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...