Pearl Petroleum Company Ltd & Ors v The Kurdistan Regional Government of Iraq

A tribunal’s provisional payment order may be enforced under Arbitration Act 1996, section 42. Section 41(5) is not confined to orders concerning procedural matters. A tribunal need not use formal words stating that compliance is necessary for the proper and expeditious conduct of the arbitration. A separate entity claims immunity under State Immunity Act 1978, section 14(2), only where the relevant sovereign authority is that of the State itself. A section 42 money order is not an injunction for section 13(2)(a). The enforcing court should support the tribunal’s process, avoid revisiting its merits, and consider material changes in circumstances. Political status and comity cannot displace justice where immunity is unavailable.

The claimants sought an order under section 42 of the Arbitration Act 1996 enforcing a peremptory order made in LCIA arbitration. The tribunal had first ordered the respondent to resume provisional payments for condensate and LPG, then ordered payment of US$100 million when that order was not complied with. The respondent resisted enforcement and sought a declaration under CPR Part 11 that it was immune under the State Immunity Act 1978.

The application raised questions concerning the tribunal’s jurisdiction to make and enforce the peremptory order, the respondent’s status as a separate entity of Iraq, the effect of the arbitration and waiver provisions of the State Immunity Act, and the court’s discretion to enforce the order.

1. Jurisdiction under section 42. Section 39 of the Arbitration Act 1996, together with Article 25 of the LCIA Rules, empowered the tribunal to order provisional payment. Section 41(5) permitted a peremptory order where a party failed, without sufficient cause, to comply with any tribunal order. The provision was not confined to orders strictly procedural in character. The tribunal’s order restored the payment status quo and preserved the subject matter of the arbitration, including the claimants’ ability to continue the arbitration. It was unnecessary for the tribunal to spell out those statutory purposes in formal terms.
2. The respondent had a full opportunity to show sufficient cause for non-compliance. The peremptory order was effectively suspended for 30 days to provide a final opportunity to pay. The requirements of section 41(5) were therefore satisfied.
3. State immunity. The respondent was a separate entity under section 14 of the State Immunity Act 1978. The Heads of Agreement concerned the long-term grant and exploitation of rights in natural resources and was entered into in the exercise of sovereign authority. However, the relevant authority was that of the Kurdistan Regional Government itself, not the Republic of Iraq. Since section 14(2) required the act to involve the sovereign authority of the State, the respondent had no immunity.
4. Alternatively, the section 42 proceedings plainly related to the arbitration for the purposes of section 9. They were distinguishable from external freezing proceedings or proceedings concerned with enforcement of a foreign judgment. A section 42 order requiring payment from no specified source was not an injunction within section 13(2)(a). The contractual waiver was in any event sufficiently broad to waive immunity from suit, including injunctive relief.
5. Discretion. The court should support the tribunal and should not revisit arguments already determined if the tribunal addressed the correct questions. It could consider material changes, utility, Act of State and comity. There was no material change justifying refusal. The respondent could arrange payment and had paid other international oil companies. Its political circumstances and friendly status could not prevent the court doing justice.

The respondent’s immunity declaration was refused. The section 42 enforcement order was made.

This was a first-instance application following the tribunal’s interim measures ruling of 10 July 2014 and peremptory order of 17 October 2014. The judgment records an earlier procedural decision concerning service, [2015] EWHC 68 (Comm), but states no appellate history.