National Iranian Oil Company v Cresent Petroleum Company International Limited & Anor

Under section 73(1) of the Arbitration Act 1996, a party must raise the substance of each jurisdictional objection during the arbitration before advancing it under section 67. The court should adopt a broad approach, allowing fuller arguments and new evidence within the same ground, but a bare mention is insufficient. A section 67 challenge may be summarily dismissed where it has no realistic prospect of success. On foreign-law interpretation, experts establish the relevant construction principles; the court construes the agreement. A clause covering disputes arising out of or relating to a contract may extend to a contracting party’s claim for liability to a third party.

The claimant challenged under section 67 of the Arbitration Act 1996 part of a Partial Remedies Award made in an arbitration concerning a gas sale and purchase contract. The challenge concerned an award of US$1,085.27 million for liability said to be owed by one defendant to a third party under a separate gas supply agreement.

The defendants applied for a preliminary determination that section 73(1) precluded the challenge and for summary judgment. The central issues were whether the jurisdictional objection had been raised before the tribunal and whether, applying Iranian law, the arbitration clause could cover the claim.

Applications and outcome. The preliminary issue was answered “No”. The defendants nevertheless obtained summary judgment, and the claimant’s section 67 challenge was dismissed.

1. Section 73. Section 73 reflects a balance between the court’s independent power to determine jurisdiction on a section 67 rehearing and the need for openness, fair dealing and economy in arbitration. The claimant must normally raise each jurisdictional ground before the tribunal. The principles in People’s Insurance Company of China v Vysanthi Shipping Co Ltd (The ‘Joanna V’) [2003] 2 Lloyd’s Rep 617, Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyd’s Rep 14 and JSC Zestafoni v Ronly Holdings Ltd [2004] 2 Lloyd’s Rep 335 supported that approach.
2. Specificity of objection. The ground should be examined broadly rather than as though it were a pleading. Later or broader arguments and new evidence may be used if they remain within the same ground. However, the substance of the objection must have been communicated to the tribunal and the opposing party, and the issue must have been distinctly advanced as one going to jurisdiction. The court modified the formulation in Province of Balochistan v Tethyan Copper Co Pty Ltd [2021] EWHC 1884 (Comm), insofar as “the case to be met” language could suggest an excessively demanding standard.
3. Application of section 73. Although the claimant had not expressly relied before the tribunal on Iranian-law construction principles or a restrictive construction of the arbitration clause, it had clearly objected that the tribunal lacked jurisdiction over a claim founded on liability under a separate contract. The substance of the present objection had therefore been raised, and section 73 did not preclude the challenge.
4. Summary judgment. The court applied the summary-judgment principles confirmed in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48. A court may decide a short legal or construction issue summarily where it has the necessary evidence and the parties have had a proper opportunity to address it. It must avoid a mini-trial, but need not defer a decision merely because further evidence is asserted without reasonable grounds for believing it would materially alter the outcome.
5. Foreign law and construction. The expert’s role was to establish Iranian principles of construction, not to construe the English words of the arbitration clause. The evidence indicated that Iranian law gives primacy to the text, adopts a restrictive approach and does not recognise a Fiona Trust presumption. Even on that basis, the words “arising out of or relating to” were wide. The claim for damages representing liability to a third party had no realistic prospect of being held outside the clause.
6. Res judicata and evidence. Findings in the Partial Remedies Award on causation and direct loss were final and binding for present purposes. Consistently with Westland Helicopters v Sheikh Salah Al-Hejailan [2004] 2 Lloyd’s Rep 523 and C v D1 [2015] EWHC 2126 (Comm), the claimant could not rely on expert evidence contradicting those findings. That inconsistency excluded the offending parts of the report, but did not alone require dismissal of the whole challenge.

The judgment records that an earlier Liability Award had been challenged under sections 67 and 68 of the Arbitration Act 1996, with those applications dismissed by Burton J. A separate section 69 challenge to part of the Partial Remedies Award was dismissed by Picken J. This judgment concerned the defendants’ applications relating to the claimant’s section 67 challenge.