Friedhelm Eronat v CNPC International (Chad) Ltd & Anor

This application for permission to appeal is concerned with the interpretation of a contractually agreed time limit for an appeal to the court under section 69 of the Arbitration Act 1996. The parties agreed that either of them could appeal to the court, but stipulated a time limit of 30 days ‘after the decision is rendered’. If that means that an appeal had to be brought within 30 days from the date when the award was provided to the parties, the appeal was in time. But if it means that time ran from the date when the award was made, the appeal was five days too late.

Mr Justice Bryan held that time ran from the date when the award was made. He went on to hold that the parties had excluded the right to make any application for an extension of the time for appealing and that, even if they had not done so, he would not have granted an extension as a matter of discretion.

The effect of these decisions was that the appeal by Mr Friedhelm Eronat from the arbitrators’ award was dismissed. The judge refused to grant permission to appeal to this court, so Mr Eronat has asked us to do so.

A question arises whether, in view of section 69(8) of the 1996 Act, this court has power to grant permission to appeal, but it is unnecessary to answer that question, on which we did not hear oral argument, because it is clear that the judge’s decision was correct. We therefore informed the parties at the conclusion of the hearing that, even on the assumption that this court has jurisdiction to grant permission to appeal, such permission would be refused. This judgment sets out my reasons for joining in that decision.

I need say very little about the parties’ underlying dispute. It arises out of a Deed of Indemnity dated 19^th December 2003 (the ‘2003 Deed of Indemnity’) which was entered into between Mr Eronat, CNPC International (Chad) Ltd (‘CNPC’), Cliveden Petroleum Co Ltd (‘Cliveden’), and a third party, CITIC Energy Inc (‘CITIC’). It was governed by the laws of Hong Kong, but provided for arbitration with an English seat in accordance with the LCIA Rules.

The 2003 Deed of Indemnity was part of a transaction whereby CNPC acquired a 25% share in Cliveden from Mr Eronat, who had previously been its 100% shareholder. Later, in 2006, CNPC acquired what was then Mr Eronat’s remaining 50% stake in Cliveden, together with the 25% stake held by CITIC, with the result that it became the 100% owner of Cliveden.

On 3^rd April 2006 Mr Eronat, CNPC and Cliveden concluded a Deed of Release, governed by English law, releasing Mr Eronat from all claims, liabilities or causes of action arising directly or indirectly from the ownership of shares in Cliveden.

In 2018 a third party (‘Carlton’) brought a claim against CNPC and Cliveden, who sought in turn to be indemnified against that claim pursuant to the 2003 Deed of Indemnity. That gave rise to a dispute between CNPC and Cliveden on the one hand and Mr Eronat on the other whether Carlton’s claim fell within the scope of the indemnity in the 2003 Deed of Indemnity and, if it did, whether it had been released by the 2006 Deed of Release.

On 30^th November 2021 CNPC and Cliveden filed a Request for Arbitration with the LCIA pursuant to the LCIA Rules 2020, claiming to recover from Mr Eronat the US $324 million which had been paid to Carlton under the terms of a settlement concluded between them and Carlton. The claim was made under the 2003 Deed of Indemnity.

The arbitrators found in favour of CNPC and Cliveden, awarding them the US $324 million which had been paid to Carlton together with interest and costs, as well as making various declarations.

The award is dated 11^th April 2024, which was a Thursday, and was signed by the arbitrators on that day. However, it was only sent to the parties by the LCIA Secretariat on the following Tuesday, 16^th April 2024. On 1^st May 2024 Mr Eronat’s then legal representative wrote to the tribunal seeking clarification whether ‘the Tribunal prescribed a period for submitting an Appeal and if so from what period’. The presiding arbitrator replied on the same day, correctly, that ‘it is not appropriate for the Tribunal to provide any guidance to counsel’.

In the event Mr Eronat did not issue his arbitration claim form seeking to appeal against the award until 16^th May 2004, 30 days after receipt of the award, but 35 days after the award was made.

The 2003 Deed of Indemnity provided for arbitration in the following terms (I have emphasised the words in clause 14.2(b) which are of particular importance):

‘14.2 Arbitration

(a)

Failing such amicable settlement as provided for in Clause 14.1, any dispute arising out of or in connection with this Deed, including any question regarding its existence, validity or termination, interpretation, application, performance or non-performance shall be referred to and finally resolved by arbitration in The London Court of International Arbitration, England by a tribunal of three (3) arbitrators in accordance with the LCIA Arbitration Rules applicable to arbitration for the time being in force which rules are deemed to be incorporated by reference in this Clause 14.2, provided however that the Parties may agree in writing to refer any disputes to binding arbitration before a single arbitrator.

(b)

The arbitration tribunal shall be appointed by mutual agreement of the Parties in dispute, and failing agreement, pursuant to the LCIA Arbitration Rules. The arbitration tribunal shall conduct its session and render its decision in English. The decision of the arbitration tribunal shall be final and binding upon the Parties and may be used as a basis for judgment thereon in any state or legal jurisdiction. Such decision shall include a determination as to how the costs of the arbitration proceedings shall be borne by the parties in dispute.

(c)

The arbitration tribunal shall have the power to issue such orders for interim relief pending its final decision as may be necessary to preserve the rights of the Parties, without prejudice to the final determination of the dispute. The arbitration tribunal shall also have authority in its final decision to direct the specific performance of the obligations of the parties under this deed as well as to grant any other relief whether legal or equitable in nature. However, the arbitration tribunal shall not have power to alter, modify or reform any express provision of this Deed or to make any award which by its terms affects any such alteration, modification or reforming.’

The LCIA Rules pursuant to which the arbitration was conducted were the 2020 Rules as those were the rules in force when the arbitration was commenced. At the time of the 2003 Deed of Indemnity, however, the current rules were the 1998 Rules and it is those rules, so far as relevant, that the parties would have had in mind when making their agreement.

The 2003 Deed of Indemnity dealt specifically with appeals and other applications to the court in clause 14.3 (again, I have emphasised the words of particular importance):

‘Appeal

(a)

In the event that the arbitration tribunal has materially erred in fact and/or law, the Parties are entitled to appeal the decision of the arbitration tribunal to a court in England, provided that such appeal is brought within thirty (30) days after the decision is rendered.

(b)

The Parties shall not be entitled to commence or maintain any action in any court of law upon any matter in dispute arising out of this Deed except for the enforcement of an arbitral award granted pursuant to this Clause 14. For avoidance of doubt, the parties expressly waive all rights to make an application or to appeal to the English courts under the Arbitration Act, except pursuant to Clause 14.3(a) above.

(c)

Judgment upon any award rendered in an arbitration hereunder may be entered in any court of competent jurisdiction, including without limitation the courts of the canton of Geneva, Switzerland, and the BVI. For avoidance of doubt, for the purposes of this Clause 14.3(c), each of the Parties hereby irrevocably submits to the jurisdiction of such courts and waives any objections or defences which it may have now or hereafter to such jurisdiction.’

As Mr Simon Davenport KC submitted on behalf of Mr Eronat, clause 14.3 appears to reflect an intention by the parties to provide wide and permissive scope for an appeal to the court. However, clause 14.3(a) goes further than is legally possible, because it is not possible to confer jurisdiction on the English court by agreement to decide an appeal from arbitrators on a question of fact (Mustill & Boyd, Commercial and Investor State Arbitration, 3^rd Ed (2024), para 14.130), while clause 14.3(b) is ineffective to the extent that it seeks to exclude the possibility of a challenge to an award under section 67 (jurisdiction) or section 68 (serious irregularity) of the 1996 Act, because those sections are mandatory and cannot be excluded by agreement.

Nevertheless, clause 14.3 does have real content because it provides for a right of appeal on a question of law without the need to obtain leave to appeal under section 69(2)(b) of the Act. However, that entitlement is subject to the proviso that the appeal must be brought ‘within thirty (30) days after the decision is rendered’. That may be compared with the period of 28 days from the date of the award referred to in section 70(3) of the Act.

Mr Davenport submitted, and I accept, that applying well established principles of contract interpretation, the question is how this proviso would be understood by a reasonable person having all the background knowledge available to the parties. He submitted that such a person would have concluded that the parties intended the 30 day period to run from the date when the award was communicated to the parties. That would allow the losing party time to review the award, to take advice, to consider the cost implications and to prepare the necessary appeal documents. To shorten that period so that it ran from the date of the award, and might even expire before the parties had received the award, would be unfair and would defeat their intention to allow a wide scope for an appeal. That would be even more unfair if, as the judge held, there was no possibility of applying for an extension of time.

In my judgment the word ‘render’ or ‘rendered’, considered in isolation, is capable of referring to the date when the award was made or to the date when it was provided to the parties. However, when the language of the clause is considered in its context and taking account of the background information available to the parties, it is clear that it has the former meaning.

First, the use of the word ‘render’ in clause 14.2(b) (‘The arbitration tribunal shall conduct its session and render its decision in English’) is unambiguous. It can only refer to the making of the award. Rendering the award in clause 14.2(b) refers to something which is done by the arbitration tribunal. It is the arbitration tribunal which makes the award by drafting a decision and signing it, but it is not the arbitration tribunal which provides the award to the parties under the LCIA Rules. Rather, the tribunal delivers the award to the LCIA Court (in practice, the Secretariat), which then transmits certified copies to the parties (Article 26.5 of the 1998 Rules). Even then, the Secretariat will only transmit the award if the costs of the arbitration have been paid to the LCIA. So there will inevitably be some delay between the making of the award and its transmission to the parties and if the costs of the arbitration have not been paid, the delay may be considerable.

I did not understand Mr Davenport to dispute any of this. Rather, he submitted that the reference to the decision being ‘rendered’ in clause 14.3(a) did not necessarily have the same meaning as the requirement for the tribunal to ‘render its decision’ in clause 14.2(b). I would reject that submission. It is overwhelmingly likely that the parties, using the same term in different parts of the same clause, intended to refer to the same thing, i.e. the making of the award.

Second, the LCIA Rules 1998 which were current at the time of the parties’ contract and which form part of the legally relevant background refer to a tribunal rendering an award in terms which plainly refer to the making of an award. Article 26.8 provides:

‘In the event of a settlement of the parties’ dispute, the Arbitral Tribunal may render an award recording the settlement if the parties so request in writing (a “Consent Award”), provided always that such award contains an express statement that it is an award made by the parties’ consent. …’

This terminology no longer appears in the equivalent provision (Article 26.9) of the 2020 Rules, but it is the 1998 Rules which the parties would have had in mind when concluding their contract.

Third, the ICC Rules which were current at the time of the parties’ contract also speak of the arbitral tribunal rendering its award in terms which can only refer to the making of the award and contrast the rendering of the award and its notification to the parties (see Articles 24.1, 27 and 28.1 of the 1998 Rules). Although the parties did not contract on the ICC Rules, these were widely known in the field of international arbitration and demonstrate that this was a common and well understood use of language. Accordingly they too form part of the background of which the parties can be taken to have been aware.

Fourth, I see nothing unfair or unreasonable in the parties having agreed a right of appeal which was subject to a time limit which might start running before they were aware of the terms of the award. Although there might be some delay between the making of the award and its transmission to the parties, the parties would have contemplated that the transmission of the award by the LCIA would take place within a few days at most, which would leave sufficient time for the preparation of any appeal documents. (Although not relevant to the interpretation of the clause, I note that the parties lost only two working days as a result of the delay in the present case, Friday 12^th and Monday 15^th April). The only reason why the delay might be greater than a few days would be if the costs of the arbitration had not been paid, in which case the remedy lay in the hands of whichever party needed more time to consider the possibility of an appeal.

Finally, to interpret clause 14.3(a) as referring to the making of the award by the arbitral tribunal accords with the scheme of the 1996 Act. The Act does not refer to rendering an award, but it does distinguish clearly between the making of an award (section 54) and its notification to the parties (section 55), with time for an appeal running from the date when the award is made and not from its notification to the parties (section 70(3)). It is true that, in the absence of contrary agreement, the statutory time limit of 28 days can be extended (section 79(1)), which mitigates to some extent the strictness of the time limit, but there is no reason to think that the power of the court to extend time was intended to be exercised merely because of a delay of a few days between the making of the award and its notification to the parties. That would be unlikely to constitute the ‘substantial injustice’ which must be shown before the power to extend time can be exercised (section 79(3)(b)).

For these reasons I consider that the judge was right to interpret the time limit in clause 14.3(a) as running from the date of the award, so that Mr Eronat’s appeal came too late.

The next question is whether the court has power to extend the time limit contained in clause 14.3(a). Any such power must be found in section 79(1) of the 1996 Act, which provides:

‘Unless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to any matter relating to the arbitral proceedings or specified in any provision of this Part having effect in default of such agreement.’

Section 79 goes on to say that an application for such an order may be made by any party to the arbitral proceedings, and CPR 62.9 describes the procedure which must be followed when making such an application.

In the present case, however, the parties have clearly excluded the possibility of such an application. Clause 14.3(b) contains an express waiver of ‘all rights to make an application or to appeal to the English courts under the Arbitration Act except pursuant to clause 14.3(a)’. An application for an extension of time is an application under the Act and has therefore been excluded. In the language of section 79(1), the parties have agreed otherwise.

Therefore the question whether this court should grant an extension of time does not arise. If it had done, however, Mr Eronat would have faced at least two difficulties. The first is that the judge’s decision that, if there was jurisdiction to do so, he would decline to grant an extension was an exercise of his discretion. He referred to the fact that no application for an extension had in fact been made, that there was no explanation for the delay, that finality and compliance with time limits in arbitration cases were important, and that Mr Eronat’s legal representative was clearly aware of the time limit as evidenced by his request to the tribunal. I can see no error of principle here which would entitle this court to intervene to overturn a discretionary decision. The second is that section 79(6) provides that the leave of the court, which means the High Court, is required for any appeal from a decision of the court under the section. Although we heard no argument about this, and would have needed to do so if the point had been decisive, I can see no answer to the submission by Mr Richard Morgan KC for the respondents that this court would have no jurisdiction to hear an appeal from the judge’s refusal to extend the time.

For these reasons I considered that permission to appeal should be refused.

I should mention two points by way of postscript. The first is that it is not clear to me whether the question of law on which Mr Eronat seeks to appeal is a question of English law or Hong Kong law in circumstances where the Deed of Release is governed by English law but the 2003 Deed of Indemnity is governed by Hong Kong law. If the question is one of Hong Kong law, the English court would have no jurisdiction to determine that question under section 69, even though it appears that there is no material difference between English and Hong Kong law (Mustill & Boyd, para 14.128). However, it is unnecessary to consider this point further.

Second, the law applicable to the interpretation of clauses 14.2 and 14.3, as part of the 2003 Deed of Indemnity, may well be Hong Kong law, even though they provide for an arbitration with an English seat in accordance with the LCIA Rules which is subject to the English Arbitration Act 1996 (Enka v Chubb [2020] UKSC 38, [2020] 1 WLR 4117). However, even if this is so, nobody suggested at any stage that the principles of interpretation under Hong Kong law would be any different, or would reach a different result, from those applicable under English law.

I agree.

I also agree.