Tecnicas v PCMC: High Court Sets Aside ICC Award For Lack Of Jurisdiction

The High Court's recent judgement in Tecnicas Reunidas Saudia for Services & Contracting Co. Ltd v Petroleum Chemicals and Mining Company Limited [2025] EWHC 1785 (Comm) provides a rare example of a successful challenge to an arbitration award under section 67 of the Arbitration Act 1996 (the "Act"). In this case, it was common ground that the parties had agreed to submit their dispute to arbitration, but the Court held that the ICC tribunal appointed by the parties lacked substantive jurisdiction because the relevant arbitration agreement, found within a hierarchical suite of contractual instruments, provided for ad hoc arbitration in London, rather than institutional arbitration under the ICC Rules.

The decision emphasises the fundamental difference between institutional and ad hoc arbitration, and that this goes to a tribunal's substantive jurisdiction. Having agreed to arbitration, the question which (if any) institutional rules apply is not merely a procedural matter. It also highlights the need to pay careful attention to 'contractual hierarchy' provisions and for careful drafting to ensure consistency of dispute resolution mechanisms across multi-document contracts.

Background

The case concerns a dispute under a subcontract between Tecnicas Reunidas Saudia for Services & Contracting Co. Ltd ("Tecnicas") and Petroleum Chemicals and Mining Company ("PCMC"), relating to works at the Fadhili gas processing plant in Saudi Arabia. The subcontract comprised several documents, subject to an express order of precedence.

After a dispute arose, PCMC commenced arbitration pursuant to the arbitration clause contained in the General Terms and Conditions for Construction Subcontracts ("GTCCS"), which provided for ICC arbitration seated in Saudi Arabia, as modified by a deviations schedule and a purchase order (the "Purchase Order"), each of which came higher in the contractual hierarchy and, PCMC contended, had the effect of moving the arbitral seat to England.

The ICC tribunal subsequently issued a partial award on preliminary issues accepting jurisdiction.

Tecnicas commenced proceedings before the High Court challenging the partial award under section 67(1)(a) of the Act on the ground that the ICC tribunal lacked substantive jurisdiction. It argued that the arbitration agreement contained in the GTCCS did not apply and thus the parties had never agreed to arbitration under the auspices of the ICC.¹ Instead, the applicable arbitration agreement was that contained in the Purchase Order, which was the 'top' document in the contractual hierarchy and which, Tecnicas contended, provided for ad hoc arbitration in London.

In response, PCMC maintained its argument that the arbitration provisions contained in the GTCCS and the Purchase Order should be read together with the result that the ICC Rules applied, but the dispute was subject to English law and the arbitration was seated in England (i.e., the Purchase Order had the effect of changing the applicable law and arbitral seat, without affecting the applicable institutional rules).[1] PCMC further submitted that, by failing to raise the specific grounds of objection to the ICC tribunal's jurisdiction on which it ultimately relied for the section 67 challenge at the time it took its "first step" in the arbitration—namely, appointing its own arbitrator and filing an Answer—Tecnicas had waived its right to bring such a challenge and was estopped from advancing it.²

The Decision

Interpretation of "Substantive Jurisdiction"

Under section 67(1)(a) of the Act, a party to arbitral proceedings may apply to the court to challenge any award of the arbitral tribunal as to its "substantive jurisdiction".³ The Court confirmed⁴ that, in this context, the phrase "substantive jurisdiction" has the same meaning as in section 30 of the Act, which provides that, unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, specifically as to: (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement.⁵

The Court held that the question of whether the parties agreed to ad hoc or institutional arbitration is clearly an issue of "substantive jurisdiction" within the meaning of section 67, as it concerns the nature and extent of the parties' agreement to arbitrate. In particular, it goes to: (a) whether there is a valid arbitration agreement—since it is necessary to determine whether an arbitration agreement exists and, if so, its terms; (b) whether the tribunal is properly constituted—since the method of constitution depends on whether the arbitration is ad hoc or institutional; and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement—since only matters submitted under the agreed terms (ad hoc versus ICC) are properly before the tribunal.⁶

Waiver and Estoppel

The Court considered the extent to which a party may be deemed to have waived, or be estopped from denying, the tribunal's jurisdiction by appointing an arbitrator and filing an Answer to a Request for Arbitration. It concluded that Tecnicas had not waived its right to bring a section 67 challenge and was not estopped from denying the tribunal's jurisdiction by virtue of appointing an arbitrator.⁷

In doing so, it emphasized that, for a tribunal to rule on a jurisdictional issue, it must first be constituted. Therefore, the act of nominating an arbitrator does not preclude a party from challenging jurisdiction; to hold otherwise "would be contrary to the ethos of the... Act...",⁸ specifically section 31(1) which provides:

"A party is not precluded from raising such an objection [that the arbitral tribunal lacks substantive jurisdiction] by the fact that he has appointed or participated in the appointment of an arbitrator."⁹

The Court also rejected PCMC's arguments that Tecnicas had waived its right to challenge jurisdiction or was estopped from doing so by participating in the arbitration, noting that not only had Tecnicas clearly and consistently reserved its rights, it had expressly challenged the tribunal's substantive jurisdiction at the outset of the proceedings (albeit the specific grounds for that challenge differed from those which ultimately formed the subject of the section 67 challenge).

Timeliness of jurisdiction challenge

As noted above, the grounds for Tecnicas' attack on the Tribunal's jurisdiction under section 67 of the Act were different to those on which it had initially relied in the arbitration.¹⁰ In particular, although Tecnicas submitted in its Answer that the tribunal should decline jurisdiction, this was on the basis that "the Request for Arbitration was submitted with no authority and PCMC had no capacity to act".¹¹ It was not until a case management conference, convened 11 days later, that Tecnicas first raised the argument that the ICC rules were not applicable at all, and that the parties had instead agreed to ad hoc arbitration (i.e., what Bryan J referred to in his judgment as the "Ad Hoc vs ICC Arbitration challenge").¹²

However, the court rejected PCMC's argument that this meant that Tecnicas had failed to raise the Ad Hoc vs ICC Arbitration challenge "forthwith" within the arbitration proceedings, such that it was barred from doing so before the court by section 73(1) of the Act.¹³ In this regard, the court applied the reasoning of the Court of Appeal in the recent case of The Czech Republic v Diag Human SE & Anor [2025] EWCA Civ 588, holding that PCMC had failed to raise an objection to the timeliness of Ad Hoc vs ICC Arbitration challenge within the arbitration (to the contrary, it had engaged with it) and, the ICC tribunal having proceeded to rule on the issue of its own jurisdiction, the challenge had implicitly been made "within such time as is allowed by the... the tribunal" for the purposes of section 73(1).

Construction of the Arbitration Agreement

As noted above, the subcontract at issue in Tecnicas consisted of several documents—namely, (1) the Purchase Order; (2) a deviation list; (3) technical requisitions; and (4) the GTCCS—with the Purchase Order specifying expressly the order of precedence as amongst those documents.¹⁴

The Court held that the Purchase Order, being at the top of the contractual hierarchy, governed the arbitration agreement.¹⁵ It provided for ad hoc arbitration in London under English law, with no reference to ICC arbitration or rules. The deviation list, while referencing "ICC Laws", was lower in the hierarchy and this could not override the Purchase Order. The same applied to the GTCCS, which contained an ICC arbitration clause with a Riyadh seat and Saudi law.

On that basis, the Court determined that any inconsistency between the terms of the Purchase Order and other contractual documents had to be resolved in favour of the Purchase Order.¹⁶ The arbitration provisions in the GTCCS were fundamentally inconsistent with those in the Purchase Order and so the parties' agreement to arbitrate was governed by the Purchase Order alone. Disputes were required to be referred to ad hoc arbitration in London, not to ICC arbitration.

Comment

The Court's decision makes clear that the distinction between ad hoc and institutional arbitration is an issue going to the substantive jurisdiction of an arbitral tribunal for the purposes of a challenge under section 67 of the Act.

It provides useful guidance on the interpretation of arbitration agreements in the context of multi-document contracts and highlights the potentially significant impact that a 'hierarchy' or 'order of precedence' clause can have. It is a reminder to contracting parties of the need to ensure that dispute resolution provisions are clear, unambiguous and—in the case of contracts composed of multiple documents—consistent.

The Court's decision is a reminder that parties seeking to challenge a tribunal's jurisdiction should do so at as early a stage of the arbitral proceedings as possible and should make explicit and timely reservations of rights to avoid potential arguments of waiver or estoppel. On the other hand, a claimant faced with a challenge to the tribunal's jurisdiction should take care to raise any objection to the timeliness of that challenge within the arbitration proceedings, to ensure that the issue is considered by the tribunal and to avoid losing the ability to raise timeliness arguments in the context of an eventual section 67 challenge.

Footnotes

1. See Tecnicas at [143].

2. See Tecnicas at [153].

3. Section 67(1) of the Act.

4. See Tecnicas at [189].

5. Section 30 of the Arbitration Act 1996.

6See Tecnicas [190].

7. See Tecnicas [173-176].

8. See Tecnicas [175].

9. See Tecnicas [176].

10. See Tecnicas [114].

11. See Tecnicas [113(8)].

12. See Tecnicas [115–116].

13. Section 73(1) of the Act provides, in relevant part: "If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal... any objection— (a) that the tribunal lacks substantive jurisdiction, ... he may not raise that objection later, before the tribunal or the court...".

14. See Tecnicas [221].

15. See Tecnicas [221].

16. See Tecnicas [221].

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