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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> IPCO (Nigeria) Ltd. v Nigerian National Petroleum Corporation [2008] EWHC 797 (Comm) (17 April 2008) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2008/797.html Cite as: [2008] 2 Lloyd's Rep 59, [2008] EWHC 797 (Comm), [2008] 1 CLC 738, [2008] Bus LR D105 |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| IPCO (NIGERIA) LIMITED |
Claimant |
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| - and - |
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| NIGERIAN NATIONAL PETROLEUM CORPORATION |
Defendant |
____________________
(instructed by Messrs Lovells) for the Claimant
Jonathan Nash QC and James Willan
(instructed by Messrs Stephenson Harwood) for the Defendant
Hearing dates: 21-22, 25 February 2008
____________________
Crown Copyright ©
Mr Justice Tomlinson :
Introduction
i) an application by NNPC to set aside the order, pursuant to sections 103(2)(f) and 103(3) of the Arbitration Act 1996;
ii) in the alternative, an application by NNPC that the enforcement of the order be adjourned, pursuant to section 103(5) of the Arbitration Act 1996;
iii) an application by IPCO, pursuant to section 103(5) of the Arbitration Act, in substance that in the event of NNPC failing on (i) but succeeding on (ii) above, then NNPC should provide security in the sum of US$50 million (or such other sum as the Court thinks fit), failing which IPCO be permitted to enforce the award as a judgment of the court.
"100(1) In this Part a 'New York Convention award' means an award made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention. …
(3) If Her Majesty by Order in Council declares that a state specified in the Order is a party to the New York Convention, or is a party in respect of any territory so specified, the Order shall, while in force, be conclusive evidence of that fact.
(4) In this section 'the New York Convention' means the convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10th June 1958.
101(1) A New York Convention award shall be recognised as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.
(2) A New York Convention award may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
…
(3) Where leave is so given, judgment may be entered in terms of the award.
…
103(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.
(2) Recognition or enforcement of the award may be refused if the party against whom it is invoked proves—
…
(f) that 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, it was made.
(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.
(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.
(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.
It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security."
"(a) the Arbitration Award has been improperly procured as the condition precedent to the constitution of the Arbitration was not complied with;
(b) the Arbitral Tribunal misconducted itself in the interpretation of clauses 79.0 and 79.3 of the General Conditions of Contract;
(c) there are several apparent errors of law on the face of the Arbitral Award;
(d) the Arbitral Award is against public policy;
(e) the Arbitral Tribunal did not properly evaluate/review the evidence of the parties."
Subsequently NNPC has amended and amplified these grounds, first by an Amended Motion, then in a proposed Re-Amended Motion which was never formalised and which was superseded by a Re-Re-Amended Motion, referred to at the hearing before me as the "RRAM". This document was available in draft form before Gross J – leave to amend in terms of the draft was subsequently given by consent in the Nigerian court.
"An order of this Honourable Court transferring this case to the Honourable Chief Judge for re-assignment to another Judge of the Federal High Court for hearing.
2. An order suspending the delivery of the ruling on the Respondent's Preliminary Objection, reserved for 12th December 2005, pending the re-assignment of this matter and the re-hearing of the objection before another Judge of this Honourable Court.
3. An Order of this Honourable Court adjourning further proceedings in this suit sine die pending the transfer of the suit before another Judge of the Federal High Court."
The grounds for the application were set out in the Motion as follows:
"1. His Lordship has observed that the case is too confusing and complicated for her and the Applicant is apprehensive that this may undermine a just and fair determination of this case.
2. The order of this Honourable Court limiting the Written Address to just 4 (four) pages made it impossible for the Applicant to adequately canvass arguments in opposition to the Respondent's Written Address and thereby curtailed the right of the Applicant to fair hearing.
3. The refusal of the Court to allow the applicant to address the Court orally on 31 October 2005, when the Written Address was adopted especially in view of His Lordship's admission that the matter was confusing and complicated and the order limiting the written address to four pages, adversely affected and prejudiced the interests of the Applicant and its right to a fair hearing.
4. The refusal of His Lordship during the proceedings on 31 October 2005, to allow the Applicant's Counsel to respond to the extensive prejudicial submissions of the Respondent's Counsel contending that the Applicant was deliberately delaying the matter is capable of prejudicing the mind of the Court against the Applicant and thereby leads to a miscarriage of justice."
I should mention that Okeke J is as I understand it a lady judge but that it remains the tradition in Nigeria to refer to such a judge as "His Lordship".
"I know as a fact that:
…
(vi) on the last adjourned date being Monday 31 October 2005, the Registrar called the matter and His Lordship complained in open court to the hearing of everybody present, about the several applications filed in the matter and declared inter alia: '… this case is too complicated … that is the plain truth!' even before Counsel announced their appearance.
…
(ix) His Lordship also stated in open court that the applications filed in this matter were rather confusing and that she was minded to return the case-file to the Chief Judge for re-assignment to another judge of the Federal High Court.
(6) With particular reference to the statement of His Lordship in paragraph 4(vi) above I also know as a fact that, the Applicant has lost confidence in and become apprehensive about the ability and capacity of His Lordship to thoroughly and judiciously consider the rather intricate facts and circumstances of the instant suit.
(7) I verily believe that from the foregoing facts His Lordship ought to disqualify herself from further hearing the instant suit and to suspend delivery of her ruling on the Respondent's preliminary objection dated 29 July 2005.
(8) I know as a fact that this Honourable Court ought to take cognizance of the quantum of the Arbitral Award against the Applicant in the sum of US$154 million which it seeks to set aside, and in the light of paragraphs 5, 6 and 7 above, the Applicant instructed its counsel, Messrs Babalakin & Co, to seek a transfer of the instant suit from His Lordship to another Judge of the Federal High Court."
"2. I have read the affidavit deposed to by Mr Ganiyu Bosuro in support of the Applicant's motion on notice dated 29th November 2005. This my affidavit is sworn in opposition to certain allegations made in the said affidavit of Mr Ganiyu Bosuro.
3. First, the Applicant has alleged in its affidavit aforesaid that during the proceedings of 31st October 2005, this Honourable Court pronounced that the issues involved in this case are 'complex' and therefore the court was inclined to return the case file to the Chief Judge of the Federal High Court.
4. I was present in court during the proceedings of 31st October 2005, and I know as a fact that the above allegation is false. The court did not at any time pronounce that this matter was 'too confusing and complicated' for it to resolve, as alleged by the Applicant, or at all.
5. Secondly, as regards the Applicant's allegation that its right to a fair hearing has been infringed by the court's directive that the written addresses be limited to four pages, I wish to make the following observations;
(i) the court made the aforesaid directive during the proceedings of 12th July 2005; the Applicant did not at that time give any indication that it considered that it would be constrained from fully presenting its case by the aforesaid directive.
(ii) after the proceedings of 12th July 2005, the Applicant changed its legal representation. The Applicant's new counsel (Messrs Babalakin & Co) had sufficient time to study the proceedings that had transpired prior to their engagement. At no time did they indicate that they considered that the Applicant would be constrained from fully presenting its case by the directive limiting Written Addresses to four pages. On the contrary, they proceeded to file their four-page written address.
(iii) the Applicant itself has, in the course of these proceedings, strenuously urged the court to strictly enforce the four page limit. Thus, when the Respondent filed an Extract of Authorities (a compilation of verbatim extracts from legal authorities cited in the Respondent's Written Address), the Applicant objected to the Extracts of Authorities on the ground that it amounted to 'an extension' beyond the four pages directed by the court.
(iv) finally, the Applicant never requested the court to review the four page limit. On 31st October 2005, its legal practitioner, Mr Bayo Adaralegbe 'adopted' the Applicant's Written Submissions."
"Today is slated for the ruly (sic) on this suit but because of the application by the Applicant which touched on the intergrity (sic) of this court this ruling cannot be read. The matter will be transferred to the Chief Judge for assignment to another judge to handle the motion because I cannot be a judge in my court where I am tried. However, if at the end the court is exonerated the court may proceed to read his ruling which as I stated earlier is ready, this suit is therefore returned to the Chief Judge for necessary action, please."
"My Lord,
The above mentioned suit was adjourned for ruling on 12/12/05 but on 29/11/05 the Applicant herein (i.e. NNPC) filed a Motion on Notice praying for the transfer of the matter to Your Lordship for reassignment to another judge of the Federal High Court for hearing.
(ii) suspending the delivery of the ruling on the Respondent's (i.e. IPCO) Preliminary Objection slated for 12/12/05 pending the reassignment of this matter and
(iii) an order of this Court adjourning further proceedings in the suit sine die pending the transfer of the suit before another judge of the Federal High Court.
My Lord I am the accused in the said Motion and since I cannot be a judge in my own case I respectfully return the files for reassignment to another judge to deal with the said motion dated 29/22/05 (sic – obviously an error for 29/11/05)
It is pertinent to inform My Lordship that ruling on the preliminary objection has been written by me but since I have become aware of Babalakin's motion it will be foolhardy to deliver the said ruling until Babalakin's motion is determined.
In addition, the sister case suit No. FHC/L/CS/505/05 between IPCO v. NNPC that was adjourned sine die pending the outcome of suit No. FHC/L/CS/1060/04 is also forwarded herein for your directive please."
"Babalakin" is of course a reference to NNPC's new lawyers Messrs Babalakin & Co. The "sister case" to which reference is made is IPCO's own proceedings issued on 25 May 2005 seeking an order that IPCO be at liberty to enforce the award as a judgment of the court. It seems plain both from this letter and from the record of the ruling of the court on 12 December 2005 that what Okeke J was requesting was reassignment of NNPC's 2004 action simply for the purpose of enabling Babalakin's motion of 29 November 2005 to be dealt with by another judge. As I read both the letter and the earlier ruling the learned Judge contemplated that she might, in the event of dismissal of the application, deliver the judgment on the Preliminary Objection which she had already prepared. I am a little puzzled as to why in those circumstances she sought the direction of the Chief Judge as regards the 2005 action, but perhaps that was out of an abundance of caution.
"… As you must be aware, this matter is coming up before a new Judge for the very first time. There is no indication on the Hearing Notice regarding what the matter is coming up for. It is therefore our considered opinion that it would be in the interest of all the parties not to pre-empt the Court in its adjudication of this matter."
"I have no doubt that the Honourable Chief Judge of this court transferred the whole case to this case (sic – presumably an error for 'court') to be heard de novo. I am therefore not ready to hear a motion that was not filed against this court. I cannot decide whether Justice Okeke is competent to handle this case or not. I am therefore not going to sent (sic) back to the Chief Judge, this file, unless Mr Tunde Fagbohunlu has any objection to the hearing of this case. The case is adjourned to 16/03/05 (sic) for hearing of the preliminary objection."
"There is a sister case before this court. I am in agreement with the Ruling of Justice G.C. Okeke, that this case be adjourned sine die, until the outcome of the first case. The two cases cannot go on simultaneously."
From this I infer that this action must already have been adjourned or stayed on an earlier occasion although I have seen no record of it.
i) The court lacked jurisdiction to entertain the application;
ii) The application was grossly incompetent and defective;
iii) The application was spent and otiose.
i) There was no decision or ruling of the Federal Court that could be appealed against: at the hearing on 20 February 2006 Auta J merely informed the parties of an administrative action by the Chief Judge;
ii) Assuming that there was a decision, there was no competent appeal because leave of the court or of the Court of Appeal was required before the question of the appeal could validly be before the court;
iii) The notice of appeal was filed out of time;
iv) As a matter of discretion, the court should refuse a stay on the basis that the affidavit of IPCO did not disclose any reason for such a stay;
v) A stay of proceedings should only be granted where it would terminate the proceedings, and the court should exercise extreme restraint in granting the order.
"Conclusion
The mill of justice can grind very slowly in Nigeria. In particular, Nigeria is not yet geared towards arbitration in a manner which meets with the international standards it agreed to when adopting the New York Convention. In this regard, the Government of the Federal Republic of Nigeria has very recently set up a committee to examine the existing system and make recommendations towards the modernisation of the arbitration law and practice in Nigeria in an attempt to make it meet with those international standards. The recommendations of the committee are yet to be published or implemented."
I do not read Justice Ayoola as taking serious issue with this appraisal. He points out that there has been no proper statistical analysis of the length of time taken to resolve disputes relating to arbitral awards in Nigeria, and makes the point that it is difficult to generalise on the basis of individual cases in isolation without considering what was responsible for the delay which may have occurred in any given case. He continues:
"148. It is proper to bear in mind, against the background of knowledge of legal practice in Nigeria, that in some cases the delay may well have been occasioned by a party indulging in appealing interlocutory orders, which would surely have the effect of further delaying the hearing of proceedings for the challenge to an award. The parties who have chosen Nigeria as the venue of the arbitral proceedings will be presumed to be familiar with the state of the Court system and the length of time it may take proceedings to be heard and disposed of up to the appellate level. Their legal advisers are also presumed to understand the nature and cause of the apparent lethargic nature of the Nigerian judicial system as compared, probably with some other countries."
"144. The fact of possibility of delay in hearing appeals means that it is strange that IPCO, with the knowledge of the congestion in the Courts and the possibility of delay, chose to appeal instead of leaving the Preliminary Objection with Justice Auta who would have disposed of it much earlier than an appeal would have been heard."
Indeed it was argued before me by NNPC that IPCO really had only itself to blame for the fact that the Preliminary Objection has not already been determined. There could have been such a determination, it argued, in the first half of 2006 (perhaps 6-8 months later than had been anticipated at the time of the hearing before Gross J) "if IPCO had accepted the decision of Auta J given on 20 February 2006 that he should re-hear the Preliminary Objection". Mr Nash continued, in his skeleton argument:
"The only reason why there has not been a determination of the Preliminary Objection is that IPCO chose to appeal Auta J's decision and to seek a stay of the proceedings in the meantime, no doubt because it saw a tactical advantage for itself in doing so. IPCO cannot be heard to complain about the delay in the determination of the Preliminary Objection where it is responsible for the delay."
It is true that IPCO has stated its belief that the judgment of Okeke J, if delivered, would have effectively struck out NNPC's challenge to the award. To that extent it is no doubt correct to characterise IPCO's conduct as seeking a tactical advantage. I do not however find this argument attractive. Whilst I express no view on the matters of which the Nigerian Court of Appeal is seised, or arguably seised, it must be obvious that any legal system must be astute to avoid the possibility of re-hearings occurring except where absolutely necessary. There must be an end to litigation. I am sure that the Nigerian legal system recognises this principle. IPCO was entitled to attempt to secure the outcome that the judgment prepared following completed argument on its application was duly delivered. Even assuming that the words said to have been uttered by Okeke J were in fact said, IPCO was entitled to put forward the argument that such matters need to be put into perspective and do not necessarily lead to the conclusion that the judge is incompetent or compromised. Some judges would no doubt have taken the robust line that they would simply proceed to deliver their judgment and leave NNPC, assuming it had indeed lost, to raise such matters by way of or as part of a substantive appeal against the decision rather than in pursuit of satellite litigation. Furthermore it is apparent from the evidence of Justice Eso that the Nigerian Government recognises the desirability of putting in place procedures which will assist arbitration in Nigeria in providing a quick and efficient process of adjudication, supported with unobtrusive efficiency by the local supervisory law – see per Lord Hoffmann in Fiona Trust v. Privalov [2007] Bus LR 1719 at 1723. IPCO might of course be open to criticism if something egregious had occurred so as to render it unreasonable to seek to oppose NNPC's application for a re-hearing, but the present is not such a case. Whatever the outcome of IPCO's appeal to the Nigerian Court of Appeal, any disinterested observer can only reflect with some dismay upon the time being taken to achieve finality in the resolution of the underlying contractual dispute between IPCO and NNPC.
The judgment of Gross J
"11. For present purposes, the relevant principles can be shortly stated. First, there can be no realistic doubt that s.103 of the Act embodies a pre-disposition to favour enforcement of New York Convention Awards, reflecting the underlying purpose of the New York Convention itself; indeed, even when a ground for refusing enforcement is established, the court retains a discretion to enforce the award: Mustill & Boyd, Commercial Arbitration, 2nd edition, 2001 Companion, at p.87.
…
14. Fourthly, s.103(5) "achieves a compromise between two equally legitimate concerns": Fouchard, at p.981. On the one hand, enforcement should not be frustrated merely by the making of an application in the country of origin; on the other hand, pending proceedings in the country of origin should not necessarily be pre-empted by rapid enforcement of the award in another jurisdiction. Pro-enforcement assumptions are sometimes outweighed by the respect due to the courts exercising jurisdiction in the country of origin – the venue chosen by the parties for their arbitration: Mustill & Boyd, at p.90. "
15. Fifthly, the Act does not furnish a threshold test in respect of the grant of an adjournment and the power to order the provision of security in the exercise of the court's discretion under s.103(5). In my judgment, it would be wrong to read a fetter into this understandably wide discretion (echoing, as it does, Art. VI of the New York Convention). Ordinarily, a number of considerations are likely to be relevant: (i) whether the application before the court in the country of origin is brought bona fide and not simply by way of delaying tactics; (ii) whether the application before the court in the country of origin has at least a real (i.e., realistic) prospect of success (the test in this jurisdiction for resisting summary judgment); (iii) the extent of the delay occasioned by an adjournment and any resulting prejudice. Beyond such matters, it is probably unwise to generalise; all must depend on the circumstances of the individual case. As it seems to me, the right approach is that of a sliding scale, in any event embodied in the decision of the Court of Appeal in Soleh Boneh v Uganda Govt. [1993] 2 Lloyd's Rep. 208 in the context of the question of security:
'….two important factors must be considered on such an application, although I do not mean to say that there may not be others. The first is the strength of the argument that the award is invalid, as perceived on a brief consideration by the Court which is asked to enforce the award while proceedings to set it aside are pending elsewhere. If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security. In between there will be various degrees of plausibility in the argument for invalidity; and the Judge must be guided by his preliminary conclusion on the point.
The second point is that the Court must consider the ease or difficulty of enforcement of the award, and whether it will be rendered more difficult…if enforcement is delayed. If that is likely to occur, the case for security is stronger; if, on the other hand, there are and always will be insufficient assets within the jurisdiction, the case for security must necessarily be weakened.'
Per Staughton LJ, at p.212. See too: Fouchard, at p.982; Dardana v Yukos [2002] EWCA Civ 543; [2003] 2 Lloyd's Rep. 326 (CA).
16. Sixthly, it is pertinent to underline that the New York Convention contains no nationality condition (unlike the Geneva Convention of 1927) and is thus applicable, as here, when an award is made abroad in an arbitration between parties of the same nationality: Van den Berg, at pp. 15-19. While primarily the New York Convention was undoubtedly intended to facilitate international arbitration rather than the enforcement in a foreign country of a domestic arbitration award, the benefits of the New York Convention are available to a party seeking enforcement in the latter case also. Such cases are necessarily rare but it would be wrong to introduce a nationality condition into the New York Convention by the backdoor. So, for example, the fact of a party's nationality would (by itself) be irrelevant to the availability of a ground for resisting enforcement under s.103(2) or (3) of the Act. All that said, in the exercise of the discretion under s.103(5) of the Act, the fact that the arbitration was domestic in the country of origin, must generally be likely to enhance the deference due to the court exercising supervisory jurisdiction in that country. Comity and common sense are likely to require no less; pre-empting the decision on a challenge to an award before the court exercising supervisory jurisdiction in the country of origin would be a strong thing in a case where all parties were domiciled or incorporated in that country."
Nigerian Law
"All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. That is all that is meant by a 'reasoned award'."
In summary, I think it is clear that Justices Eso and Ayoola agree that the standard required is not exacting. Where precisely the line is to be drawn is a matter peculiarly within the province of the Nigerian court, likely to be informed by local practice.
The Nigerian Award
Head of Claim No. 2 – Non-payment US$1,641,234.00
Head of Claim No. 3 – Variations US$58,521,249.55
Head of Claim No. 4 – Phase II Prolongation US$53,563,352.00
Head of Claim No. 5 – Standby US$3,870,679.00
Head of Claim No. 6 – Escalation of Contract Price US$ 618,116.00
Head of Claim No. 7 – Financing Charges US$34,514,356.00
Total: US$152,728,986.55
Before me it was NNPC's case that it has at least a properly arguable challenge to each Head of Claim within the award. It was also NNPC's case that the award is defective in toto because the tribunal lacked jurisdiction and because the award is inadequately reasoned. Before me there was deployed very much more evidence relating to the conduct of the arbitration than had been deployed before Gross J. In particular, I was shown the voluminous written submissions exchanged in the course of the arbitration. Furthermore, for the purposes of the hearing before me lengthy witness statements were prepared by the advocates involved in the arbitration describing the course taken by it. I defer consideration of the question whether this was an appropriate exercise. Since one ground on which it is said to be appropriate is the suggestion that Gross J was inadvertently misled, I must next reproduce those parts of his judgment which record his conclusions as to the strength of the challenge to the award as it was developed before him and without which my judgment would be incomprehensible. Gross J plainly did not think it likely that NNPC would make good a challenge to the entirety of the award, and nor do I. Before turning to the conclusions of Gross J I will however first deal with the challenge to the jurisdiction of the tribunal, a challenge which formed no part of the case as it was developed by NNPC before Gross J.
The challenge to the jurisdiction of the tribunal
"A. The Arbitration Award was improperly procured as the Arbitral Tribunal lacked jurisdiction to hear and/or determine the Arbitral Proceedings as the condition precedent to its assumption of jurisdiction was not complied with.
PARTICULARS
(i) By the provisions of Clause 65.0 of the General Conditions of Contract which is the binding terms of contract between the parties, it was stated that;
(a) 'if any dispute or difference of any kind whatsoever shall arise between the Owner and Contractor or the Engineer and the Contractor, in connection with or arising out of contract or the execution of the works, whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the contract, it shall in the first place be referred to and settled by the Engineer who shall within a period of 90 (ninety) days after being requested by either party to do so, give written notice of his decision to the Owner or Contract.
(ii) The condition was not complied with and there was no notice in writing by the Engineer resolving the dispute that later culminated into the Arbitral Proceedings."
It is of course unclear from this formulation what precisely is the complaint. Is it said that the difference was never referred to the Engineer, or is the complaint that he gave no written notice of his decision? If it is the latter, this is irrelevant given the manner in which Clause 65 continues, not set out in the RRAM, as follows:
"… If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of ninety (90) days after being requested as aforesaid, or if either the Owner or the Contractor be dissatisfied with any such decision, then and in any such case either the Owner or Contract may within ninety (90) days after receiving notice of decision or within ninety (90) days after the expiration of the first named period of ninety (90) days, as the case may be, serve on the other a demand for arbitration.
Within thirty (30) days of such demand being served, each party shall appoint an arbitrator and the two arbitrators thus appointed shall within thirty (30) days appoint a third arbitrator who shall preside over the arbitral proceedings."
"Following our Phase 2 Claim submission dated 24th April 2002 and the submissions of the Variations numbers 2-23 inclusive, we have yet to receive the Engineer's written decision on these matters. …
We have pursued these matters with all due process for several years, without any tangible evidence that any conclusion is imminent. Please advise us as to when we may receive the Engineer's written decisions on the Variations and Phase 2 Claims."
"4. Production of the Notice of Arbitration and of Contract
4.1 At the request of the Arbitral Tribunal, the Claimant produced a copy of the following:
(a) The Notice of Arbitration. At this stage, Mr Gadzama (counsel for NNPC) drew attention to clause 65 of the Contract which requires the Engineer to make a report or fail to make a report before reference to arbitration. He said that the Respondent was not aware that the provision had been complied with.
Mr Fagbohunlu, (counsel for IPCO), in response, produced a letter dated 4th September 2002 addressed to Respondent which shows that the clause had been complied with.
In the light of this development, Mr Gadzama agreed to investigate the letter and it was agreed that the proceedings should continue."
The proceedings in the arbitration thereafter continued intensively for some eighteen months. Pleadings were exchanged. Voluminous written submissions were exchanged. Lengthy procedural and substantive hearings took place. Witnesses were called, including on behalf of NNPC. NNPC cross-examined IPCO's witnesses. In all of this NNPC participated without protest. NNPC used the arbitration as a forum in which to pursue its counterclaim, which was partially successful. The point as to jurisdiction arising out of alleged non-compliance with the provisions of clause 65 was never again mentioned until the Delphic reference to it in the RRAM, and the more full development of it in the second Witness Statement of Mr Akoni, three years after the issue of the award. Before Gross J NNPC conceded that there were amounts indisputably due under that award.
"Jurisdiction of arbitral tribunal
12(1) An arbitral tribunal shall be competent to rule on questions pertaining to its own jurisdiction and on any objections with regard to the existence or validity of an arbitration agreement.
…
12(3) In any arbitral proceedings a plea that the arbitral tribunal
(a) does not have jurisdiction may be raised not later than the time of submission of the points of defence and a party is not precluded from raising such plea by reason that he has appointed or participated in the appointment of an arbitrator;
(b) is exceeding the scope of its authority may be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the proceedings,
and the arbitral tribunal may, in either case, admit a later plea if it considers that the delay was justified.
12(4) The arbitral tribunal may rule on any plea referred to it under subsection (3) of this section either as a preliminary question or in an award on the merits; and such ruling shall be final and binding.
…
33. A party who knows—
…
(b) that any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to non-compliance within the time limit provided therefore (sic) shall be deemed to have waived his right to object to the non-compliance."
It is obviously correct that NNPC at the preliminary meeting raised a point as to compliance with clause 65 of the contract. It is not entirely clear what the point was. On any view the Engineer had failed to make a report before reference to arbitration. Whatever the point was, the letter of 4 September 2002 was plainly regarded by all present as on the face of it an answer to it. Mr Gadzama agreed to "investigate" the letter and it was agreed that the proceedings should continue. The point was never again mentioned. Under section 12(4) of the Nigerian Arbitration and Conciliation Act the tribunal could have been asked to rule on the plea either as a preliminary issue or in its award on the merits. It was not asked to do either. The suggestion that NNPC can in these circumstances after publication of the award seek to challenge the jurisdiction of the tribunal on the ground of some failure to comply with the requirements of clause 65 is not seriously arguable.
The challenge to the award as developed before Gross J
"(4) Finance Charges: Under this heading, the tribunal awarded IPCO some US$34.5 million, the amount claimed. As its title suggests, the claim related to the funding charges said to have been incurred by IPCO arising out of variations, delay and the increased costs of materials and services occasioned by inflation and exchange rate fluctuations over the delay period ("variations", "prolongation" and "escalation" respectively). The treatment of this claim in the award has given rise to a number of allegations of misconduct. First, in calculating finance charges in respect of escalation as a percentage of US$22,998,113 – the sum claimed for escalation – given that the tribunal only ultimately awarded US$618,116 in respect of escalation. Secondly, in awarding finance charges on prolongation costs, which already included a 25% mark up. Thirdly, in ignoring cl.67.3 of the contract, to which I shall return. Fourthly, in that the finance charges are too remote as a matter of Nigerian law. Fifthly, by reason of duplication of damages. Sixthly, in that the tribunal failed to give any or adequate reasons for its decision.
I take the final two charges (duplication and inadequate reasons) first. These form part and parcel of two separate complaints and I defer dealing with them until I come to those complaints.
As to the first charge, wrongly calculating the finance charges on the basis of the claimed rather than the awarded figure for escalation, it appears soundly based as a matter of fact. It is worth something in the order of a $6 million reduction in the award. To my mind, NNPC has at least a real prospect of success in alleging "misconduct" in this regard; it appears to be a simple case of procedural error, calling for redress. There is at least an arguable case that the Nigerian doctrine of misconduct extends thus far.
Next, I think that there is likewise factual mileage in respect of NNPC's second charge. As it seems to me, IPCO is seeking to recover its additional financing costs; at least at first blush, it did not incur financing costs in respect of the 25% profit mark up. While there may well be argument here as to whether the tribunal has gone wrong in a manner which permits redress under the ACA, I could not say that this complaint does not have at least a real prospect of success. From the award's approach to the figures, it is not easy to say what a reduction in this regard would be worth; but on no view would it be de minimis and it would not be unrealistic to contemplate a reduction of up to US$4 million.
I am less impressed, with respect, with the third and fourth charges. So far as concerns cl. 67.3 of the contract, it provides as follows:
'67.0 Default of owner
67.3 In the event of such termination [i.e. termination by IPCO of its employment under the contract by reason of NNPC's default] the OWNER [i.e., NNPC] shall be liable to pay the CONTRACTOR [i.e., IPCO] the payments specified in clause 86 hereof. In no case shall the OWNER be liable for indirect and consequential damage.'
To begin with, it must be questionable whether cl. 67.3 is applicable in a situation where it is common ground that there has been no termination of the contract. In any event, it is to be recollected that NNPC complains of misconduct. If regard is had to para. 20 of the award, it does not appear that NNPC advanced any argument in respect of cl. 67.3 of the contract or remoteness as a matter of Nigerian law. If so, it is difficult to see how it could be misconduct for the tribunal to fail to take into account points of this nature, which were not argued.
In all the circumstances, it seems to me that NNPC has a real prospect of success in attacking the tribunal's conclusions on financing charges in an amount of (very roughly) between US$6 and 10 million. Unless account is taken of the broader issues of duplication and reasons (to which I return), NNPC does not have a real prospect of success of reducing the tribunal's award by the full amount of the finance charges awarded.
(5) Force Majeure: Cl. 79 of the contract provided:
'79.0 Force Majeure
Neither party shall be considered in default in performance of his obligations under the CONTRACT to the extent that performance of such obligations is delayed by Force Majeure…
79.3 …in the event of termination of the CONTRACT or part thereof under this Clause,……..The OWNER shall pay all payments due to the CONTRACTOR arising from FORCE Majeure…'
In three instances (award, paras. 17.13, 17.15 and 17.16), the tribunal, basing itself on cl.79 of the contract, held that IPCO was entitled to damages for prolongation of the completion date. NNPC submits that the payment provisions under cl.79.3 were only applicable if there had been a termination of the contract. Supported by the evidence of Justice Wusu, NNPC contends that in reaching its conclusion, the tribunal fell into error, constituting material misconstruction of the contract and/or error of law and, in either event, amounting to misconduct. In a nutshell, IPCO retorts that the tribunal was correct in its approach to the issue of force majeure but, even if it was wrong, the award does not disclose any basis for challenge within s.30, ACA. The mere fact, if it be the fact, that the court would have reached a different conclusion on the true construction of cl.79, does not give rise to a ground for setting aside the award: Baker Marina (supra).
In my judgment, NNPC has at least a real prospect of success in submitting that the tribunal erred in its construction of cl.79.3. It does seem curious that, without termination of the contract, an event of force majeure gives rise to an obligation on the part of NNPC to pay IPCO. If NNPC is right so far, then, without underestimating the difficulties which may remain, I would be reluctant to conclude that it has no real prospect of demonstrating an error of law on the face of the award. The tribunal's approach to the construction of cl. 79.3 is apparent from the award; all that needs to be looked at (outside the award) are the terms of cl. 79.3 itself.
In my judgment, therefore, NNPC has a real prospect of success on this issue. More difficult is assessing its impact in terms of quantum. As is apparent from the award, the tribunal did not quantify the impact of each period of delay attributable to force majeure; nor did the tribunal address the overall causative consequences (if any) of the force majeure events it found. I return to considerations of this nature when considering the argument as to the tribunal's reasons.
(6) Duplication of damages: This is a topic of the first importance; if NNPC has a realistic prospect of success here, then it is arguably worth something in the order of US$88 million.
The matter arises in this way. Much of the US$152 million odd awarded by the tribunal to IPCO was comprised as follows: US$58.5 million in respect of variations; US$53.5 million in respect of prolongation; US$34.5 million in respect of financing charges. The battle lines here are clearly drawn. NNPC's complaint may be simply stated: the tribunal has duplicated the award of damages. That is apparent on the face of the award and amounts to misconduct. IPCO was not entitled to be paid for the additional works and for the delay and for the financing. Even assuming that IPCO may have been entitled to recover in respect of one of these matters, it was not entitled to recover in respect of all three. It was being paid twice or three times over for the same thing. IPCO's response was equally simple. The variations amounted to the additional works done; the award for prolongation compensated IPCO for the time it took; the finance charges reflected the increased financing cost. There was no duplication; but even if there was, there has been no error of law on the face of the award entitling NNPC to have the award set aside.
As a matter of first impression, I confess to having had considerable sympathy with IPCO's stance. There is no necessary duplication in awarding separately the cost of the works, compensation for the additional time and recovery of the additional financing costs. Moreover, even if the tribunal did err in these respects, there is undoubted scope for IPCO to argue that the error was not one of law and, if it was, that it was not misconduct as alleged or at all. But on closer reflection, there is or may be rather more force in the NNPC complaint than first met the eye.
As appears from the award (para. 11.2.3), IPCO claimed the cost of the variations at the rates specified in cl. 52 of the contract. Cl.52 necessarily leads on to cl. 55, where the contract price is dealt with. Sub-clauses 55.1 and 55.16 make it plain that the contract price included administration, supervision, payment for contractor's equipment, overhead costs and profit. Putting the matter shortly, if that be right, then it is difficult to see the room for awarding on top of such recovery further compensation for prolongation, let alone prolongation plus a 25% mark up and finance charges. In essence, the width of the terms dealing with contract price, suggests that there is or might be duplication if additional sums are awarded for prolongation and financing costs. By way of example, the award (in para. 17.17.1 (3)) shows that some US$12.8 million of IPCO's prolongation claim related to equipment; yet if cl.55 of the contract was applied to price the variations, it would appear already to have been paid for the equipment involved in undertaking the works.
Accordingly, in the light of the definitions in the contract, there is a puzzle as to how the tribunal came to award IPCO cumulative amounts in respect of variations, prolongation and finance charges. In my judgment, there is a sufficient puzzle for NNPC to have a real prospect of success in arguing duplication. There remains of course the formidable hurdle of moving from establishing a factual error (if such can be made good) to establishing misconduct within s.30. But I do not think that NNPC's case is so weak in that regard that it would be right to discount it or to pre-empt its consideration before the Nigerian court. If this be right, then NNPC has a realistic prospect of reducing the award by up to some US$88 million on the ground of duplication alone: i.e., the award would stand in respect of the US$58.5 million for variations but would be set aside in respect of the additional US$88 million for prolongation costs and finance charges. Of course, intermediate solutions are likewise possible.
(7) Inadequate reasons: As it seemed to me, the nub of this complaint was twofold. First, that the tribunal in respect of the many individual but substantial items with which it dealt comprising the variations, while summarising the rival arguments, gave very little by way of reasons for preferring IPCO's case to that of NNPC. Secondly, that the tribunal did not address how each of the variations had an impact on the overall time for completion of the project. Such criticisms require close scrutiny. All too easily, they can be exploited in an attempt to re-open the tribunal's findings of fact. No arbitration tribunal should be criticised for succinctness; nor is any tribunal required to set out every point raised before it, still less at length.
Had this matter stood alone, I am inclined to think that I would have been largely unsympathetic. It does not, however, do so; this criticism of the award is linked to the argument as to duplication of damages. I also accept that there may be force in the second of the principal criticisms; it is not easy on the face of the award to assess the causative impact of individual variations on the overall time for completion of the project. By way of example, this is a matter to which reference has already been made when dealing with the argument on force majeure. In all the circumstances, this too is an aspect of the case on which I would draw back from seeking to pre-empt the decision of the Nigerian court.
(8) Public policy: I can take this point summarily. The NNPC argument was that the tribunal's errors (amounting to misconduct) led to an award so exaggerated in size that its enforcement, against a state company, would be contrary to public policy. With respect, this complaint appears to lack substance. Were it soundly based, a mere error of fact, if sufficiently large, could result in the setting aside of an award. That cannot be right and I say no more of this topic.
(9) Decision: Pulling the threads together:
There was no suggestion that NNPC's application to the Nigerian Court was other than bona fide. Nor had there been any delay in the initiation of that application; as already remarked, it preceded the applications in this court.
In the various respects already outlined, the NNPC application does have a realistic prospect of success. In particular, there is a measure of concern as to whether IPCO's recovery has been very substantially duplicated. However, as also underlined, the NNPC application faces formidable hurdles, not least in moving from well-founded criticism of the tribunal (if such is established) to making good a case of misconduct within s.30 of the ACA. Employing the terminology of Soleh Boneh, the award is, at least to the extent discussed, neither manifestly valid nor manifestly invalid.
In all the circumstances, proper deference, going beyond lip service, must be shown to the pending Nigerian proceedings.
Even if NNPC's application in Nigeria is successful, it is common ground that an amount of some US$13 million is indisputably due to IPCO. Moreover, as it seems to me (see above), success for NNPC on the duplication point is, by its nature, likely to leave IPCO with an award of in excess of US$50 million.
Given the size of the award, it may be inferred that any delay in enforcement is likely to prejudice IPCO. Very few commercial entities would not be prejudiced by delay in the availability of US$152 million. It must be right to seek to minimise any such prejudice, so far as it is practicable and appropriate to do so.
With specific regard to security, I accept on the evidence both that there is provision in Nigerian legal proceedings for ordering NNPC to furnish security and that NNPC, given its trading activities, is likely to have assets in London. On the other hand, there is in my judgment, a risk of enforcement in Nigeria becoming more complex by reason of the domestic application of s.14 of the NNPC Act (on one view as to its true construction and scope).
So far as concerns IPCO and on the evidence of its financial status, were immediate enforcement ordered without the provision of cross-security, there would be a very substantial risk that the moneys thus paid out would be irrecoverable – even if NNPC succeeded in setting the award aside before the Nigerian court.
Balancing all these factors in the exercise of my discretion, I was neither attracted (i) to proceeding with the immediate enforcement of the order (even if accompanied by a condition that IPCO provide cross-security), thereby pre-empting the decision of the Nigerian court, nor (ii) to merely adjourning the enforcement of the order, thus giving too little weight to the importance of enforcement and the arithmetical realities in the Nigerian proceedings. Instead, I was amply satisfied that practical justice would best be done by adjourning the enforcement of the order on terms, inter alia, requiring NNPC to pay the US$13 million indisputably due to IPCO and to provide appropriate security in London (and thus free of any domestic constraints) in an amount of US$50 million. The detail of those terms and the consequence that IPCO should have permission to enforce the order in the event of NNPC failing to satisfy them, have already been set out in the order drawn up following the conclusion of the hearing."
Argument and discussion
"Valuation of Variations
52.1 All extra or additional work done or work omitted by order of the Engineer shall be valued at the rates and prices set out in the Contract if, in the opinion of the Engineer, the same shall be applicable. If the Contract does not contain any rates or prices applicable to the extra or additional work, then suitable rates or prices shall be mutually agreed upon between the Engineer and the Contractor. In the event of disagreement the Engineer shall fix such rates or prices as shall, in his opinion, be reasonable and proper."
There are no rates and prices set out in the contract relevant to extras or additional work. There is a lump sum contract price and clause 55 explains what that includes. Clause 55 also makes clear that IPCO is entitled to recover direct costs, overhead/indirect costs and profit. There are therefore no rates for variations specified in clause 52 or indeed anywhere in the contract. The "principles" set out in clause 52 relevant to the rates or prices applicable to extra or additional work are that they shall be "suitable" and mutually agreed upon or, if not agreed, such as in the opinion of the Engineer shall be reasonable and proper. Gross J was entirely correct to observe at the end of paragraph 47 that if clause 55 of the contract was applied to price the variations, such price would include all the matters there set out including therefore overhead costs such as the cost of equipment and financing. However no rates or prices were agreed whether by reference to clause 55 or at all, the Engineer did not fix any rates or prices and IPCO, in presenting its claim in arbitration for the costs of the variations, made no attempt to present a claim for lump sum prices which included indirect costs and profit.
"It is NNPC's case (Re-Re-Amended Motion, paras c(xxvii)-(xxix)) that there was a duplication in IPCO's recovery of damages under all these heads, i.e. it was misconduct to order damages for the price of the variation work, but also alleged expenses of staying on site to carry out the variations and alleged financing costs. This resulted in recovery that was grossly exaggerated. In this respect:
(a) as appears from para 11.2.3 of the award, IPCO claimed the cost of variations at the rates specified by clause 52 of the Contract, i.e. at contracts rates and prices in so far as applicable, otherwise as agreed, otherwise as reasonable and proper.
(b) the Contract price included overhead costs and profits – see clause 55.16 of the Contract.
(c) the Contract price also included administration, supervision, and Contractor's equipment – see clause 55.1 of the Contract.
(d) in receiving Contract rates and prices for the variation works, IPCO received fair compensation and should not then have been awarded the prolongation costs, i.e. costs of administration, supervision, and Contractor's equipment, plus a further 25% profit mark-up.
(e) it should not then have been awarded financing costs of the variation and prolongation claims, i.e. including the 'costs' of financing its own profits and profit mark-up."
At the risk of repetition IPCO did not under the award receive contract rates and prices for the variation works, not least because there were no such contract rates and prices. Mr Wordsworth's argument as adumbrated in his skeleton was developed in his oral argument as recorded in the transcript for 7 April 2005 at pages 43 to 48. At page 44 one finds the judge asking Mr Wordsworth whether anyone other than himself had grappled with the suggestion that there was duplication. It was not a matter dealt with by the then Nigerian law expert for NNPC, Justice Wusu. It was Mr Wordsworth's reply in the negative that led to the judge's observation at page 45 of the transcript that this was "Wordsworth flying solo". There was at that stage no evidence before the court from any person who had actually been involved in the conduct of the arbitration for NNPC. There were two witness statements from Mr Fagbohunlu for IPCO but obviously he did not anticipate Mr Wordsworth's argument. Furthermore NNPC's Amended Originating Motion of 4 February 2005 by reference to which Mr Fagbohunlu prepared his evidence made no reference to duplication. The RRAM, available in draft before Gross J, does refer to duplication but is hardly clear as to the nature of the allegation. The relevant passages, which curiously enough appear as Particulars of an allegation of misconduct as to the interpretation of the force majeure clause, read:
"c(xxviii) There has been a duplication in claims made by the Respondent/Claimant in respect of the claims made for escalation, prolongation and finance charges in that variations being a separate head of claim for which the Claimant claimed US$58,521,250 … was also included as an element or constituent part of escalation, prolongation and finance charges.
c(xxix) The Respondent/Claimant claims were grossly exaggerated as a result of double counting, which the Tribunal also failed to subsequently address in the Award. This resulted in NNPC suffering a gross miscarriage of justice."
The argument in the hands of Mr Wordsworth assumed a more structured appearance but unfortunately it was a construct which bore no relationship either to the contract or to the manner in which the claim was pleaded and dealt with at the arbitration.
"In this case, referring only to the award and the contract the only conclusion that can be reached is that:
(i) the award of damages for breach of clause 52 GCC includes all indirect costs of the variations;
(ii) the tribunal also awarded indirect costs in respect of variations pursuant to the prolongation head;
(iii) there was therefore clear duplication on the face of the award which amounts to a patent error of law and, therefore, misconduct on the part of the tribunal."
This is simply recycling and seeking to take advantage of Mr Wordsworth's flawed analysis. It may be telling that in the previous paragraph of his Witness Statement Mr Akoni had asserted that "as the award is being challenged in this regard for errors of law on the face of the record, it is not legitimate to refer to other materials (e.g. underlying documents) to attempt to 'explain away' an error of law, viz duplication, which appears on the face of the award". Finally at paragraph 20(2) Mr Akoni says this:
"IPCO expressly pleaded that its costs were 'valued according to the principles set out in clauses 52.1 and 52.2 GCC', i.e. on the basis of the Contract Price."
This is I am afraid disingenuous. IPCO's Appendix D2 did indeed assert that it was a Costs Summary for each variation on the principles set out in clause 52 but that did not mean that it was done on the basis of the Contract Price, as everyone involved in the arbitration well understood. It meant that the rates or prices claimed were alleged to be reasonable and proper. If the rates or prices claimed for the variations had been thought to include overheads, indirect costs and profit, why did NNPC fail to point out the consequent obvious duplication in any of its pleadings, written submissions or oral argument? Whilst NNPC denied any liability to pay in respect of the variations, sometimes alleging that the work done was in any event included within the lump sum contract price, it never suggested that the rates or prices claimed were in themselves unreasonable, and never put forward any counter figure. The tribunal dealt with each head of the variation claim individually at paragraph 16 of the award.
"29(1) A party who is aggrieved by an arbitral award may within three months—
(a) from the date of the award; or
(b) in a case falling within section 28 of this Act, from the date of the request for additional award is disposed of by the arbitral tribunal,
by way of an application for setting aside, request the court to set aside the award in accordance with subsection (2) of this section."
The parties' Nigerian law experts are not agreed as to the effect of this provision. I cannot say that it is obvious that on this point IPCO will prevail. The decision of the Supreme Court in Araka v. Ejeagwu 15 NWLR (pt 692) 684 does not deal with the question of amendment to an application brought within time, still less amendments to which there have been no objection and the making of which have been effected by what are effectively orders by consent. I also note that section 36 of the Arbitration and Conciliation Act, which is the concluding section of that Part of the Act which deals with "Recourse Against Award" provides:
"Notwithstanding the provisions of this Act the arbitral tribunal may, if it considers it necessary, extend the time specified for the performance of any act under this Act."
It would to my mind be an odd result if, as contended by IPCO, the court lacked jurisdiction to allow amendments outside the three month time limit in circumstances where the arbitral tribunal itself would have the power to extend the time for the making of an application. Neither expert addresses the point. It will be for the Nigerian court to determine whether NNPC may pursue all of the grounds which now appear in its RRAM.
The admission as to an amount indisputably due
"We write further to your fax dated 16 August 2007, as required by the Order of Andrew Smith J dated 8 October 2007.
We have obtained our client's instructions in relation to your queries and the responses are set out below. This is not intended to waive privilege in any way whatsoever.
At the very start of the hearing on 7 April 2005, Mr Justice Gross asked NNPC's counsel to provide, by 2 p.m. the same day, a figure which NNPC considered that it owed to IPCO. NNPC's then solicitors, Messrs Hunton & Williams, obtained urgent instructions from NNPC and reported back to Mr Justice Gross shortly after 2 p.m. on the same day. The figures produced to the Court were the only analysis available in the limited time given to those representing NNPC. The figures had been produced internally within NNPC in 2003. We understand that Hunton & Williams were given the headline figures of US$20,418,636.55 and US$7,316,274.81 but not any underlying analysis. However, we believe that those headline figures reflected various amounts that, as part of the internal process referred to above, had been notionally allocated to various of the heads and sub-heads of IPCO's claim as set out below. This was of course, and remains, without prejudice to NNPC's contention that the Award should be set aside in its entirety by the Nigerian courts; and NNPC did not then and does not now concede that any part of the balance of US$13.1m is referable to any particular head or sub-head of IPCO's claims (including those to which the parts were notionally allocated in 2003 as set out below).
1. The figure of US$20,418,636.55 was broken down as follows:
(a) US$11,991,111.55 in respect of IPCO's variations claims:
| var. no | title of variation | amount |
| 08 | Changes to PPMC site buildings | 885,247.88 |
| 09 | Changes to oily water disposal system | 1,687,961.00 |
| 010 | Sea island miscellaneous items | 208,067.00 |
| 011 | Changes to fire water piping | 871,476.60 |
| 012 | Changes to paints specification | Nil |
| 013 | Upgrade of emergency generator | 41,768.00 |
| 014 | Fire protection system in terminal | Nil |
| 015 | Changes to the metering system | Nil |
| 016 | Increase in scope of instrumentation | 455,970.00 |
| 017 | Site location changes in site layout | 1,614,429.59 |
| 018 | Increase in complexity pipelay | 4,784,768.00 |
| 019 | Increase in fuel pipeline diameter | 2,061,145.00 |
| 020 | Changes to tank foundation | 484,270.58 |
| 021 | Changes to the tank farm bund walls | 468,200.90 |
| 022 | Other miscellaneous changes | 120,669.00 |
| sub-total | 13,683,973.55 | |
| 06a & 06b | Deletion of fibre optic cable | (1,086,717.00) |
| 07 | Deletion of the dye injection facility | (124,895.00) |
| 023 | Delete 500m 4" diameter HDPE line | (481,250.00) |
| total | 11,991,111.55 |
(b) US$5,043,236.58 in respect of IPCO's prolongation claims, broken down as follows:
| description of claim | amount | |
| 1 | Personnel costs | 2,417,280.00 |
| 2 | Site indirect costs | 241,278.00 |
| 3 | Lagos office costs | 236,850.38 |
| 4 | Kuala Lumpur facilities | 368,949.47 |
| 5 | Head Office support | 52,500.00 |
| 6 | Claims outstanding (third party) | 0.00 |
| 7 | Clients costs | 35,688.73 |
| 8 | Equipment | 1,690,240.00 |
| 9 | Insurance | 0.00 |
| 10 | Sub-total (for items 1 to 9) | 5,043,236.58 |
| 11 | Add 25% group distribution | 0.00 |
| 12 | total (for items 1 to 9 plus mark up) | 5,043,236.58 |
(c) US$3,384,288.40 in respect of IPCO's claim for escalation.
2. In respect of the figure of US$7,316,274.81 in respect of the counterclaim, this was broken down as follows:
(a) Outstanding works – heat tracing and insulation: US$450,000.00
(b) 2-year operating spare parts: US$814,069.00
(c) 1 unreturned Toyota Corolla car: US$20,000.00
(d) Unsupplied boats: US$506,894.11
(e) Unaccounted provisional sum drawn down: US$3,129,000.00
(f) Deletion of fibre optic cable and communication link: US$1,797,666.70
(g) Deletion of dye injection facilities: US$124,895.00
(h) Provision of 5 kilometres pipeline: US$473,750.00"
Prejudice to IPCO
Partial enforcement
"Each Contracting State shall recognise 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 articles. 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."
The wording used in sections 101(2) and (3) of the Act is the same, mutatis mutandis, as that used in sections 66(1) and (2) wherein is to be found the court's general power to enforce an award made by a tribunal in England and Wales in the same manner as a judgment or order of the court to the same effect. Article III of the Convention in terms refers to the rules of procedure of the territory where the award is relied upon. To that extent therefore the court is not directly concerned to ensure that the English approach is the same as that adopted in other Convention states. On the other hand the substantive provisions in section 103 of the Act are derived directly from Articles V and VI of the Convention. Sections 103(4) and 103(2)(d) of the Act derive from Article V.1(c) of the Convention which reads:
"Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
…
(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced…"
In section 103(4) of the Act and Article V.1(c) of the Convention one finds a clear reference to the possibility of partial enforcement of the award, albeit in a limited jurisdictional context. That of course might lead to the conclusion, either under the Convention or under the Act, that since an express power of partial enforcement is given in that limited circumstance, it cannot be regarded as intended to be available in other circumstances. Gross J raised this very point in argument before him – see the Transcript for 12 April 2005 at page 168. Mr Diwan, then Counsel for IPCO, accepted that he had found no examples of partial enforcement and the point was not further argued. Mr Wordsworth for his part did not suggest that the assumed unavailability of partial enforcement militated against the imposition of a requirement of payment of the undisputed part of the award as a term of the adjournment of the decision on enforcement.
"44. The Court of Appeal deemed in principle that a foreign arbitral award may be enforced only in part… However, partial enforcement can only be considered when there are sufficient grounds in the foreign arbitral award, whose overall legal effect is at least partly in violation of public policy, for a clear division between acceptable and totally unacceptable legal consequences for the domestic legal system.
45. In the present case, it is possible to grant enforcement on the main sum and deny enforcement of the awarded interest. However, this divisibility does not apply to the awarded rate of interest itself, since the award does not so provide. The domestic enforcement court may not make an apportionment according to its discretion. Hence, the Court of Appeal may not determine which de facto annual rate of interest, lower than 107.35%, could be acceptable, in the sense that it would not result in a violation of domestic public policy."
It is unclear whether that conclusion derives from Austrian domestic law or is rooted in the Convention. As a result however it introduces divisibility into the public policy context dealt with by Article V.2(b) of the Convention wherein is found no express reference to divisibility or separability as is found in Article V.1(c).
"The broad approach of our courts to the interpretation of an international convention incorporated into our law is well settled. The international currency of the convention must be respected, as also its international purpose. The convention should be construed 'on broad principles of general acceptation.' The approach was formulated by Lord MacMillan in Stag Line Limited v. Foscolo, Mango & Co. Limited [1932] AC328, 350; it was adopted by this House in the recent case of James Buchanan & Co. Limited v. Babco Forwarding & Shipping (UK) Limited [1978] AC 141."
Staughton LJ in the Soleh Boneh case also referred at page 211 to the importance of uniformity in the interpretation of international conventions.
"17. Section 100 and following of the Arbitration Act 1996 ('the 1996 Act') provide for the recognition and enforcement of New York Convention Awards. There is an important policy interest, reflected in the country's treaty obligations, in ensuring the effective and speedy enforcement of such international arbitration awards; the corollary, however, is that the task of the enfoircing court should be as 'mechanistic' as possible. Save in connection with the threshold requirements for enforcement and the exhaustive grounds on which enforcement of a New York Convention award may be refused (ss 102, 103 of the 1996 Act), the enforcing court is neither entitled nor bound to go behind the award in question, explore the reasoning of the arbitration tribunal or second-guess its intentions. Additionally, the enforcing court seeks to ensure that an award is carried out by making available its own domestic law sanctions. It is against this background that issue (1) falls to be considered.
18. Viewed in this light, as a matter of principle and instinct, an order providing for enforcement of an award must follow the award. No doubt, true 'slips' and changes of name can be accommodated; suffice to say, that is not this case. Here it is sought to enforce an award made against a single party, against two separate and distinct parties. To proceed in such a fashion, necessarily required the enforcing court to stray into the arena of the substantive reasoning and intentions of the arbitration tribunal. Further, enforcement backed by sanctions, is sought in terms other than those of the award. Still further, though I do not rest my decision on it, such an approach raises the spectre of unintended consequences should a false step be taken for example, English domestic law rules as to election and the enforcement of judgments against principals and agents would need to be considered: see, for example, Morel v. Westmorland [1904] AC 11, [1900-03] All ER Rep. 397; Moore v. Flannagan and Wife [1920] 1 KB 919, [1920] All ER Rep. 254. In my judgment, this is all inappropriate territory for the enforcing court. The right approach is to seek enforcement of an award in the terms of that award."
Mr Nash not unnaturally relied upon this passage in the context of the entire exercise which was conducted before me. However I do not consider that in reaching the conclusions which I have thus far I have acted in a manner inconsistent with these strictures. Furthermore, the identification of two discrete parts of the award as capable of immediate enforcement is not an exercise which contravenes the spirit of Gross J's remarks. Immediate enforcement of discrete parts of the award would go with the grain of the award, not undermine it or second guess it.
"On the whole I found that the award has been so battered that only two out of five (sic) award were approved that is award 7 and 10, that I do not consider whatever is left can be called the award. This is so in view of the fact that there was no Appeal on the Counter-claim and no opportunity was made available to examine it. In the interests of justice, it is my view that the best conclusion that can be reached is to set aside the whole award. And I so do."
Final conclusion and decision
i) US$1,641,234, together with interest thereon as directed by the award until the date of judgment;
ii) Interest on US$58,521,249.55 as directed by the award until 12 May 2005;
iii) US$50,830,163.22, together with interest thereon as directed by the award from 12 May 2005 until the date of judgment.
