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They were set out in a draft, circulated on 4 September 2015 in the usual way, by para 175 of which the Court proposed to require NNPC to provide security for the whole of the principal and interest then claimed, around USD 300m. Ratio |
This led to a request by NNPC to the Court for it, exceptionally, to reconsider the position, on the ground that the order for security was made without jurisdiction or was alternatively wrong in principle and/or manifestly wrong. Ratio |
On the former point, NNPC referred to Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyds Rep 208 and Dardana Ltd v Yukos Oil Co (Dardana v Yukos) [2002] EWCA Civ 543; [2002] 2 Lloyds Rep 326. Ratio |
After receiving submissions from both parties, the Court of Appeal issued two judgments, neither in precisely the same terms as the original draft. Ratio |
It rejected the submission of lack of jurisdiction, but acceded to the request that it reconsider the quantum of security, which it reduced to a requirement for a further USD 100m. Ratio |
In the Courts first, main judgment, Christopher Clarke LJ, said: Decision 174. RLC |
In my judgment the appropriate course to take is as follows. RLC |
First, we should order that IPCOs application to enforce should be adjourned pending the determination by the Commercial Court pursuant to section 103(3) of the Act as to whether the Award should not be enforced in whole or in part because it would be against English public policy so to do. RLC |
175. RLC |
Second, we should make that order conditional upon the provision by NNPC of further security in a form and within a time period to be agreed, or if not agreed, to be determined by this Court, in the sum of $ 100m. 176. RLC |
Third, we should order that, if such security is not provided within a period which we shall specify from the time when the form of security is agreed or determined, IPCO shall have permission to enforce the Award. RLC |
177. RLC |
Fourth, we should order that, if such security is provided, then, if and to the extent that it is determined by a final order of the courts of England and Wales that the enforcement of the Award is not contrary to the public policy of England & Wales, IPCO may enforce it. RLC |
178. RLC |
Fifth, there shall be Permission to apply to the Commercial Court. RLC |
In the Courts shorter supplementary judgment [2015] EWCA Civ 1145 dealing more extensively with the issue of jurisdiction, Christopher Clarke LJ said: Discussion 18. RLC |
In the present case it seems to us that in reality it is NNPC, the Award debtor, which sought the continuance of the adjournment in the face of IPCOs attempt to enforce the Award and bring the adjournment to an end. RLC |
In its respondents notice NNPC said that, if the judges contingent exercise of his discretion was in error, he was nevertheless correct to conclude that it was appropriate to adjourn under section 103(5) so that the challenge could proceed in Nigeria inter alia because, if the court were minded to enforce the Award, it... |
In other words it was relying on the possibility of a later English public policy challenge as a reason to uphold the continuance of the adjournment, ordered by consent on 17 June 2009, pending resolution of the fraud challenge in Nigeria, rather than suggesting that enforcement should only abide a section 103(3) deter... |
19. RLC |
So far as the ability of IPCO to enforce any judgment is concerned, much will depend on whether NNPC has sufficient assets in this country, or any other country in which an English judgment may be enforced, to ensure that it can swiftly receive the fruits of any judgment in its favour. RLC |
20. RLC |
Although NNPC is a large business we have no details of its assets within such countries, or the form in which they are held, how long they have been held there, or how readily any trading arrangements might be changed so as to render enforcement difficult or impossible. RLC |
21. RLC |
where there is a very large award, delay without security is inherently likely to prejudice the award creditor and certainly risks doing so. RLC |
We regard that as a factor which should incline us towards providing some security to ensure that if the fraud challenge fails, IPCO will not be faced with a further round of attempts to avoid payment of the Award or a situation in which its prospects of recovery have worsened. RLC |
22. RLC |
Another material factor is the need in a case involving such extraordinary delay, extending over a decade, to provide a strong incentive to securing finality. RLC |
NNPL [sic] says that, now that the fraud challenge is to be heard in London, the prospects of excessive delay are much reduced. RLC |
Hopefully so. RLC |
But the history of these proceedings, and their inordinate delay, persuades us of the need to provide an incentive, indeed something of a goad, to progress. RLC |
23. RLC |
Lastly we bear in mind that the delay which has already taken place has meant that the ratio between the amount of security in place and the amount due has greatly decreased. RLC |
Interest under the award is running at 14% per annum. RLC |
Gross J ordered that security of $ 50m be provided 10 years ago. RLC |
$ 50m x 14% x 10 = $ 70m. RLC |
The same exercise applied to the $ 30m security provided in 2008 produces about another $ 31.5m ($ 30m x 14% x 7.5). RLC |
NNPC now appeals, by permission of this Court, against the Court of Appeals order for security, in essence on the ground that the order was made without jurisdiction or wrong in principle and/or was illegitimate in circumstances where NNPC has a good prima facie case of fraud entitling it to resist enforcement of the w... |
Sections 100 to 104 of Part III of the 1996 Act address the recognition and enforcement of foreign awards. Ratio |
They give effect to the United Kingdoms obligations under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Ratio |
Section 103 is central to the resolution of this appeal. Ratio |
It reads: 103. STA |
Refusal of recognition or enforcement. STA |
(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases. STA |
(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves - (a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity; (b) that the arbitration agreement was not valid under the law to which the parties subjected it or, fai... |
(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. STA |
(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. STA |
(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. ST... |
It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security. STA |
Section 103(2) and (3) give effect to article V, while section 103(5) gives effect to article VI, of the New York Convention. Ratio |
Articles V(1) specifies as a ground on which recognition and enforcement may be refused that: (e) 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, that award was made. STA |
Article VI reads: If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, ... |
In this light it was common ground, and it is in any event clear, that sections 103(2)(f) and (5) are both addressing a situation where an award sought to be recognised or enforced in this jurisdiction has been or is under challenge in an overseas jurisdiction where, or under the law of which, it was made. Ratio |
The issue on this appeal falls under two heads: first, whether the Court of Appeals order was justified by reference to section 103(5) of the 1996 Act; and, second, whether it was justified by reference to general English procedural rules. Ratio |
In the latter connection, reliance is placed on CPR 3.1(3) as well as, indirectly, on section 70(7) of the 1996 Act. Ratio |
CPR 3.1(3) provides that: Where the court makes an order, it may - a) make it subject to conditions, including a condition to pay a sum of money into court; and specify the consequences of failure to comply b) with the order or a condition. Ratio |
Section 70(7) is one of a group of sections appearing under the heading Powers of the court in relation to award in Part I of the 1996 Act. Ratio |
Part I concerns arbitrations that (unlike the present) have their seat in England, Wales or Northern Ireland: see section 2(1). Ratio |
The group starts with section 66, addressing enforcement generally: Enforcement of the award (1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect. STA |
(2) Where leave is so given, judgment may be entered in terms of the award. STA |
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award. STA |
The right to raise such an objection may have been lost (see section 73). STA |
(4) Nothing in this section affects the recognition or enforcement of an award under any other enactment or rule of law, in particular under Part II of the Arbitration Act 1950 (enforcement of awards under Geneva Convention) or the provisions of Part III of this Act relating to the recognition and enforcement of awards... |
Section 66 must be read with section 81(1), providing that: Saving for certain matters governed by common law. STA |
(1) Nothing in this Part shall be construed as excluding the operation of any rule of law consistent with the provisions of this Part, in particular, any rule of law as to - (a) matters which are not capable of settlement by arbitration; (b) (c) arbitral award on grounds of public policy. STA |
the effect of an oral arbitration agreement; or the refusal of recognition or enforcement of an Sections 67, 68 and 69 concern challenges to awards for lack of substantive jurisdiction (section 67), serious irregularity (section 68) or by way of appeal on a point of law (section 69), in each case in proceedings initiat... |
They therefore contrast with section 66(3), which, read with section 81, enables an award debtor to challenge enforcement on grounds there indicated by resisting enforcement proceedings initiated by the award creditor. STA |
Section 70(1) provides that the following provisions, inter alia, apply to an application or appeal under sections 67, 68 or 69 of the Act: (6) The court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the... |
(7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with. STA |
CPR 62.18(9) provides that, within 14 days of service of an ex parte order giving permission to enforce under section 66, the defendant may apply to set aside the order and the award must not be enforced until after any application made by the defendant within that [14 day] period has been finally disposed of. Ratio |
I start with the relationship between the Court of Appeals order and the scheme of section 103 of the Act. Ratio |
The order was that the fraud issue, raised as an issue of public policy under section 103(3), should, for the purposes of determining whether enforcement should be ordered, be decided in the English, rather than Nigerian, proceedings. Ratio |
But the decision of the fraud issue was made conditional upon the provision by NNPC of a further USD 100m security, failing which the Court gave leave to enforce without any decision of the fraud issue. Ratio |
Upon provision of such security, on the other hand, the Courts order provided that any further enforcement of the award should be adjourned under section 103(5) pending decision of the fraud issue. Ratio |
The position is therefore that the Court held that an enforcing courts decision upon an issue, raised by an award debtor under section 103(3) or, as must follow, section 103(2) could (and in the instant case should) be made conditional upon the award debtors provision of security in respect of the award. Ratio |
Further, it regarded the delay which would follow while that decision was being reached by the enforcing court as involving an adjournment within the meaning of the words the court may adjourn the decision on the recognition or enforcement of the award in section 103(5). Ratio |
In both these respects, the Court of Appeal fell in my opinion into error. Ratio |
First, nothing in section 103(2) or (3) (or in the underlying provisions of article V of the New York Convention) provides that an enforcing court may make the decision of an issue raised under either subsection conditional upon the provision of security in respect of the award. Ratio |
In this respect, there is a marked contrast with section 103(5), which specifically provides that security may be ordered where there is an adjournment within its terms. Ratio |
Second, the Court erred in regarding its order that the English court should as the enforcing court decide the fraud issue as involving adjournment of the decision on that issue within the terms of section 103(5). Ratio |
This error has two aspects. Ratio |
First, as stated in para 15 above, section 103(5) concerns the situation where an enforcing court adjourns its decision on enforcement under section 103(2) or (3), while an application for setting aside or suspension of the award is pending before the court of the country in, or under the law of which, the award was ma... |
This was the situation when orders were made by Gross J on 12 April 2005, by Flaux J on 16 December 2008 and by consent on 17 June 2009. Ratio |
But it ceased to be the situation for the future, once the Court of Appeal held that the issue whether fraud was an answer to enforcement should no longer await the outcome of the Nigerian proceedings, but should be decided by the English courts. Ratio |
Although the literal trigger to the application of section 103(5) is that an application has been made to the courts of the country where, or under the law of which, the award was made, the adjournment which it contemplates is pending the outcome of that application. Ratio |
Once it is held that there should be no such further adjournment, there is no basis for ordering further security under section 103(5). Ratio |
The Court of Appeal, in ordering that any further enforcement of the award should be adjourned under section 103(5) pending determination of the section 103(3) proceedings, was, therefore, misusing the word in the context of section 103(5). Ratio |
Of course, any decision of an issue raised under section 103(2) or (3) may take a court a little time, even if it is only while reading the papers, or adjourning overnight or for a number of weeks, in order to consider and take the decision. Ratio |
But that does not mean that the decision was being adjourned within section 103(5). Ratio |
On the contrary, delays of this nature are all part of the decision-making process. Ratio |
The second aspect is that section 103(5) contemplates an order for security being made on the application of the party claiming recognition or enforcement of the award. Ratio |
It is true that in Dardana v Yukos, when giving the reasons of all members of the court, I said, at para 31: I am fully prepared to proceed on the basis that section 103(5) provides the court with jurisdiction to make such an order, in a case where it, either of its own motion (cf Soleh Boneh) or at the instance of the... |
Christopher Clarke LJ in his supplementary judgment, para 6, questioned how section 103(5) was thought to provide jurisdiction to the court to act of its own motion. Ratio |
It is unnecessary to consider that question here, although I shall return to para 6. Ratio |
What is however important to note is an evident error in the passage cited, which no one appears to have spotted. Ratio |
The word seeking after which I have inserted sic should clearly have read resisting, to reflect the actual language of section 103(5). Ratio |
That is also evident from the actual decision in Dardana v Yukos and its supporting reasoning. Ratio |
In Dardana v Yukos, the award debtor (Yukos) was challenging a Swedish award in Stockholm, but its primary response to an application to enforce in England was that the English courts should themselves decide whether the award should be recognised or enforced under section 103(2)(b) and/or (d). Ratio |
(Only in the alternative, did Yukos apply for an adjournment under section 103(5).) For a considerable time, the award creditor (Dardana) shared the award debtors stance, that the issues should be decided under section 103(2)(b) and/or (d). Ratio |
But, during the hearing, Dardana appreciated that its case was less strong than it had thought. Ratio |
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