English Courts Cannot Order Security In Public Policy Challenges To Enforcement

The UK Supreme Court last week issued the latest decision in a long-running attempt to enforce a US$150 million Nigerian arbitration award (IPCO (Nigeria) Limited v. Nigerian National Petroleum Corporation [2017] UKSC 16). Overturning the Court of Appeal's decision, a unanimous Supreme Court held that NNPC did not have to provide security in order to challenge the enforcement of award against it, which was allegedly procured through fraud, on public policy grounds.

The Supreme Court confirmed that the English courts have no power under section 103(2) or (3) of the Arbitration Act 1996 to require a party resisting enforcement in this jurisdiction to provide security (as opposed to where a party seeks an adjournment of English proceedings while a challenge is brought in the country where the award was made). This decision removes a significant potential obstacle to parties hoping to avoid paying out under flawed awards against them by raising defences before national courts where enforcement is sought.

History of the enforcement application

The underlying arbitration arose out of a contract by which IPCO was to design and construct a petroleum export terminal for NNPC. The tribunal rendered an award of more than US$150 million plus 5 milion Nigerian Naira in IPCO's favour in October 2004. NNPC challenged the award in Nigeria, initially for "non-fraud reasons" and (from 2009) for alleged fraud in relation to IPCO's presentation of its claim. The Nigerian proceedings were subject to protracted delays and remain ongoing.

IPCO first tried to enforce the award in England in 2004. Those proceedings were adjourned by the High Court under section 103(5) of the 1996 Act, which permits the court to adjourn where there is an application to set aside the award in the jurisdiction where (or under the law of which) the award was made. Section 103(5) also allows the court to order the party resisting recognition or enforcement to provide security - which the High Court did to the tune of US$50 million, pending resolution of the challenges in Nigeria. This was later increased to US$80 million in return for a continued adjournment granted in 2009, in light of extended delays in the Nigerian proceedings.

Fast forward to 2012, when IPCO again applied to enforce in England. The Court of Appeal decided to end the impasse caused by the "sclerotic" delays in the Nigerian proceedings, and held that the High Court should itself determine whether the award should be...