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

A determination under section 73 of the Arbitration Act 1996 about whether a party has lost its right to challenge an award is a decision under section 67 or section 68. Under sections 67(4) and 68(4), only the first-instance court may grant permission to appeal from that determination, whichever way it is decided.

On a section 67 rehearing, the court determines substantive jurisdiction for itself. Where foreign law governs an arbitration agreement, experts establish the foreign rules of construction, but the English court applies those rules. An arbitration clause covering claims arising out of or relating to a contract ordinarily includes issues which must be decided under a separate contract to assess recoverable loss, without binding the third party.

An arbitral tribunal awarded Crescent damages for National Iranian Oil Company’s breach of a gas sale contract. Part of the award compensated Crescent for its liability to a subsidiary under a separate contract. National Iranian Oil Company challenged that part of the award under section 67 of the Arbitration Act 1996, contending that the tribunal lacked jurisdiction to determine liability under the separate contract.

Butcher J held that the objection had been sufficiently raised in the arbitration and was not barred by section 73. He nevertheless summarily dismissed the section 67 challenge because it had no realistic prospect of success: [2022] EWHC 2641 (Comm).

National Iranian Oil Company appealed against summary dismissal. Crescent sought permission to cross-appeal on the section 73 issue. The Court of Appeal first had to decide whether it could grant that permission and then whether the jurisdictional challenge had any realistic prospect of success under the Iranian law principles relied upon by National Iranian Oil Company.

1. Appeal dismissed; permission to cross-appeal unavailable. A section 73 determination is entirely ancillary to a challenge under section 67 or section 68 of the Arbitration Act 1996. It is part of the process of deciding that challenge and falls within the compass of the relevant section. It is therefore a decision under section 67 or section 68, whether the court finds that the right to object has or has not been lost. Under sections 67(4) and 68(4), only the first-instance court can grant permission to appeal. The Court of Appeal consequently lacked jurisdiction to grant Crescent permission to cross-appeal: paras 64–69.

2. That construction accords with the statutory policies of avoiding unnecessary delay and expense and limiting judicial intervention. It would be anomalous if only the first-instance court could permit an appeal from the final disposition of a challenge, while the Court of Appeal could permit appeals from preliminary or case-management decisions. Even an unsuccessful permission application could delay enforcement and leave the award’s status uncertain: paras 60–68.

3. A section 67 challenge requires the court to determine substantive jurisdiction for itself by rehearing the issue. Where foreign law governs an arbitration agreement, expert evidence identifies the foreign rules of construction. The meaning of the agreement under those rules remains a question for the English court. An expert’s opinion on the agreement’s ultimate meaning is inadmissible and irrelevant: paras 25 and 77–85.

4. The judge applied the correct summary-judgment approach. He accepted the admissible Iranian-law evidence at face value and did not conduct a mini-trial. He was entitled to separate the admissible principles of construction from the expert’s inadmissible conclusions and decide whether the pleaded case had a realistic prospect of success: paras 86–92.

5. The Iranian-law evidence made the agreement’s words paramount and required a restrictive approach only where ambiguity or reasonable doubt arose. The phrase covering disputes and claims “arising out of or relating to” the contract or its breach unambiguously included Crescent’s claim for loss consisting of liability under the separate contract. Determining that liability did not purport to bind the subsidiary: paras 93–97.

6. The distinction between a claim and a “matter” under section 30(1)(c) did not alter the result. A reference of a claim necessarily includes the issues or matters which must be resolved to determine it. The tribunal therefore had jurisdiction, and the section 67 challenge had no realistic prospect of success: paras 98–103.

1. Court of Appeal (Civil Division): The appeal was dismissed. The court held that it lacked jurisdiction to grant Crescent permission to cross-appeal because the section 73 determination was a decision under section 67 of the Arbitration Act 1996: [2023] EWCA Civ 826.

2. Commercial Court: Butcher J held that the jurisdictional objection had been sufficiently communicated in the arbitration and was not barred by section 73. He summarily dismissed the section 67 challenge because it had no realistic prospect of success, but granted National Iranian Oil Company permission to appeal: [2022] EWHC 2641 (Comm).