NATIONAL IRANIAN OIL COMPANY v CRESCENT PETROLEUM COMPANY INTERNATIONAL LIMITED & Anor

Under section 69 of the Arbitration Act 1996, the statutory right to appeal on a question of law remains available unless the parties have agreed sufficiently clearly to exclude it. A limited incorporation of arbitral procedural rules does not ordinarily extend to post-award appeals. In a bifurcated arbitration, a party cannot reserve a matter for the remedies phase where doing so would require findings on liability and quantum which sit unhappily together. The could and should test applies to abuse of process. However, an arbitral tribunal need not recite that test expressly where, reading the award as a whole, it is apparent that the correct test was applied. Permission to appeal under section 69 requires more than an arguable error: the decision must be shown to be obviously wrong.

NIOC applied for permission to appeal under section 69 of the Arbitration Act 1996 against a partial award in a long-running arbitration concerning a gas sales contract. The arbitration had been bifurcated between liability and remedies. The tribunal had previously found NIOC liable for failing to deliver gas and later rejected NIOC’s reliance on sanctions and other events in reducing Crescent’s damages, principally on res judicata and abuse of process grounds.

Crescent first objected that the parties had excluded the statutory appeal right by incorporating the ICC Rules. The central issues were whether the appeal right had been waived, whether the tribunal had applied the correct could and should test, and whether its decision was obviously wrong for section 69 purposes.

1. Jurisdictional objection. Crescent’s objection failed. Whether the parties had otherwise agreed to exclude section 69 was a question of construction. Annex 2 incorporated ICC procedural rules only in the event of a disagreement or gap in the procedural rules of the arbitration. It did not incorporate post-award appeal provisions. The contractual words making an award final and binding were insufficient, without more, to waive the statutory appeal right.
2. Question submitted to the tribunal. The requirement in section 69(3)(b) was satisfied. The legal question need not have been formulated with technical precision. It was enough that the issue was fairly and squarely before the tribunal and inherent in the issues for decision.
3. Applicable test and review. The correct test for abuse of process was whether the matters could with reasonable diligence and should, in all the circumstances, have been raised earlier. The tribunal’s use of terms such as “could”, “may” and “would” did not establish that it had applied a different test. Reading the partial award as a whole, the tribunal understood that NIOC was seeking to use sanctions at the remedies stage to achieve an outcome inconsistent with the earlier liability findings. It was entitled to conclude that this amounted to an abuse of process.
4. Bifurcation. Separating liability and remedies did not permit NIOC to advance at the remedies stage a case which should have been addressed at liability and which made the two stages materially inconsistent.
5. Disposition. NIOC had not shown an error of law, still less an obvious error. Nor was there the inevitability required to infer an error from the result. Permission to appeal was therefore refused. The remaining statutory requirements were addressed for completeness and would have been satisfied if the obvious-error threshold had been crossed.

The judgment itself was a first-instance decision on an application for permission to appeal an arbitral award under section 69 of the Arbitration Act 1996. Permission was refused.