Case comment: National Iranian Oil Company v Crescent Petroleum Company International & Crescent Gas [2016] EWHC 1900 (Comm)

National Iranian Oil Company v Crescent Petroleum Company International & Crescent Gas [2016] EWHC 1900 (Comm)

Principle: This decision confirms that there is a discretion to set aside a Notice of Discontinuance in proceedings under the Arbitration Act 1996 where there is an abuse of process. This had been suggested, correctly, by Aikens J. in Sheltam Rail Company (Proprietary) Limited v (1) Mirambo Holdings Limited (2) Primefuels (Kenya) Limited [2008] EWHC 829 (Comm). A party cannot invoke the supervisory jurisdiction of the English courts by applying under s.68 Arbitration Act 1996 and then discontinuing its appeal before the conclusion of that process for strategic reasons, without first offering an acceptable undertaking to the Court.

Facts: NIOC and Crescent entered into a gas supply and purchase contract. A dispute arose when NIOC failed to supply gas. The dispute proceeded to arbitration. Crescent was successful and obtained a majority award. NIOC appealed the award under s.68 Arbitration Act 1996. NIOC alleged that there were serious irregularities in the arbitral proceedings. NIOC complained, amongst other things, that its nominated arbitrator was excluded from deliberations between the other two arbitrators, and that the panel failed to control regular discourtesy shown towards it and witnesses by leading counsel for Crescent.

Arguments: NIOC lost on all of its grounds of appeal at a hearing of preliminary issues in March 2016 (see my case comment here). The balance of the grounds of appeal fell to be heard on 18-19 July 2016. Ten days before the hearing, NIOC’s solicitors served a Notice of Discontinuance on Crescent. They abandoned the remainder of NIOC’s appeal under s.68 Arbitration Act 1996. By letter, NIOC’s solicitors explicitly reserved their client’s rights to raise the remaining arguments contained within the grounds of appeal in another forum. Crescent applied to set aside the Notice of Discontinuance. On the eve of the hearing, NIOC through its solicitors offered an undertaking to:

not resist the recognition or enforcement of the Tribunal Award dated 31 July 2014 by raising any argument based upon Grounds II(D), III(C) or III(D) of the Grounds of Appeal

Crescent refused to accept the undertaking and maintained its application to set aside the Notice of Discontinuance. The proposed undertaking did not refer to all of the remaining grounds of appeal.

Decision: Teare J. set aside the Notice of Discontinuance. It appeared to have been served by NIOC for tactical reasons, in order to preserve its ability to frustrate enforcement proceedings in another New York Convention court. The undertaking belatedly offered by NIOC was inadequate. This is because it left open the possibility that NIOC could delay or resist enforcement in another state in future. Whilst NIOC did not require permission to discontinue, under CPR Part 38, the Court had a residual discretion to set aside a Notice of Discontinuance in such circumstances.

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