Sonatrach v Statoil

A challenge for serious irregularity under section 68 of the Arbitration Act 1996 concerns due process, not the correctness of an arbitral tribunal’s factual findings. The applicant must establish an irregularity within the statutory list and substantial injustice. The remedy is a long-stop for extreme cases.

Evaluation and weighting of evidence belong to the tribunal. A dissatisfied party cannot convert an attack on factual findings into a procedural challenge by alleging that evidence was overlooked or misunderstood.

Once an award is entered as a judgment under section 66, the obligation under the award merges into a judgment debt. Interest then runs under the Judgments Act 1838, irrespective of whether the tribunal awarded post-award interest.

Sonatrach applied under section 68(2)(a) of the Arbitration Act 1996 to set aside an ICC award made in Statoil’s favour. The arbitration concerned Sonatrach’s failure to perform interconnected agreements for the supply, conversion and return of liquefied natural gas and natural gas. The tribunal rejected Sonatrach’s case that the agreements remained ineffective for want of Algerian governmental approval.

Sonatrach alleged that the tribunal had overlooked a ministry letter, mischaracterised two witnesses’ evidence and improperly involved an administrative secretary in its work. It also challenged parts of an earlier section 66 enforcement order. Those challenges concerned alternative service on Sonatrach’s Paris arbitration lawyers and the award of judgment interest.

The central questions were whether the alleged evidential and administrative failings constituted serious irregularity causing substantial injustice, whether alternative service should stand, and whether judgment interest could run after enforcement under section 66.

1. The section 68 application was dismissed. Section 68 of the Arbitration Act 1996 addresses due process rather than whether the tribunal reached the correct result. An applicant must establish a serious irregularity within the closed statutory list and substantial injustice. The provision is a long-stop confined to extreme cases: paras [10]–[11].

2. Evaluation of evidence and the drawing of factual inferences are matters for the tribunal. A party cannot challenge factual findings under section 68 by asserting that particular evidence was overlooked, misunderstood or given insufficient weight. Flaux J doubted whether the obiter suggestion in Arduina Holdings BV v Celtic Resources Holdings Plc [2006] EWHC 3155 (Comm) permitted intervention where evidence had genuinely been overlooked. A case involving ignored agreed or admitted evidence might engage section 33, but the point did not require decision: paras [12]–[19].

   The ministry letter concerned Sonatrach’s alleged general practice of obtaining formal approval for detailed contracts. Once the tribunal held that practice inapplicable, the letter was not crucial. In any event, its weight was for the tribunal. The tribunal neither overlooked the letter nor mischaracterised the witnesses’ evidence, and ample other evidence supported its finding of approval: paras [28]–[45].

3. The allegation that the tribunal improperly delegated authority to its administrative secretary, or allowed her to join its deliberations, was without merit. Sonatrach had not objected to her appointment. Preparing notes useful to the tribunal fell within the disclosed remit, while the notes could remain confidential as part of the tribunal’s deliberative material: paras [46]–[50].

4. The original basis for alternative service under CPR 6.15 may have been inadequate. Nevertheless, CPR 6.15(2) permitted retrospective validation. The absence of a bilateral service treaty and the prospect that service in Algeria would take at least a year supplied good reason. Service on Sonatrach’s Paris arbitration lawyers was retrospectively validated: para [51].

5. The challenge to judgment interest was dismissed. The restriction on adding post-award, pre-judgment interest did not govern interest after judgment. Once the award was entered as a judgment under section 66, the award obligation merged into a judgment debt carrying interest under the Judgments Act 1838. Cooke J had therefore correctly awarded interest at 8% from the date of judgment until payment: paras [52]–[58].

• High Court (Commercial Court): Sonatrach’s section 68 challenge to the arbitral award and its challenge to the judgment-interest provision were dismissed. Alternative service was retrospectively validated: [2014] EWHC 875 (Comm).
• High Court (Commercial Court), Cooke J: On 11 July 2013, Statoil obtained permission under section 66 of the Arbitration Act 1996 to enforce the award as a judgment, together with alternative service and judgment interest. No citation is stated.
• ICC arbitral tribunal: By an award dated 30 April 2013, the tribunal upheld Statoil’s contractual claims and rejected Sonatrach’s case concerning governmental approval.