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It then changed direction, and rather than risk losing in England, resisted determination of Yukoss case in England, and itself in reality sought an adjournment pending the outcome of the Swedish proceedings (see judgment, para 23). Ratio |
In these circumstances, the Court of Appeal held in Dardana v Yukos that the English courts had no power under section 103(5) to order Yukos to provide security on the tacit basis that, if Yukos did not do this, immediate enforcement would be ordered against it (paras 26-31). Ratio |
Security pending the outcome of foreign proceedings is, in effect, the price of an adjournment which an award debtor is seeking, not to be imposed on an award debtor who is resisting enforcement on properly arguable grounds. Ratio |
The reasoning in Dardana v Yukos underlines both these aspects. Ratio |
I have added italics for emphasis: 27. Ratio |
In most cases it would be the party resisting recognition or enforcement, who had already begun proceedings to set aside in the foreign state, who would be seeking an adjournment of the recognition or enforcement proceedings, pending resolution of the foreign application. Ratio |
An order for security, on the application of the party seeking recognition or enforcement, would be the price of the adjournment sought by the other party, and would protect the party seeking recognition or enforcement during the adjournment. Ratio |
There is no power under section 103(5) to order security except in connection with an adjournment. Ratio |
If no foreign application had been made to set aside, the domestic proceedings under section 103(2) would have had to be fought out to a conclusion; and there would be no power under section 103(5) to order security during the period which that took. Ratio |
There could of course, in an appropriate case be an application for freezing relief 28. Ratio |
In a case where a party resisting enforcement applies under section 103(2), but later seeks an adjournment of its application pending resolution of foreign proceedings in which it is also challenging the award, adjournment may as a matter of general principle be ordered on condition that security be provided (failing w... |
29. Ratio |
The reality in the present case is that the appellants were obliged to provide the security, on the tacit basis that, if they did not do so, then enforcement would be ordered unconditionally against them, despite their outstanding application under section 103(2). Ratio |
The provision for security was, in other words, made a condition not of any adjournment sought by the appellants, but of avoiding immediate and final enforcement; and, failing its provision, the appellants outstanding application under section 103(2) would have been liable to be struck out or dismissed, without determi... |
I do not consider that as a legitimate sanction to attach to any order made for the provision of security in the present circumstances. Ratio |
It would involve overriding or fettering an outstanding application under section 103(2), in a way for which sections 100-104 provide no warrant. Ratio |
It is inconsistent with paragraph 31.9 of the Arbitration Practice Direction, and the concluding words of Mr Justice Steels order, whereby the award was not to be enforced, if the appellants applied (as they did) to set aside his order, until the application was finally disposed of. Ratio |
Paragraph 31.9 of the Arbitration Practice Direction has now become CPR 62.18, set out in para 21 above. Ratio |
In the present case, the Court of Appeals order involves the same error as that identified in the first and third italicised passages. Ratio |
It required security, not as the price of a further adjournment falling within section 103(5), but as the price of the decision of an issue under section 103(3). Ratio |
The Court was lifting the adjournments previously ordered pending the outcome of the Nigerian proceedings, not ordering an adjournment. Ratio |
It had no power under section 103 to make a decision of the properly arguable case raised by NNPC under section 103(3) conditional on NNPC providing further security. Ratio |
The Court of Appeals reasoning at paras 174-177 of its main judgment and para 18 of its supplementary judgment demonstrates the same errors that are evident in its order. Ratio |
Para 18 by focusing on NNPCs (alternative) submission that, if Field Js contingent exercise of his discretion (to refuse enforcement) was wrong, there should be an adjournment under section 103(5) case misses the point. Ratio |
What is critical here is not what submissions were advanced (contingently), but whether there was in the event an adjournment (and, if there was, whether it was effectively at the award debtors instance as well as pending the outcome of the relevant challenge in the overseas court of the country in which, or under the ... |
Here, no such adjournment was ordered by the Court of Appeal, which on the contrary decided that the fraud issue should be resolved in the English proceedings. Ratio |
There was therefore no adjournment under section 103(5) onto which to hang, as the price, a requirement of further security. Ratio |
The Court of Appeals further reasons at paras 19-23 in its supplementary judgment do not go to the jurisdiction or power to order security under section 103, though they might have gone to the exercise of any discretion, if (contrary to my conclusion) any such discretion had existed under section 103. Ratio |
The perceived inadequacy by the time of the Court of Appeals order of the security of USD 80m validly ordered as a condition of past adjournments under section 103(5) was no basis for ordering further security when further adjournment was being refused. Ratio |
Mr Michael Black QC suggested that, when the matter came before Field J and the Court of Appeal, there was no outstanding challenge by NNPC under section 103(3). Ratio |
If that were so, it is difficult to understand what either court was doing in considering and deciding, at some length, whether NNPC had shown a good prima facie case of fraud, and, in the case of the Court of Appeal, making an order for its decision by the English courts. Ratio |
Further, NNPC had made a formal challenge by its application dated 18 December 2008; the decision on that challenge was adjourned, pending the outcome of the Nigerian proceedings, by the consent order dated 17 June 2009; and the whole purpose and effect of the Court of Appeals decision that there had been a change of c... |
For these reasons, the Court of Appeals order for security was not within the scope of any jurisdiction or power conferred by section 103 of the 1996 Act. Ratio |
Mr Black has, however, submitted that the order can be and was justified on grounds not directly considered in Dardana v Yukos, and touched on, if at all, then only very tangentially by the Court of Appeal. ARG |
At the basis of this submission is the proposition that the New York Convention, and sections 100-104 of the 1996 Act, leave untouched the ordinary procedural powers of the English courts in respect of proceedings before them. ARG |
I have no difficulty accepting the general correctness of that in relation to the conduct of a challenge to recognition or enforcement being decided under section 103(2) and/or (3): see further para 45 below. Ratio |
But it provides no basis for making the raising for decision of a properly arguable challenge under these sections conditional upon the provision of security for the award. Ratio |
providing: In support of his submission, Mr Black points to article III of the Convention, Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following article... |
There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards. ARG |
Although article III is not itself part of English law, Mr Black submits that we can and should, on familiar principles, view sections 100-104 of the 1996 Act in its light. ARG |
I also have little difficulty with that as a general proposition, although the possible differences between the meaning of the word conditions used twice in article III have given rise to much discussion. ARG |
I am prepared for present purposes to proceed on the basis, without deciding, that the second reference to conditions refers in effect to principles or rules of procedure (as Mr Black submits with the weighty support of Professor Albert van den Bergs commentary on The New York Arbitration Convention of 1958 (1981), p 2... |
Mr Blacks submission is that sections 100-104 only occupy the field of procedural matters to a limited extent. ARG |
The second paragraph of article VI (which led domestically to the second paragraph of section 103(5)) was, according to the Summary Record of the Seventeenth Meeting of the United Nations Conference on International Commercial Arbitration held on 3 June 1958, inserted to address the risk of abuse of what became article... |
The submission continues by pointing to the English courts general power to make conditional orders, including orders on its own motion under CPR 3.1(3)(a) and 3.3. ARG |
In this connection, Mr Black is able to submit that this is in fact what the Court of Appeal must, or must also, have had in mind when it made its order. ARG |
In para 6 of his supplementary judgment, commenting on the passage from Dardana v Yukos set out in para 27 above, Christopher Clarke LJ said this: It is not wholly clear to us how section 103(5) was thought to provide jurisdiction to the Court to act of its own motion but, in any event, a court which is asked to adjour... |
Section 103(5) cannot be treated as precluding the exercise of that right. ARG |
Finally, Mr Black argues that the English courts would, contrary to article III, be discriminating procedurally against foreign awards compared with awards in arbitrations where the seat is English, if they could not order security against a party who was merely mounting a challenge under section 103(2) or (3). ARG |
It is in this connection that he deploys section 70(7) of the 1996 Act. ARG |
He relies on reasoning of Rix LJ (supported to some extent by that of Moses LJ, but opposed by that of Buxton LJ) in Gater Assets Ltd v NAK Naftogaz Ukrainiy (Gater) [2007] EWCA Civ 988; [2007] 2 Lloyds Rep 588; [2008] Bus LR 388. ARG |
Rix LJ considered that an award debtor resisting enforcement by destroying the formal validity of the award, either as a matter of substantive jurisdiction or serious irregularity or as a matter of public policy is in substance in a position of a claimant analogous to that of an award debtor under an English award seek... |
On Mr Blacks case, therefore, if English procedural law does not enable an award creditor under a Nigerian arbitration award to apply and, if the court thinks fit, to obtain security for the award from an award debtor who is challenging enforcement under section 103(2) or (3), then it is imposing on the award creditor ... |
Mr Blacks case on these points fails, in my opinion, at a number of levels. Ratio |
First, the Court of Appeal in Gater was addressing an issue of security for the future costs of a challenge under section 103(3), which raises very different considerations to an issue of security for the past award itself. Ratio |
Even then, although Rix LJ did not make this the ground of decision because it had not been argued, he noted that the Convention might be regarded as a complete code, precluding the making of a decision under section 103(2) or (3) conditional upon the provision of security for costs: para 82. Ratio |
More importantly, in relation to the provision of security for the award itself, he said this, at para 81: Field J, however, was prepared to refuse enforcement, on the ground of failure to provide the security for costs ordered. Ratio |
That was the order that Field J made, setting aside the enforcement order if the security was not provided, and doing so on a ground not expressly within the Convention. Ratio |
There is no express basis in the New York Convention for that condition. Ratio |
Enforcement may be refused only if one of the exceptions within article V is made good. Ratio |
Security is discussed in the Convention, but only security for the award itself and only in the context of an adjournment of enforcement proceedings pending an application to set aside or suspend the award to the competent authority of the country in which, or under the law of which, that award was made: article VI, re... |
That is not just an example of a circumstance in which such security might be ordered, but is the only circumstance in which it might be: see the decision of this court in Dardana Ltd v Yukos Oil Co [2002] All ER (Comm) 819, para 27. Ratio |
In my opinion, the conditions for recognition and enforcement set out in articles V and VI of the Convention do constitute a code. Ratio |
Just as article V codifies the grounds of challenge (see Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 16-137), so the combination of articles V and VI must have been intended to establish a common international approach, within the field which they cover. Ratio |
They contemplate that a challenge under article V may only be made conditional upon the provision of security in one situation falling within their scope. Ratio |
Had it been contemplated that the right to have a decision of a properly arguable challenge, on a ground mentioned in article V (domestically, section 103(2) and (3)), might be made conditional upon provision of security in the amount of the award, that could and would have been said. Ratio |
The Convention reflects a balancing of interests, with a prima facie right to enforce being countered by rights of challenge. Ratio |
Apart from the second paragraph of article VI, its provisions were not aimed at improving award creditors prospects of laying hands on assets to satisfy awards. Ratio |
Courts have, as noted in Dardana v Yukos, other means of assisting award creditors, which do not impinge on award debtors rights of challenge, eg disclosure and freezing orders. Ratio |
It is unnecessary in this context to address the issue which divided the Court of Appeal in Gater, whether or how far an award debtor challenging an award should or may be regarded as being in the position of a claimant, rather than a defendant. Ratio |
Suffice it to say that I would leave open the correctness of Rix LJs view (Gater, paras 77-79) that there is no material difference at a domestic level between challenges falling within the scope of section 66 of the Act, read with section 81(1), and challenges falling within sections 67, 68 or 69. Ratio |
The fact that section 70(6) and (7) only apply to the latter, and not to challenges under section 66, highlights this point. Ratio |
If it were appropriate or relevant to have regard to the position regarding an English award, the true domestic analogy with, at any rate, the present fraud challenge under section 103(3) would be a challenge under section 66 read with section 81(1)(c). Ratio |
On that section 70(7) cannot on any view offer any direct assistance to Mr Blacks submission. Ratio |
In fact, however, the challenges permissible under section 103(2) and (3) embrace, but do not distinguish between, matters which could in some cases be raised both under section 66 and under either section 67 or 68 and in other cases only under one of the latter two sections. Ratio |
Domestic analogies are in these circumstances unlikely to illuminate the operation of the internationally-based provisions of sections 100-104. Ratio |
In any event, I do not regard the argument based on article III and section 70(7) as having any force. PRE |
First, article III may serve as a caution against interpreting or applying English procedural provisions in a sense which discriminates against Convention awards by imposing substantially more onerous rules of procedure. PRE |
But this is only so long as the conditions laid down in the following articles of the Convention do not otherwise provide. PRE |
As I have indicated, I consider that articles V and VI constitute a code relating to security for an award when the issue is enforcement or adjournment; and that the code excludes requiring security for an award in the face of a properly arguable challenge under article V, except in so far as article VI provides. PRE |
Second, even if that were not so, I would have some doubt whether an inability to order security on a challenge to an overseas award could constitute a substantially more onerous rule of procedure in relation to recognition or enforcement than a rule allowing such security in the case of an English award. PRE |
Third, be that as it may, the fact is that the 1996 Act contains in relation to Convention awards no equivalent to section 70(7) in relation to English awards. PRE |
Whatever article III might require in that respect (if anything), it is not found in the 1996 Act, and no amount of consistent interpretation can alter the Act in that respect. PRE |
Fourth, there is first instance authority, which in my opinion accurately reflects what would be expected as a matter of principle in relation to the provision of security for the amount of an award in issue, that the power under section 70(7) will only be exercised if the challenge appears flimsy or otherwise lacks su... |
Finally, I turn to CPR 3.1(3). Ratio |
In my opinion, this takes IPCO nowhere. Ratio |
It is a power, expressed in general terms, to impose conditions on orders. Ratio |
It cannot authorise the imposition, on a person exercising its right to raise a properly arguable challenge to recognition or enforcement, of a condition requiring security for all or any part of the amount of the award in issue. Ratio |
Its obvious subject matter is the imposition of a condition as the price of relief sought as a matter of discretion or concession, not the imposition of a fetter on a person exercising an entirely properly arguable right. Ratio |
The Court of Appeal was right to underline in Huscroft v P & O Ferries Ltd (Practice Note) [2010] EWCA Civ 1483; [2011] 1 WLR 939, paras 18- 19 that rule 3.1(3) does not give the court a general power to impose conditions on one or other party whenever it happens to be making an order, and that its purpose is to enable... |
CPR 3.1(3) may be relevant where the court only permits the pursuit on terms of a claim or defence which in some respect is problematic: see Deutsche Bank AG v Unitech Global Ltd [2016] EWCA Civ 119, paras 72-81 (to which the appellants solicitors very properly drew the Supreme Courts attention after the handing down i... |
But it is entirely clear that CPR 3.1(3) has no relevance on this appeal. Ratio |
That is not to say that CPR 3.1(3) or the courts other general procedural powers may never become relevant in the context of an issue being decided under section 103(2) or (3). Ratio |
I have noted that the courts power to make disclosure and freezing orders is one means by which an award may indirectly be secured, without impinging on a defendants right to raise challenges under section 103. Ratio |
The court may in the course of such a challenge make all sorts of other procedural orders, and back them where necessary with sanctions. Ratio |
But none of this has anything to do with this appeal. Ratio |
NNPC here had not misconducted themselves or given any sort of cause for the exercise of any procedural discretion to make an order against them or to condition it in any way. Ratio |
Some of the factors to which the Court of Appeal alluded in paras 19 to 23 of its supplementary judgment might have had some possible relevance had NNPC in some way defaulted in the pursuit of a challenge under section 103. Ratio |
As it is, paras 19-21 amount to no more than concern that the award might be difficult to enforce in practice, while para 23 links this to a perception that the previously ordered security now appears insufficient. Ratio |
These were not admissible bases for attaching a condition to the future exercise in this jurisdiction of a right of challenge under section 103(3). Ratio |
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