Decision time – The Court of Appeal holds that it has no jurisdiction to grant permission to appeal under section 67(4) of the Arbitration Act 1996 absent permission from the trial judge; there is no distinction between ‘decisions finally disposing of a challenge to an award’ and ‘decisions made in the course of an application’ for the purposes of sections 67(4) and 68(4) of the Act. 

National Iranian Oil Company v Crescent Petroleum Company International Ltd & Anor [2023] EWCA Civ 826

David Bailey KC, Jessica Sutherland and Frederick Alliott represented the National Iranian Oil Company (“NIOC”) in this jurisdictional challenge to an ad hoc arbitration award, brought under s.67 of the Arbitration Act 1996 (“the 1996 Act”). The case raises many complex issues about the interplay between s.67, 68 and 73 of the 1996 Act. This is a hot topic now; the Law Commission is at an advanced stage with consulting on any changes to the procedure for jurisdictional challenges under a new arbitration act.

The decision of Butcher J at first instance [2022] EWHC 2641 (Comm). [2023] Bus. L.R. 235 refined the principles applicable to determining whether a ground of objection has been raised for the purposes of s.73 1996 Act. It is also a rare example of summary judgment being given on a s.67 challenge which raised complex issue of foreign (Iranian law).

The s.67 Claim – NIOC is challenging a US$2.4 billion arbitration award in favour of the UAE’s Crescent Petroleum (“Crescent”) in a dispute over gas supply. NIOC contends that under s.67 of the 1996 Act the Tribunal had no jurisdiction to determine the existence and extent of Crescent’s liability to a third-party (CNGC) under a separate contract and to award damages against NIOC. NIOC sought to rely on expert evidence on Iranian law demonstrating that the scope of the arbitration agreement does not cover these matters.

The decision of Butcher J – A hearing of: (i) a trial of Crescent’s Preliminary Issue Objection (whether NIOC’s challenge was precluded by s.73(1) of the 1996 Act) and (ii) Crescent’s application for reverse summary judgment, took place in September 2022. Following a 2-day hearing, Butcher J rejected Crescent’s Preliminary Issue Objection but having considered the expert evidence on Iranian law, Butcher J took the rare step of summarily dismissing the s.67 Claim.

NIOC’s appeal – Butcher J granted NIOC permission to appeal against the summary dismissal of the s.67 Claim on four grounds. NIOC’s appeal raised fundamental questions about the correct approach to expert evidence of foreign law on an application for summary judgment. Permission from Butcher J was required because s.67(4) of the 1996 Act provides that only the first instance judge can grant permission to appeal from a decision under s.67 and that (save for two limited exceptions) the Court of Appeal has no independent jurisdiction to do so.

Crescent’s cross appeal – Having not sought permission from Butcher J, Crescent subsequently brought a cross appeal seeking to reverse his decision on the Preliminary Issue Objection. Crescent applied for permission to appeal directly to the Court of Appeal and argued that s.67(4) of the 1996 Act was not applicable as the Judge’s rejection of the Preliminary Issue Objection gave rise to “no decision either way” on NIOC’s s.67 Claim. Crescent argued that s.67(4) only applied to decisions ‘finally disposing of a challenge to an award under s.67’ and did not apply to decisions along the way/decision made in the course of an application as part of a s.67 Claim.

The decision of the Court of Appeal (Lord Justice Males, Lord Justice Nugee, Lady Justice Falk) – NIOC successfully resisted Crescent’s cross application for permission to appeal (paragraphs 37-69).

Having reviewed the previous Court of Appeal authorities of  ASM Shipping Ltd v TTMI Ltd [2006] EWCA Civ 1341, [2007] 1 Lloyd’s Rep 136; Sumukan Ltd v Commonwealth Secretariat [2007] EWCA Civ 243, [2007] Bus LR 1075; Johann MK Blumenthal GmbH & Co KG v Itochu Corporation [2012] EWCA Civ 996, [2013] 1 All ER 504 (Comm); and Manchester City Football Club Ltd v Football Association Premier League Ltd [2021] EWCA Civ 1110, [2021] 1 WLR 5513, the Court of Appeal held that there was no support for the view that only a decision finally disposing of a challenge to an award is capable of being a “decision under” section 67 or 68 of the 1996 Act.

Males LJ, giving the leading judgment, held that it was clear that: “section 73 is entirely ancillary to sections 67 and 68. It has no relevance or application independent of a challenge to an award under one or both of those sections. A decision whether a party has lost the right to challenge an award is undoubtedly “part of the process” for determining a challenge under section 67 or section 68 and is “within the compass” of those sections. It is a preliminary question, but not a question going to the court’s jurisdiction, the answer to which determines whether the court needs to consider the merits of the section 67 or section 68 challenge. “Decision” is a broad term and the determination of a section 73 issue is naturally to be regarded as a decision under section 67 or section 68 as a matter of language, whichever way it goes. There is no justification for saying that it is a decision under section 67 or section 68 if the section 73 issue is decided in favour of the award creditor (ASM Shipping), but not if it goes against the award creditor.” (paragraph 65)

Although the Court of Appeal heard full argument on the substance of Crescent’s cross appeal (the correct test for determining whether a ground of objection has been raised for the purposes of s.73 of the 1996 Act) it declined say anything about the substantive arguments (paragraph 69). The decision of Butcher J therefore represents the current state of the law on the interplay between s.67 and s.73 of the 1996 Act.

The Court of Appeal dismissed NIOC’s appeal against the summary dismissal of its s.67 Claim (paragraphs 70-99). The Court of Appeal found that the judge had not conducted a mini trial rather he had focused on arguability of NIOC’s case on Iranian law, his distillations of the principles of Iranian law was an accurate summary of the expert evidence to the extent that it was relevant and admissible.

This decision of the Court of Appeal is in line with the English Court’s pro-enforcement bias.

David Bailey KC, Jessica Sutherland and Frederick Alliott were instructed by Mark Howarth and Luisa Zukowski of Eversheds Sutherland LLP.

Please click here to view a copy of the Judgment of Butcher J and here to view a copy of the Judgment of the Court of Appeal.