In National Iranian Oil Company v Crescent Petroleum Company International Ltd and another [2023], the English Court of Appeal held that it had no jurisdiction to grant permission to appeal under section 67 of the Arbitration Act 1996 ("AA 1996") without permission from the trial judge. The case also provided insight on the role of a judge when asked to consider expert evidence on foreign law as part of an application for summary dismissal.
The decision will be of interest to those looking to enforce or challenge arbitration awards in the courts of England & Wales, particularly where there are jurisdictional issues involved. In this article we consider the factual background to the case, the Court of Appeal ruling and its implications.
Background
The case involved a dispute over a gas supply contract (the "Contract") between the National Iranian Oil Company (“NIOC”) and Crescent Petroleum Company International Limited and Crescent Gas Corporation Limited ("Crescent"). The Contract was governed by Iranian law and contained a wide arbitration clause, with the seat being London. When NIOC failed to perform its obligations under the Contract, Crescent commenced arbitration proceedings against them.
In the arbitration, the tribunal made: (a) a 2014 award finding NIOC in continuing breach of the Contract; and (b) a 2021 award by which Crescent was awarded damages in excess of USD 2.4 billion including in relation to losses incurred under a separate agreement with a partly owned subsidiary of NIOC ("CNGC").
NIOC challenged the award for damages before the English High Court under section 67 of the AA 1996. NIOC argued that the tribunal had no jurisdiction to determine Crescent's liability to CNGC under the separate agreement, nor to make an award for damages in respect of any alleged liability under that separate contract. They relied on expert evidence on Iranian law demonstrating that the arbitration agreement's scope did not cover these matters.
Crescent countered that NIOC had lost its right to make a section 67 challenge by virtue of section 73 of the AA 1996. This provision states that a party to arbitral proceedings that takes part in the proceedings without challenging jurisdiction when possible, cannot later raise that objection before the tribunal or a court. Although NIOC had previously raised jurisdictional issues in the arbitration, Crescent argued these were different from the issues raised before the court.
Crescent applied for the determination of this point as a preliminary issue and for the summary dismissal of the section 67 challenge on the basis that it had no real prospect of success. In a judgment delivered on 21 October 20022, Butcher J ruled that:
- NIOC had not lost its right to appeal by virtue of section 73 as it had adequately communicated the substance of its jurisdiction objection to the tribunal initially and could not be said to have kept a jurisdictional objection "up its sleeve".
- NIOC's challenge of the award for damages under section 67 should be summarily dismissed as it had no real prospect of success as the arbitration clause was broad enough to cover the losses under the separate agreement.
Questions Before the Court on Appeal
Butcher J granted NIOC permission to appeal his decision. NIOC argued that Butcher J should not have summarily dismissed their challenge of the award for damages. It said that a full trial including cross-examination of witnesses might have brought out further evidence on Iranian law and that the court had wrongly engaged in a mini-trial at the interlocutory stage. Further, NIOC argued that the judge had misunderstood the approach which should be taken under Iranian law when considering the parties' arbitration agreement.
Crescent also brought a cross-appeal directly to the Court of Appeal (having not sought permission from Butcher J) maintaining that NIOC had lost the right to object to the tribunal's jurisdiction by virtue of section 73.
The questions for the Court of Appeal were therefore:
- Whether the judge had taken the correct approach to the summary judgement application;
- Whether the judge had correctly applied Iranian law in respect of the arbitration agreement; and
- Whether the Court of Appeal had jurisdiction to grant permission to appeal from a decision under section 67.
The Decision
In a judgment given by Males LJ (with whom Nugee and Falk LJJ agreed), the Court of Appeal dismissed NIOC's appeal against the summary dismissal of its section 67 challenge. It found that, rather than engaging in a mini-trial, Butcher J had correctly understood and applied the expert evidence from the Iranian lawyer and proceeded to assume that all of those propositions would be established at trial. It concluded that NIOC still had no real prospect of success in contending that the claim for CNGC damages was outside of the jurisdiction of the arbitration agreement.
The Court of Appeal also held that it did not have jurisdiction to grant Crescent permission to cross-appeal on their argument in relation to section 73. The judgment clarified that only the first instance court can grant permission to appeal against a decision on challenging an award under section 67 (relating to jurisdiction) or section 68 (which covers challenges for serious irregularity), including on whether section 73 has restricted the applicant's right to pursue its challenge. As Butcher J had not given permission, Crescent could not bring the appeal.
Comment and Implications
The Court of Appeal decision follows the 'pro-enforcement approach' taken by the English courts. Further, in upholding Butcher J's decision on summary judgment, the court avoided a full rehearsing of the matter as part of a substantial trial in the High Court.
This case is a rare example of a summary judgment being upheld by the Court of Appeal in relation to a complex issue of foreign law. The court highlighted that, when asked to consider expert evidence on foreign law as part of an application for summary dismissal, a judge should focus on a party's pleaded case and its strengths and weaknesses. Here, NIOC's grounds of challenge had expressly stressed its expert's evidence on Iranian law as part of the summary judgement application. Therefore, Butcher J had to "disentangle the admissible from the inadmissible by identifying the relevant principles of Iranian law" and managed to do so successfully without requiring detailed cross examination.
The case also highlights the complexity of the law on bringing jurisdictional challenges and the interplay between sections 67, 68 and 73 of the AA 1996. The Law Commission recently released its long-awaited review of the AA 1996 including suggested adjustments to the court's approach to hearing jurisdiction challenges. A full commentary on the reforms suggested by the Law Commission from our team can be found here.
This article has been co-written by Rebecca Wyke (Associate) and Heba Ahmad (Trainee Solicitor).
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