supreme Court recently
set aside a decision of the Court of Appeal which had ordered
adjournment of an order for enforcement of an arbitral award
pending payment of security. The Supreme Court found that the Court
of Appeal had exceeded its jurisdiction and that nothing in the
Arbitration Act 1996 (AA 1996) nor the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (the New
York Convention) gave the court such power. This is understood to
be the first appellate court decision on this issue worldwide and
is therefore likely to be relied upon by other national courts when
interpreting the New York Convention.
The dispute arose out of a contract between the contractor
(IPCO) and the Nigerian National Petroleum Company (NNPC) to design
and construct a petroleum expert terminal in Nigeria. The contract
was governed by Nigerian law with disputes to be resolved under the
Nigerian Arbitration and Conciliation Act 1990.
A dispute arose and arbitration was conducted. An award was made
in Nigeria in 2004 in IPCO's favour for around US$ 340 million.
NNPC sought to have the award set aside in Nigeria (this claim is
still yet to be heard).
Between 2004 and 2009 IPCO sought enforcement of the award in
England or for enforcement adjourned pending resolution of
challenges to the award in Nigeria (initially, on non-fraud but
subsequently fraud charges). The courts ordered adjournment of
enforcement of the award and security under AA 1996, s 103(5) (note
the Supreme Court decision relates to s 103(3)).
In 2014, IPCO again sought enforcement in England but Mr Justice
Field in the Commercial Court refused the application because of
further delays in Nigeria which were found to amount to a change of
circumstance. Field J did however highlight that the substantial
delays in the Nigerian proceedings (the so-called 'Gordian
knot') should not be permitted to continue in the interest of
the parties and the Nigerian legal system. IPCO appealed this
decision to the Court of Appeal.
The Court of Appeal were concerned by the length of time that it
would take to reach a resolution of the Nigerian proceedings and
remitted the case to the Commercial Court to determine whether
enforcement of the award would contravene English public policy
under section 103(3) of the 1996 Arbitration Act 1996 (AA 1996).
The Court of Appeal also adjourned any further enforcement of the
award under AA 1996, s 103(5) but ordered NNPC to pay a further
US$100 million in security in addition to the US$80 million it had
already paid. If the security was not paid, the court ordered the
whole award to become payable.
Decision of the Supreme Court
NNPC appealed to the Supreme Court on grounds that the order for
security under AA 1996, s 103(2) and (3) was made without
jurisdiction or was illegitimate in circumstances where the court
had found that NNPC had a good prima facie case of fraud which
entitled it to resist enforcement of the whole award.
The Supreme Court allowed the appeal. In doing so, it set aside
the decision of the Court of Appeal, finding that it had exceeded
its jurisdiction and powers in making its order. The five judges of
the Supreme Court (Lord Mance delivering the leading judgment)
found that there is no express power in AA 1996,s 103(2) or 103(3),
or in the same provisions of Article V of the New York Convention,
which enables the enforcing court to make its decision conditional
on the award debtor providing security.
Lord Mance did however clarify that, where an adjournment is
sought under AA 1996, s 103(5) security may be ordered (thus
leaving the original order for US$80 million security made under
this section in place). The court may postpone making a decision on
recognition and enforcement until a foreign competent court has
considered a set-aside application and security may be ordered on
these terms as this is specifically provided for.
In arriving at its decision, the Supreme Court demonstrated its
willingness to look to the spirit of the New York Convention as
reflecting a balancing of interests between the award creditor and
For the parties the saga of this case and IPCO's efforts to
enforce its arbitral award continue. While this decision is
positive for arbitration in that it clarifies a question on
enforcement, it does highlight the continuing difficulties with
enforcing awards and the opportunities to thwart enforcement by
challenging the award in jurisdictions where the courts are unable
to address the application without significant delay.
IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation
 UKSC 16
The UK Supreme Court last week issued the latest decision in a long-running attempt to enforce a US$150 million Nigerian arbitration award (IPCO (Nigeria) Limited v. Nigerian National Petroleum Corporation...
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