IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation

A court exercising its discretion to adjourn enforcement of an arbitral award may impose security as a condition, including on its own initiative where the enforcing party’s application remains extant. The discretion is not confined to assets within the jurisdiction. Relevant considerations include prejudice caused by delay, the merits of the challenge, the size of the award, the need to incentivise progress and finality, and the adequacy of the security. Where delay is extraordinary, enforcement may follow failure of a fraud challenge even though non-fraud objections remain unresolved. Security may be set below the full award where fraud plausibly affects part of it.

IPCO appealed from a decision of Field J, reported at [2014] EWHC 576 (Comm), concerning enforcement in England of an arbitral award challenged in Nigeria. The Court of Appeal’s main judgment was reported at [2015] EWCA Civ 1144. This supplementary judgment followed NNPC’s request to reconsider the draft order.

The issues were whether security could be required as a condition of continuing an adjournment under the Arbitration Act 1996, and whether enforcement should take effect if the fraud challenge failed while non-fraud challenges remained unresolved. The Court also reconsidered the amount and form of security and the costs consequences.

1. Disposition. The Court ordered further security of $100 million as a condition of continuing the adjournment. If the fraud challenge failed, enforcement of the full award, including interest, was to proceed despite unresolved non-fraud challenges.
2. Jurisdiction. IPCO’s earlier applications, and its present request for security, meant that an application remained extant. In any event, a court asked to adjourn or continue an adjournment of enforcement may impose conditions on that adjournment. Arbitration Act 1996 section 103(5) did not exclude that power. The power was supported by CPR 3.1(3)(a) and CPR 3.3.
3. Discretion. The discretion was broad and was not limited to assets within the jurisdiction. The Court considered the likely prejudice caused by further delay, the uncertain location and availability of assets, the need to provide a strong incentive for progress and finality, the size of the award and accrued interest, and the merits of the fraud challenge. The reasoning in [2002] EWCA Civ 643 was distinguished because the award creditor, rather than the award debtor, had sought the adjournment in that case. The approaches in Soleh Boneh, Continental Transfert Technique Ltd v Federal Government of Nigeria [2010] EWHC 780, Dowans Holding SA v Tanzania Electric Supply Co Ltd [2011] EWHC 1957 (Comm) and Monde Petroleum v Westernzagors [2015] EWHC 67 (Comm) supported the order.
4. Quantum and form. Full security was inappropriate because there was a good prima facie fraud case concerning at least part of the award. A $100 million guarantee represented practical justice between immediate enforcement and an adjournment without further protection. A first-class London bank guarantee was appropriate; a Nigerian bank guarantee was not.
5. The Court found no procedural unfairness. IPCO had been given notice of the possible order and had addressed the issue. IPCO recovered 50% of the appeal costs. NNPC recovered 85% of its costs below. Permission to appeal to the Supreme Court was refused.

• Court of Appeal (Civil Division): This supplementary judgment reconsidered the security and enforcement orders made in the related main judgment, [2015] EWCA Civ 1144, and varied the order.
• High Court, Commercial Court: Field J gave the decision under appeal, [2014] EWHC 576 (Comm). The Court of Appeal held that the approach to changed circumstances and the resulting order required alteration.