Gater Assets Ltd v Nak Naftogaz Ukrainiy

The Court of Appeal allowed the appeal by a majority. The judges agreed that an award creditor should not be required to give security for the costs of an award debtor’s challenge to enforcement of a New York Convention award in the circumstances of this case.

There was no single majority rationale. Rix LJ held that, even assuming a technical jurisdiction, it was not just in principle to exercise it save exceptionally. Moses LJ held that no jurisdiction arose where enforcement had been ordered without notice and the arbitration claim form had not been directed to be served. Buxton LJ dissented.

Gater, as assignee of a Moscow arbitral award, obtained without-notice permission and judgment to enforce the award in England under section 101 of the Arbitration Act 1996. Naftogaz applied to set that enforcement order aside, relying in particular on alleged fraud, and sought security for the costs of that challenge.

Field J ordered Gater to provide £250,000 security, failing which its enforcement claim would be struck out: [2007] EWHC 725 (Comm). Gater appealed. The central issue was whether, and if so when, an award debtor resisting enforcement of a New York Convention award could obtain security for costs from the award creditor.

1. Appeal allowed by a majority (Rix and Moses LJJ; Buxton LJ dissenting). The security-for-costs order against the award creditor could not stand.

2. Rix LJ considered that, even if CPR 25.12 technically permitted such an order, it was not just to exercise the power here. A debtor resisting enforcement bears the burden of establishing a limited Convention ground, but does so by attacking the validity or enforceability of an award. The summary enforcement regime, the limited exceptions in the Convention, and the comparison with challenges to domestic awards made security against the creditor inappropriate save exceptionally.

3. Rix LJ further considered that requiring security from the creditor of a Convention award would in practice impose a more onerous condition than for a domestic award, contrary to article III of the Convention. Article VI and section 103(5) address security for the award only when enforcement is adjourned pending a curial challenge; they gave no support for withholding enforcement because the creditor had not secured the debtor’s challenge costs.

4. Moses LJ reached the same result on jurisdiction. Where enforcement had been ordered without notice and the court had not required service of the arbitration claim form under CPR 62.18(2)–(3), the ordinary security-for-costs regime did not apply. He also regarded an opposite result as incoherent with the position of a domestic award debtor and article III.

5. Buxton LJ dissented. He would have held that an award creditor seeking enforcement is a claimant for CPR 25 purposes and that Field J’s discretionary order should not be disturbed.

• Court of Appeal (Civil Division): Appeal allowed by a majority; Field J’s order for £250,000 security for costs against Gater was set aside: [2007] EWCA Civ 988.
• High Court, Commercial Court (Field J): Ordered Gater, the award creditor, to provide security for Naftogaz’s costs of its application to set aside enforcement of the award: [2007] EWHC 725 (Comm).