PT Transportasi Gas Indonesia v Conocophillips (Grissik) Ltd & Anor

A challenge under section 68 of the Arbitration Act 1996 is a high-threshold, exceptional remedy. An alleged error in applying the substantive law is not an excess of arbitral power. A tribunal deals with an issue when, read reasonably and commercially, its award determines the substance of that issue; it need not address every argument or step in reasoning. An award is not contrary to English public policy merely because enforcement may have consequences under foreign law, particularly where the alleged illegality has already been considered by the tribunal. In the absence of a basis for setting aside an award, the court may grant leave to enforce it under section 66.

The claimant challenged a final UNCITRAL arbitration award under sections 68(2)(a), (b), (d) and (g) of the Arbitration Act 1996. The defendants applied under section 66(1) for leave to enforce the award as a judgment.

The underlying dispute concerned a gas transportation agreement governed by Indonesian law. The tribunal held that Indonesian tariff decrees displaced the contractual tariff, but that the claimant had breached continuing warranties and undertakings concerning the validity, performance and maintenance of the contractual arrangements. Damages were awarded to the defendants.

The central questions were whether the tribunal had failed to deal with the claimant’s inconsistency defence, exceeded its powers, acted unfairly, or made an award contrary to public policy.

1. The section 68 challenge was dismissed and leave to enforce the award was granted. The statutory remedy is a high-threshold long-stop, available only where a serious irregularity within the closed list has caused or will cause substantial injustice.

2. The complaint under section 68(2)(b) failed. The distinction is between purporting to exercise a power which the tribunal does not possess and erroneously exercising a power which it does possess. An error of law or fact, including an alleged error in applying Indonesian law, is not an excess of power.

   The tribunal had power under section 46(1) to decide the dispute according to Indonesian law. Its conclusion that the contractual warranties remained enforceable was therefore an exercise of that power, even if the claimant considered the conclusion wrong.

3. The tribunal had dealt with the inconsistency defence. A tribunal need not set out every step in its reasoning or answer every point made by a party. The award must be read in a reasonable and commercial manner, with the parties’ submissions available as context. Here, the tribunal identified and rejected the only substantive basis advanced for the defence: that Indonesian public policy required the claimant’s regulated income to be protected against compensatory damages.

4. There was no inconsistency, in terms, between the tariff decrees and the continuing contractual warranties. The decrees changed the tariff but did not invalidate warranties allocating to the claimant the risk of adverse legal or regulatory change. The award of damages for breach of those warranties therefore did not produce the alleged logical contradiction.

5. The public-policy challenge also failed. The alleged error concerned Indonesian law and did not establish that enforcement would be clearly injurious to the English public good. The award did not require performance in Indonesia, and questions of enforceability in other jurisdictions were matters for those jurisdictions. The court would not use section 68 to relitigate issues already determined by the tribunal.

6. The defendants were entitled to enforcement under section 66 whether or not the claimant had assets in England and regardless of possible consequences in Indonesia. Costs were to follow the event, subject to agreement or further determination.

First-instance decision concerning applications to set aside and enforce an arbitral award. No further appellate history is stated in the judgment.