National Iranian Oil Company v Crescent Petroleum Company International Ltd & Anor

A party may not use discontinuance of an arbitration challenge to preserve unresolved objections for deployment in enforcement proceedings elsewhere. The supervisory court may set aside a Notice of Discontinuance where that course would abuse its process or create unacceptable uncertainty. Under section 68 of the Arbitration Act 1996, the applicant must establish a serious irregularity falling within the statutory categories and substantial injustice. The provision is a long-stop remedy concerned with due process, not the correctness of the award. Arbitrators must participate in deliberations, but once a majority has reached its decision, dissenting arbitrators need not participate in drafting the majority award. A procedural defect will not justify relief where it caused no substantial injustice.

National Iranian Oil Company challenged an arbitration award in favour of Crescent Petroleum Company International Ltd and Crescent Gas Corporation Ltd. The court had already determined preliminary grounds in [2016] EWHC 510 (Comm). Before the remaining grounds were heard, NIOC served a Notice of Discontinuance while seeking to preserve its ability to rely on the grounds elsewhere. Crescent applied to set the notice aside.

The remaining issues concerned alleged exclusion of NIOC-appointed arbitrators and an alleged failure by the tribunal to control discourteous advocacy, said to constitute irregularity and substantial injustice under sections 68 and 33 of the Arbitration Act 1996.

1. Discontinuance. The Notice of Discontinuance was set aside. The proposed undertaking merely prevented NIOC from resisting recognition or enforcement of the liability award by reference to the remaining grounds. That award did not determine quantum and was not itself enforceable. The undertaking therefore offered no adequate protection and could leave the objections available for use in another jurisdiction. The appropriate course was to dismiss the remaining grounds in the supervisory court.
2. Section 68. Following Primera Maritime (Hellas) Ltd v Jiangsu Eastern Heavy Industry Co Ltd [2014] 1 Lloyd's Law Reports 255, an applicant had to establish a serious irregularity, an irregularity within the closed list in section 68(2), and substantial injustice. The inquiry concerned due process rather than the correctness of the tribunal’s decision, and section 68 was a long-stop remedy for extreme cases.
3. Participation by arbitrators. The earlier resignations of NIOC-appointed arbitrators caused no substantial injustice. Dr Noori participated fully in the deliberations. After he withdrew and made clear his dissent, the majority were entitled to settle and draft their majority award without him. The court followed the distinction explained in Bank Mellat v GAA Development and Construction Co [1988] 2 Lloyd's Law Reports 44: all arbitrators must participate in deliberations, but a dissenting arbitrator need not be consulted on the drafting of a majority award once the decision has been reached.
4. Civility and tribunal control. Although counsel for Crescent had used robust and sometimes rude language, the evidence did not show that the tribunal was intimidated, biased or prevented from performing its functions. The tribunal had made rulings adverse to Crescent as well as rulings favourable to it. There was no breach of section 33 causing substantial injustice and no basis for relief under section 68.
5. The appeal was dismissed. NIOC was ordered to pay Crescent’s costs of the application and the remaining grounds on an indemnity basis.

• High Court (Commercial Court): Preliminary grounds were dismissed in [2016] EWHC 510 (Comm). The remaining grounds were subsequently dismissed in the present judgment.