ICC Award in favour of Statoil upheld by Commercial Court

2 April, 2014

Toby Landau QC and Jessica Wells, instructed by Kieron O’Callaghan and Ben Hornan of Hogan Lovells London, represented Norwegian state oil company Statoil in the defence of the application by the Algerian state oil company Sonatrach to set aside an ICC award. Mr Justice Flaux dismissed the application in the English Commercial Court and upheld the award, issued in April last year by a London-seated tribunal, worth US$536 million in favour of Statoil.

The arbitration which was brought in 2010 related to a 2008 contract under which Statoil agreed to purchase liquefied natural gas (LNG) from Sonatrach and sell an equivalent quantity of natural gas to Sonatrach in return. However, Sonatrach did not ultimately provide the LNG or purchase the natural gas under the contract, claiming that it had not received the necessary approval of the contract terms from the Algerian government. The arbitral tribunal upheld Statoil’s claim, holding that only the government’s approval of the contract’s heads of agreement had been necessary, not of its detailed terms, and that the government had been informed about the contract and did not object to its terms.

Sonatrach applied for the award to be set aside under s.68 of the Arbitration Act 1996, on the basis that the Tribunal had failed to conduct the proceedings in accordance with its mandatory duty as a matter of English law, in particular having failed to make any reference to key evidence, and having mischaracterised other parts of the evidential record. But Flaux J ruled, “Upon close analysis, the claimants’ real complaint is that they consider the tribunal reached the wrong result.”

The Court also rejected an argument from Sonatrach that the Tribunal had improperly delegated authority to its administrative secretary, who had prepared notes used in the Tribunal’s deliberations. The Tribunal had declined to produce the notes by reason of the secrecy of the deliberations, but Chairman Tercier asserted that the secretary had not exceeded her authority.