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

Where an arbitration is seated in England and Wales, Arbitration Act 1996, s 7 ordinarily makes the arbitration agreement separable from the underlying contract. A foreign governing-law clause does not disapply s 7 unless it specifically chooses foreign law for separability. Written consent to assignment may be obtained when the consent is granted and recorded in writing; delivery of the document is not necessarily required. English public policy does not require refusal to enforce an otherwise lawful contract merely because it was preceded by an unsuccessful or ineffective attempt to procure it by bribery. Where arbitrators have fully considered the evidence and found no corrupt procurement, a challenge under s 68(2)(g) requires fresh evidence or exceptional circumstances.

National Iranian Oil Company challenged an arbitral award under ss 67 and 68 of the Arbitration Act 1996. The award held that a long-term gas supply contract was valid, that an assignment to Crescent Gas Corporation Ltd was effective, and that NIOC had breached its obligation to supply gas.

The preliminary issues concerned the governing law and separability of the arbitration agreement, the meaning of written consent to assignment, and whether the award was vulnerable on English public-policy grounds because of alleged corruption. The defendants also sought to strike out the public-policy challenge as unarguable.

1. Separability. The arbitration was seated in England and Wales, so Part I of the Arbitration Act 1996 applied. Section 4(5) requires a specific choice of foreign law in respect of the matter governed by a non-mandatory provision. The Iranian governing-law clause did not specifically choose Iranian law for separability. Section 7 therefore governed, and the arbitration agreement was distinct from the gas supply contract. Under the separability principle in Fiona Trust & Holdings Corp v Privalov [2008] 1 Lloyds Rep 254, the alleged corruption impeached only the underlying contract and did not affect the arbitrators’ jurisdiction. The s 67 challenge failed.
2. Assignment. Article 16.1 required Crescent to request NIOC’s consent and required that consent to be granted in writing. It did not require delivery or receipt of a copy of the written consent. The NIOC board resolution therefore constituted sufficient written consent when passed and recorded. The assignment was effective and Crescent Gas was a party to the arbitration. Alternatively, the countersigned guarantee contract recorded NIOC’s willingness to permit the assignment subject to the guarantee and itself constituted written consent.
3. Public policy. English public policy prevents enforcement of an illegal contract, such as a contract to pay a bribe. It does not require refusal to enforce an otherwise lawful contract merely because it was procured by bribery; such conduct may instead make the contract voidable in an appropriate case. Still less does it require refusal where an alleged bribery attempt failed and had no effect on the contract. Introducing a general doctrine of contractual taint would create uncertainty and undermine party autonomy.
4. The arbitrators had heard extensive evidence and found that the gas supply contract was not procured by corruption. There was no fresh evidence and no exceptional circumstance justifying intervention. The s 68(2)(g) challenge was unarguable and was struck out.

Teare J ordered the trial of preliminary issues by order dated 23 February 2015. Burton J resolved issues 1, 2, 5 and 7 in favour of the defendants; the remaining issues did not arise.