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PrintBy Mikhail Vishnyakov and Tulsi Bhatia
The recent judgment in National Iranian Oil Company v Crescent Petroleum Company International Limited [1] provides useful insight into how a challenge to an arbitration award on the basis that the tribunal lacked jurisdiction (available under section 67 of the Arbitration Act 1996 (“AA 1996”)) can be disposed of via summary judgment, thus avoiding a complete rehearing, when the challenge has no realistic prospect of success.
Currently, under section 67 of the AA 1996, if a party is unsuccessful in challenging jurisdiction before the tribunal, it can have another opportunity to challenge the subsequent arbitral award before the English courts. That challenge would entail a full rehearing permitting new evidence, witnesses, documents, and expert opinions. Accordingly, it has been said that the challenge before the tribunal may be a mere “dress rehearsal”. Indeed, as part of the Law Commission’s review of the AA 1996, it has been provisionally proposed to amend the section 67 process into an appeal, rather than a rehearing, if the applicant has participated in the arbitration. This means that the court would review the decision of the tribunal rather than consider the matter afresh, thereby reducing the potential costs and duration of the process.
Pending any changes to the current position, the recent judgment outlined below demonstrates that the potential criticisms of the section 67 mechanism in its current form may be mitigated via the summary judgment procedure, particularly if the challenge appears to be weak.
Background
National Iranian Oil Company (“NIOC”) agreed to supply gas to Crescent Petroleum Company International Limited (“CPCIL”) pursuant to a contract that CPCIL subsequently assigned to Crescent Gas Corporation Limited (“CGC”). NIOC failed to supply the gas and CGC commenced an arbitration, seeking, among other remedies, lost profits on the sale of the gas via CGC’s subsidiary to end customers. The tribunal awarded substantial damages to CGC.
In the arbitration, NIOC challenged the tribunal’s jurisdiction on the basis that the CGC’s liability to end customers was governed by a separate contract. NIOC also filed an application to challenge the award under section 67 of the AA 1996; in response, both CPCIL and CGC issued an application for the summary dismissal of NIOC’s application.
Key Criteria for Summary Judgment
Summary judgment enables a claim to be determined via a short hearing at an early stage, without a trial. If successful, it saves time and costs. As per the English procedural rules, summary judgment is available to either party where:
- A claim or issue or a defence to a claim or issue has no real prospect of success, and
- There is no other compelling reason for a trial.
An application for summary judgment may be based on a point of law or the evidence which can reasonably be expected to be available at trial (or the lack of it), or a combination of these.
Court’s Ruling on Summary Judgment
NIOC argued, in reliance on expert evidence of Iranian law – being the law governing the arbitration clause and the contract at issue – that the arbitration agreement did not extend to the claim pursued against NIOC. The court held that the role of the expert was only to inform the court of the principles of contractual interpretation under the foreign law, and not to provide views on what is the proper interpretation. Relying on the principles of interpretation under Iranian law as explained by NIOC’s expert, the court found that the words of the arbitration agreement were wide and encompassed the claim pursued in the arbitration. Accordingly, the court dismissed the section 67 challenge on a summary basis.
Comment
This case is a useful reminder that not all section 67 challenges are bound to involve a protracted de novo hearing. In particular, if the challenge meets the criteria for a summary judgment, then that procedure may – if successfully deployed – reduce potential costs and delay of the challenge.
