Sui Northern Gas Pipelines Limited v National Power Parks Management Company (Private) Limited

For a challenge under section 68 of the Arbitration Act 1996, a tribunal may decide an issue that was not pleaded in precise terms if its essential building blocks were in play and the parties had a fair opportunity to address it. A point is not in play merely because it emerges from the tribunal’s own analysis. If the tribunal becomes interested in a new point likely to affect its decision, it must put that point to the parties.

When construing an arbitral award, the court must distinguish the dispositive decision from the tribunal’s reasoning. A declaration that invoices must be issued monthly does not necessarily require them to be issued before the end of the relevant month. A tribunal may also exercise its discretion to award interest by reference to a contractual rate agreed for other circumstances.

The claimant challenged two materially identical LCIA awards under section 68(2)(a), (b) and (d) of the Arbitration Act 1996. The underlying disputes concerned take-or-pay gas supply agreements. The tribunal declared that invoices for monthly take-or-pay quantities had to be issued monthly and held that invoices covering several earlier months were non-compliant. It also awarded interest by reference to the contractual delayed-payment rate.

The claimant argued that the tribunal had decided an issue not put to it, namely that invoices had to be issued before the end of the relevant month, and that the interest award was impermissible. The central issues were the true meaning and effect of the awards and whether the tribunal had breached its duty to act fairly.

1. The application was dismissed. The claimant’s principal challenge proceeded on the premise that the tribunal had decided that invoices had to be issued before the end of the relevant month. That was not the meaning or effect of the awards.
2. Under section 68(2)(a), read with section 33(1)(a) of the Arbitration Act 1996, the question is whether the tribunal decided a point which had not fairly been put to the parties. The arbitration must be considered as a whole, including pleadings and written and oral submissions. A point is sufficiently in play where the tribunal’s attention was clearly drawn to it as an issue it was required to determine, or where its essential building blocks were in the arena. If the tribunal becomes interested in a new point likely to form part of its decision, it must give the parties an opportunity to comment.
3. The meaning and effect of the contractual invoicing provisions had been addressed by both parties because it was relevant to the estoppel issue. But neither party had advanced, or been given an opportunity to address, a case that invoices had to be issued before the end of the month. Had the award adopted that construction, the section 68 challenge would in principle have succeeded, subject to substantial injustice and the other statutory requirements. The appropriate remedy would at most have been remission, potentially to the original tribunal.
4. Objectively construed, the tribunal decided only that the agreements required one invoice for each month. The expression on a monthly basis said nothing about the precise time of issue. The tribunal’s criticism of retroactive invoicing concerned invoices issued several months late and covering multiple months. It did not decide how promptly monthly invoices had to be issued. The tribunal’s failure to distinguish those invoices from later single-month invoices might have supported an application under section 57 or section 68(2)(d) and (f), but that was not the application before the court.
5. The challenge to interest also failed. The tribunal had a discretion as to the rate of interest. It was entitled to take account of the contractual delayed-payment rate, even though the agreement did not expressly apply that rate to the particular claim.

The claimant was the loser and the defendant the winner. The judge indicated that recoverable costs might be reduced because the defendant had initially shared the claimant’s mistaken understanding of the awards.