IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation

The grounds for resisting enforcement of a New York Convention award, and the circumstances in which security for the award may be required, form a statutory code. A properly arguable challenge under section 103(2) or (3) of the Arbitration Act 1996 cannot be made conditional upon security for the award.

Security under section 103(5) is available only in connection with an adjournment pending the outcome of a challenge before the competent foreign court. It is ordinarily the price of an adjournment sought by the award debtor. Time taken by the enforcing court to determine the challenge itself is not such an adjournment. General case-management powers cannot be used to circumvent these limits or fetter a properly arguable statutory defence.

IPCO obtained a Nigerian arbitration award against NNPC and sought enforcement in England. NNPC resisted enforcement on non-fraud grounds and subsequently alleged that IPCO had procured the award through fraud. Earlier English orders adjourned enforcement pending Nigerian proceedings and required security totalling USD80m.

Field J dismissed IPCO’s renewed enforcement application in [2014] EWHC 576 (Comm). The Court of Appeal allowed IPCO’s appeal in [2015] EWCA Civ 1144 and gave a supplementary judgment in [2015] EWCA Civ 1145. It directed that the English Commercial Court determine the enforcement challenges, but required NNPC to provide a further USD100m security, failing which IPCO could enforce the award.

The Supreme Court considered whether that condition was authorised by section 103(5) of the Arbitration Act 1996 or by the English court’s general procedural powers.

1. The appeal was allowed unanimously. Lord Mance, with whom Lord Clarke, Lord Sumption, Lord Hodge and Lord Toulson agreed, held that the Court of Appeal lacked power to require the further USD100m security. The condition was set aside, and the fraud and non-fraud challenges were remitted to the Commercial Court for determination without that further condition: paras 24–34, 47.

2. Sections 103(2), 103(3) and 103(5) of the Arbitration Act 1996, reflecting articles V and VI of the New York Convention, distinguish between deciding an enforcement challenge and adjourning enforcement pending a challenge in the country where, or under whose law, the award was made. Section 103(5) permits security only in connection with the latter form of adjournment. Time required by the English enforcing court to determine a section 103(2) or (3) defence forms part of its decision-making process and is not an adjournment within section 103(5): paras 24–30.

3. Security is the price of an adjournment sought by an award debtor pending foreign proceedings. It cannot be imposed as the price of obtaining a decision upon a properly arguable resistance to enforcement. The Court of Appeal was lifting the adjournment pending the Nigerian proceedings and directing an English determination. It therefore had no section 103(5) adjournment upon which to attach further security: paras 28–34.

4. Articles V and VI constitute a code governing challenges to enforcement and security for the award within their field. The balance struck between the prima facie right to enforce and the debtor’s rights of challenge excludes security for the award during a properly arguable article V challenge, except as article VI permits. Disclosure and freezing orders remain available where appropriate because they do not fetter the statutory right of challenge: paras 41–43.

5. CPR 3.1(3) permits conditions as the proper and proportionate price of discretionary relief. It does not confer a general power to burden a party’s exercise of a properly arguable statutory right. Concerns about recoverability, the diminished relative value of earlier security or a desire to provide a procedural goad could not justify the condition where NNPC had committed no relevant default: paras 44–45.

6. The existing USD80m security had been the agreed price of earlier adjournments and was subject to NNPC’s undertaking to maintain it until further order. The ending of the adjournment did not entitle NNPC to let those guarantees lapse: para 46.

1. United Kingdom Supreme Court: The appeal was allowed unanimously. The further security condition was set aside and the enforcement challenges were remitted to the Commercial Court.
2. Court of Appeal: In [2015] EWCA Civ 1144 and the supplementary judgment [2015] EWCA Civ 1145, the court allowed IPCO’s appeal, directed that the Commercial Court determine the challenges under section 103(3) of the Arbitration Act 1996, and required NNPC to provide an additional USD100m security.
3. Commercial Court: Field J, in [2014] EWHC 576 (Comm), dismissed IPCO’s renewed enforcement application and concluded that NNPC had a good prima facie fraud case which should proceed in Nigeria.