IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation

Enforcement of a New York Convention award may be adjourned while a bona fide challenge proceeds in the country of origin. The court exercises a broad, pro-enforcement discretion under section 103(5) of the Arbitration Act 1996.

The court should assess the challenge’s realistic prospects, likely delay and prejudice, enforceability, and the appropriate respect for the supervisory court. These considerations operate on a sliding scale. An adjournment may be made conditional upon payment of an undisputed sum and suitable security.

A foreign challenge does not itself suspend an award for section 103(2)(f). The public policy exception is confined to English public policy concerning the fair and orderly administration of justice and must be approached with extreme caution.

A Nigerian contractor obtained a Lagos arbitration award exceeding US$152 million against a Nigerian state petroleum corporation. An English order permitted enforcement of the award as a judgment. The corporation applied to set that order aside or, alternatively, to adjourn enforcement while its challenge to the award remained pending before the Federal High Court in Lagos. The contractor sought security if enforcement was adjourned.

The applications raised whether the Nigerian proceedings suspended the award, whether enforcement offended English public policy, and how the discretion under section 103(5) of the Arbitration Act 1996 should be exercised. The court also considered a formal defect in the enforcement order and made a preliminary assessment of the Nigerian challenge.

1. The application to set aside the enforcement order was refused. Section 103 of the Arbitration Act 1996 embodies a predisposition in favour of enforcing New York Convention awards. Its grounds for refusing enforcement are exclusive and exhaustive, and the court retains a discretion to enforce even when a ground is established.

2. A pending application in the country of origin does not itself suspend an award for section 103(2)(f). That provision requires an order or decision suspending the award by the competent foreign authority. Treating the mere application as sufficient would also deprive section 103(5) of much of its purpose.

3. The public policy objection failed. Section 103(3) concerns English public policy and is confined to maintaining the fair and orderly administration of justice. Even if section 14 of the Nigerian NNPC Act 1977 restricted execution against the corporation in Nigeria, enforcing the award in England would not offend English public policy.

4. The enforcement order omitted the required statement that enforcement could not proceed until a timely setting-aside application had been finally disposed of. Although that formal defect caused expense and prejudice, setting the order aside would have been disproportionate. The proper response was a costs sanction for the premature enforcement proceedings.

5. Enforcement was adjourned on terms. Section 103(5) creates a wide discretion without a threshold test. Relevant considerations ordinarily include the foreign challenge’s bona fides and realistic prospects, the delay and resulting prejudice, the strength of the alleged invalidity, and whether delayed enforcement will become more difficult. These matters operate on a sliding scale.

6. The Nigerian challenge was bona fide and had realistic prospects on aspects of the financing charges, force majeure, possible duplication of damages and adequacy of reasons. It nevertheless faced substantial obstacles in proving arbitral misconduct. The award was therefore neither manifestly valid nor manifestly invalid. Because the arbitration was domestic to Nigeria, proper deference was due to the Nigerian supervisory court.

7. Practical justice required more than an unconditional adjournment. A little over US$13 million was indisputably due, and delayed enforcement of a very large award was likely to prejudice the contractor. The adjournment was therefore conditional upon payment of that sum and the provision of US$50 million security in London. Failure to comply would permit enforcement of the order.

• High Court (Commercial Court): David Steel J had made an ex parte order on 29 November 2004 permitting enforcement of the arbitration award as a judgment. Gross J refused to set that order aside but adjourned its enforcement on conditions.
• Federal High Court in Lagos: Proceedings commenced on 15 November 2004 to set aside the award and stay execution remained pending. The English court did not determine that challenge.