The Supreme Court of the United Kingdom on 1st March 2017, issued an important arbitration-related decision in favour of the Nigerian National Petroleum Corporation (NNPC) in a case against IPCO (Nigeria) Ltd, a member of the IPCO Group.
The hearing is the latest in a decade long dispute which arose from a contract which NNPC entered into with IPCO for the construction of a Bonny Export Terminal in Port Harcourt, Nigeria in the 1990s. Following an arbitration conducted in Nigeria, IPCO was awarded over US$150 million in 2004, with annual interest running at 14%. NNPC immediately challenged the award in the Nigerian courts while IPCO has repeatedly sought to have the award enforced in the United Kingdom in line with the New York Convention, resulting in several reported cases.
During the course of one of the enforcement attempts, NNPC discovered evidence that IPCO had forged documents relating to the claim and the related arbitration in Nigeria, this led to an agreement by parties in 2009 to adjourn the enforcement proceedings on the condition that NNPC will provide and maintain security in the sum of US$80 million. Despite that agreement, IPCO again sought albeit unsuccessfully to enforce the award before the English Commercial Court between 2012 and 2014. However, on appeal, the English Court of Appeal decided that the length of the delays in the Nigerian proceedings required the English Court to lift the adjournment and to decide whether to allow enforcement following a trial of the fraud allegations in the Commercial Court.
Both the Commercial Court and the Court of Appeal had concluded that NNPC has a bona fide prima facie case that IPCO practised a fraud on the tribunal and that there is a realistic prospect that the whole award would be set aside on that basis. However, the Court of Appeal ordered NNPC to provide further security of US$100 million (in addition to the previously agreed security of US$80million) as a condition of being entitled to advance a defence that enforcement should be refused on grounds of English public policy, e.g. because the award was procured by IPCO’s fraud.
On ultimate appeal to the UK Supreme Court, the Court considered whether the English Court, as an enforcing court of an arbitral award rendered by a tribunal of another jurisdiction [in this case Nigeria], was entitled to require a party resisting enforcement to provide security for the money payable under the award as a condition of being entitled to advance a good arguable defence that enforcement should be refused on grounds of English public policy, e.g. because of the above referenced fraud.
Lords Mance, Sumption, Toulson, Hodge and Clarke unanimously set aside the Court of Appeal’s order, thus allowing NNPC to advance its defence in the English Court free of any such conditions.
The long running dispute has highlighted important issues regarding the interpretation of the New York Convention 1958 and the English Arbitration Act, 1996, [particularly section 103 which corresponds with section 52 of the Nigerian Arbitration and Conciliation Act]. In particular, this judgment has provided significant clarification of the limits of an enforcing Court’s power to order security under the New York Convention 1958.
International law firm, Stephenson Harwood LLP acted as Solicitors to NNPC for the case, in collaboration with a team from Nigerian commercial firm, Babalakin & Co. led by Olawale Akoni, SAN and Ajokpaoghene Utake. Babalakin & Co. also represents NNPC in the Nigerian disputes. Counsel for NNPC at the Supreme Court was Toby Landau QC and James Willan of Essex Court Chambers.
Babalakin & Co. also recently participated in and advised Shell Petroleum Development Co. Ltd. (SPDC) in a litigation commenced against it and its parent company, Royal Dutch Shell (RDS) at the English High Court in London by the Bille and Ogale communities from Rivers State, Nigeria. The claim involved damages for alleged injuries caused by the alleged negligence etc. of SPDC in respect of its operations in Nigeria. SPDC and RDS challenged the English court’s jurisdiction and argued that the case should be heard by Nigerian courts. In a ruling delivered on 26th January 2017, the English court declined jurisdiction in deference to Nigerian courts and struck out the case. SPDC and RDS’s external legal team comprised of the London law firm of Debevoise & Plimpton, led by Lord Peter Goldsmith (a former Attorney General of the UK) while Babalakin & Co. led by Olawale Akoni, SAN provided detailed advice on the Nigerian law issues that arose in the course of the application.