In National Iranian Oil Company (NIOC) v 1.) Crescent Petroleum Company International Limited and 2.) Crescent Gas Corporation Limited [2023] EWCA Civ 826, the Court of Appeal dismissed NIOC’s appeal in respect of the summary dismissal by Butcher J of its s.67 jurisdictional challenge to an arbitral award by which Crescent was awarded damages in excess of USD 2.4 billion.
The case provides a further important example of the Court using its CPR powers to weed out a thin jurisdictional challenge having no real prospect of success and thereby avoid a complete rehearing and the time and cost that this engenders.
It compliments and follows on from the Supreme Court’s decision in Kabab-Ji SAL v Kout Food Group [2021] UKSC 48 (also argued by Ricky Diwan KC) a jurisdictional challenge under the New York Convention 1958 (i.e. s.100-103 of the Arbitration Act 1996) which was summarily upheld on the basis that the award creditor had no real prospect of establishing that Kout Food Group became a party to the arbitration agreement by conduct in the face of a No Oral Modification Clause that required any change to the parties to the agreement to be in signed writing. The Supreme Court decision thus avoided a full rehearing of questions of alleged conduct that would have otherwise engendered a substantial trial in the High Court (as it did in the underlying Paris seated arbitration).
In the present case, NIOC had sought to argue that one of the claims for damages (for breach of contract) fell outside of the scope of the arbitration agreement on its true construction applying Iranian law as the governing law of the contract and thereby the governing law of the arbitration agreement. For this purpose, NIOC relied upon an expert report on the Iranian law principles of contractual interpretation to advance its case on construction and sought to contend that its case could not be dismissed without a trial and that the court had wrongly engaged in a mini-trial at the interlocutory stage. This was rejected by the Court of Appeal applying the well-established guidance in Okpabi v Dutch Shell [2021] UKSC 3. Rather than engaging in a mini-trial, the Court had correctly identified the principles of Iranian law advanced by the expert and proceeded to assume that all of those propositions would be established at trial. It then correctly concluded that NIOC still had no real prospect of success in contending that the claim was outside of the scope of the arbitration agreement applying Iranian law principles of construction to the wording of the arbitration agreement.
Furthermore, given the limited role of foreign law in the context of contractual construction (which the Court reemphasised), combined with the decision of the Supreme Court in Brownlie v FS Cairo (Nile Plaza) LLC [2021] UKSC 45 that is reflected in the flexibility conferred on the Commercial Court in dealing with foreign law (see Section H.3), it can be expected that there will be further developments in the Court’s handling of foreign law expert evidence in the future and a closer convergence with international arbitration where foreign law is frequently dealt with by way of submission.
Finally, the Court of Appeal’s judgment also addressed the question of whether Butcher J’s rejection of Crescent’s application under s.73 of the Arbitration Act 1996 that NIOC had waived its jurisdictional objection by not raising it before the tribunal constituted a decision under s.67 and therefore was subject to the restrictions on appeal contained in s.67(4). The Court held that it did constitute a decision under s.67. On the basis of the Court’s reasoning any decision along the way to the substantive determination of the s.67 jurisdictional challenge constitutes a decision that is subject to the restrictions on appeal contained in s.67(4).
The full judgment can be found here.
Ricky Diwan KC, together with Tariq Baloch (3 Verulam Buildings) and Moeiz Farhan (36 Stone), instructed by Michael Darowski, Jennifer Ronz and Jannika Glendon of McDermott Will & Emery, acted for the Respondents.
