Star Hydro Power Limited v National Transmission and Despatch Company Limited

The issue on this appeal was whether the respondent (“NTDCL”) should be injuncted from continuing proceedings in Lahore, Pakistan in which NTDCL seeks various relief in respect of a final award issued on 7 May 2024 (“the Award”) in London-seated arbitration proceedings between NTDCL and the appellant (“SHPL”).

On 29 November 2024 Dias J (“the Judge”) dismissed SHPL’s application for an interim anti-suit injunction to restrain NTDCL pursuing the Lahore proceedings. The Judge held that, although England and Wales was the supervisory jurisdiction in relation to the arbitration between NTDCL and SHPL and the Award, NTDCL was entitled to apply in Pakistan under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention” or “the Convention”) for the partial recognition and enforcement of the Award and/or pre-emptively to assert that parts of the Award were not recognisable or enforceable in that jurisdiction.

The Judge granted SHPL permission to appeal on the question of whether an application may be made under the New York Convention pre-emptively. Males LJ granted further permission for SHPL to contend that, properly characterised, the Lahore proceedings were brought by NTDCL in breach of the arbitration agreement between NTDCL and SHPL and were an attempt to undermine the arbitration Award.

At the conclusion of the hearing we allowed the appeal and granted an anti-suit injunction largely on the terms sought by SHPL, with judgments to follow. These are my reasons for concurring in that decision.

The Power Purchase Agreement

NTDCL is a state entity incorporated in Pakistan and is the centralised electricity purchaser and the operator of the electricity network of that country. SHPL is a special purpose vehicle incorporated in Pakistan in the business of power production. It is ultimately owned by companies incorporated in South Korea.

On 8 March 2012 NTDCL and SHPL entered a Power Purchase Agreement (“the PPA”) pursuant to which SHPL agreed to construct, operate and maintain a 147 MW hydro-electric power generation complex (“the Plant”) located at Patrind in Azad Jammu and Kashmir (“the AJK”). In exchange, NTDCL agreed to purchase from SHPL electricity generated at the Plant for a period of 30 years from the commercial operation date (“the COD”) of the Plant. The PPA specified a Reference Tariff of 7.0496 PKR/kWh (8.2937 US Cents/kWh) for the electricity to be supplied by SHPL, based on an assumed total cost of the project of US$362,392,000 (the Reference Project Cost). Schedule 1 of the PPA contains detailed provisions for adjusting the Reference Tariff, including provision in Annex V to that Schedule for adjusting, as at the COD, the cost of civil works due to cost escalation during the construction period.

Article 18 of the PPA deals with the resolution of disputes between the parties. Article 18.3 provides that any dispute that has not been resolved by discussion or by expert determination under 18.1 or 18.2:

“(a)

…shall be settled in accordance with the rules of the London Court of International Arbitration, as in effect on the date of this Agreement (the “Rules”), by one (1) arbitrator appointed in accordance with the Rules. The arbitration proceedings shall be conducted, and the award shall be rendered, in the English language.”

Article 18.3(b) provides for UNCITRAL arbitration instead of LCIA arbitration in certain circumstances which did not arise in the present case. Article 18.3(c) provides for the seat of the arbitration as follows:

“The arbitration shall be conducted in Lahore, Pakistan; provided, however, that if the amount in Dispute is greater than five million Dollars ($5,000,000) or the amount of such Dispute together with the amount of all previous Disputes submitted for arbitration pursuant to this Section 18.3 exceeds seven million Dollars ($7,000,000) or any issue in Dispute is (i) the legality, validity or enforceability of this Agreement or any material provision hereof, or (ii) the termination of this Agreement, then either Party may, unless otherwise agreed by the Parties, require that the arbitration be conducted in London, in which case the arbitration shall be conducted in London. Except as awarded by the arbitrator and except as hereinafter provided, each Party shall be responsible for its own costs incurred by it in connection with an arbitration hereunder. Notwithstanding the foregoing, either Party may require that arbitration of any Dispute be conducted in London (or such other location outside Pakistan agreed to by the Parties), in which case the arbitration shall be conducted in London (or such other location outside Pakistan agreed by the parties); provided, however that if the dispute is not of a type that could have been conducted in London (or such other location outside Pakistan agreed by the Parties) in accordance with the provisions of the foregoing sentence, the Party requiring that arbitration be conducted in London (or such other location outside Pakistan agreed by the Parties) shall pay all costs of arbitration as and when incurred by the other Party (including out of pocket costs but excluding any award made by the arbitrator) in excess of the costs that would have been otherwise incurred by such other Party had the arbitration been conducted in Lahore, Pakistan…”

By Article 19.7, the PPA is to be governed by and construed in accordance with the laws of Pakistan.

The dispute referred to arbitration

8 November 2017 was declared to be the COD. On 9 August 2018 SHPL sought an adjustment of the Project Cost (an increase to US$420,128,000) and the tariff (an increase to 11.600 PKR/kWh or 11.0586 US Cents/kWh) as at the COD in accordance with Schedule 1 to the PPA, reflecting various changes to the design of the project over the course of its construction and development.

However, although the PPA provides for determination of the applicable tariff as between SHPL and NTDCL, it is common ground that, as a matter of the law of Pakistan, determination of tariffs for electricity is the exclusive statutory responsibility of the National Electric Power Regulatory Authority (“NEPRA”). In 2008 NEPRA had issued a Mechanism for determination of Tariff for Hydropower Projects. NTDCL forwarded SHPL’s request to NEPRA. On 29 July 2020 NEPRA issued a decision reducing the Project Cost at the COD to US$326,261,000 and the final tariff at the COD to 8.3924 PKR/kWh or 8.3170 US Cents/kWh.

On 31 March 2021 SHPL issued a notice of dispute to NTDCL under Article 18.1 of the PPA, stating that it was entitled to the higher tariff of 11.6600 PKR /kWh under the PPA. Having received no response, on 31 August 2021 SHPL filed a Request for Arbitration under Article 18.3 of the PPA, commencing an arbitration under the rules of the London Court of International Arbitration (“LCIA”) with its seat in London. The London seat was confirmed by NTDCL in its Response to the Request for Arbitration. On 13 June 2022 the LCIA Court appointed Laurent Gouiffès as sole arbitrator (“the Arbitrator”).

The substantive relief claimed by SHPL in the arbitration was for (i) a declaration that pursuant to Schedule 1 of the PPA the Adjusted Project Cost at COD is US$394,561,183; (ii) a declaration that SHPL is entitled pursuant to that Schedule to a COD Tariff of 10.6736 PKR/kWh and (iii) an order that NTDCL pay the balance of the COD Tariff to the extent not compensated by the tariff paid by NTDCL from 8 November 2017 to the date of the Award.

NTDCL’s contention was, essentially, that NEPRA has exclusive authority to determine the tariff as a matter of the law of Pakistan and NEPRA had duly exercised that power, taking into account SHPL’s contentions. SHPL’s claim was, it submitted, an impermissible attempt to circumvent the regulatory position. The arbitrator had no jurisdiction to determine a different tariff to that determined by NEPRA and such a claim was inadmissible. In any event, NTDCL argued that SHPL’s claimed costs were unreasonably inflated.

The Award

In the Award, issued on 7 May 2024, the Arbitrator decided at [474] that the correct interpretation and application of Schedule 1 the PPA produced a total Project Cost at COD of US$378,312,000 and a COD Tariff of 10.3632 PKR/kWh.

As for the role of NEPRA, and his own jurisdiction, the Arbitrator pointed out at [148] that in 2012 NEPRA had approved the PPA, the adjustment provisions in Schedule 1 and the arbitration provisions in Article 18.3. He went on to state as follows:

“148….On a purely contractual level, there is no barrier to an arbitral tribunal opining on provisions set out in a commercial contract which contains an arbitration clause, and issuing decisions as to the interpretation and application of that contract. As set out above, the PPA contains a broad arbitration clause at Section 18.3, which refers any dispute “arising out of or in connection with” the PPA to resolution by arbitration.

149.

It is not in dispute that NEPRA’s decision at COD provides that [SHPL] is “allowed to charge […] tariff of Rupees 8.3924/kWh”, and that this was published in the Gazette on 2 August 2021. However, the fact that this tariff was published in the Gazette does not necessarily mean that it arose from a correct application of the contract. The question before the Sole Arbitrator is one of contractual interpretation, and he is not prevented by public policy from opining on whether this published tariff arose from a correct interpretation of the PPA or not.

150.

In any event, notwithstanding [NTDCL’s] public-facing role, it is still a commercial entity which has voluntarily entered into a commercial contract and cannot escape the implications of the terms it has agreed to. If that means that money is owed to [SHPL], then that sum is due as a matter of contract….. There is, in any event, no legal or regulatory barrier to an order that [SHPL] is entitled to what it calls the “balance” for the past, if it is determined that anything is due as a matter of contract.

…..

152.

With respect to [SHPL’s] requested relief for the past, however, a declaration as to the theoretical consequences of the application of the PPA would serve a practical purpose. If it is established that the application of the PPA would, in theory, result in a different tariff than that arrived at by NEPRA, it is within the powers of the Sole Arbitrator to order payment of the delta between the amount which should have been paid and what has actually been paid to date, since that is a purely contractual matter and there is nothing in Pakistani law which would prevent such an order. The fact that such an order may have indirect implications for consumers is, as stated above, a natural and unavoidable consequence of [NTDCL’s] role, common to all entities that are funded by the public, and is not a good enough reason not to hold the Parties to the contractual terms they agreed to.”

The Arbitrator returned to the question of the interrelationship between the role of NEPRA and the contractual provisions of the PPA later in the Award, recognising that it was for NEPRA to determine the actual tariff to be paid as a matter of the law of Pakistan, but that could be proven to be contractually wrong and so declared by the Arbitrator, such that the difference would be payable to SHPL as a matter of contract:

“377.

The Sole Arbitrator agrees with [NTDCL] that NEPRA’s determination of 29 July 2020 is now part of Pakistani law, and that this is a reality regardless of whether any such determination was required by the PPA or by law. The fact that NEPRA may have incorrectly applied the contract is one thing: the fact remains that this tariff, even if can be proven to be contractually wrong, has been published in the Gazette. Accordingly, any declaration from the Sole Arbitrator on the tariff resulting from a correct application of Schedule 1 could not replace the tariff set by NEPRA’s going forward. The most that such a declaration could achieve with respect to the current and future tariff would be to identify a misalignment between the law and the contract on the basis of which the Parties can work together with the relevant authorities to remedy the misalignment going forward.

378.

With respect to the past, however, a declaration as to the consequences of the application of the PPA would serve a practical purpose for [SHPL], as it would give rise to a contractual claim for the delta between the amount which should have been paid and what has actually been paid to date. Notwithstanding [NTDCL’s] public-facing role, it is still a commercial entity which has voluntarily entered into a commercial contract and cannot escape the implications of the terms it has agreed to. If that means that money is owed to [SHPL], then that sum is due as a matter of contract.…

….

380.

Unlike determining the tariff, then, there is no legal or regulatory barrier to an order that [SHPL] is entitled to what it calls the “balance” for the past, if it is determined that anything is due as a matter of contract.”

The dispositive section of the Award accordingly provided as follows:

“514.

For the reasons set out above, the Sole Arbitrator:

(a)

Declares that he has jurisdiction to hear [SHPL’s] claims;

(b)

Declares that [SHPL’s] claims are admissible;

(c)

Declares that the correct application of Schedule 1 of the PPA results in a final Project Cost of 378,312,000 USD and a COD Tariff of 10.3632 PKR/kWh;

(d)

Orders [NTDCL] to pay [SHPL] the difference between what it has actually paid since 8 November 2017 and what it would have paid from that date had the tariff been set at 10.3632 PKR/kWh, less what it has actually paid, this difference to be calculated as at the date of payment;

(e)

Orders [NTDCL] to pay simple interest at the legal judgment rate on the amount set out at subsection (d) above, accruing from the 1 July 2024 up until the date payment is made;

(f)

Orders [NTDCL] to pay [SHPL] interest in respect of the invoices actually issued which are late or outstanding, at the Delayed Payment Rate set out in the PPA;

(g)

Orders [NTDCL] to pay [SHPL] the sum of 247,688.49 GBP in respect of the arbitration costs, plus simple interest at the legal judgment rate accruing from 1 July 2024 until the date payment is made;

(h)

Orders [NTDCL] to pay [SHPL] the sum of 2,172,768.28 PKR and 1,867,251.5 USD in respect of [SHPL’s] legal fees, plus simple interest at the legal judgment rate, accruing from 1 July 2024 until the date of payment; and

(i)

Dismisses and denies all other claims and requests for relief.”

On 13 June 2024 the Arbitrator issued a Memorandum of Correction, deleting the words “less what it has actually paid” in [514(d)] of the Award, accepting SHPL’s submission (agreed by NTDCL) that those words were included in error and would, if taken literally, result in double deduction of the amount paid.

The Lahore proceedings

On or about 7 August 2024 NTDCL issued an application in the Lahore High Court. In paragraph 1 the application was described as being under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 for “inter alia, partial recognition and enforcement of an LCIA Award dated 07.05.24”. The paragraph went on to state that NTDCL primarily sought enforcement and recognition of declarations of the Arbitrator “on certain central and foundational issues in dispute between the Parties, in particular Paragraph 514(i) of the Award”. This referred to the catch-all provision at the end of the dispositive section of the Award stating that the Arbitrator “Dismisses and denies all other claims and requests for relief”.

After setting out the background to the matter, at paragraph 30 the applicant referred again to paragraph 514(i) of the Award, stating that the Arbitrator “broadly upheld the positions advanced by” NTDCL and had made “salient findings and declarations on the central and foundational issues between the Parties”. NTDCL then identified the Arbitrator’s recognitions of NEPRA’s exclusive jurisdiction on tariffs under the law of Pakistan, including on electricity imported from the AJK.

NTDCL then asserted as follows:

“32.

That the natural and necessary consequence of the foregoing findings of the Sole Arbitrator, particularly in relation to tariff, was that the Sole Arbitrator did not have jurisdiction in relation to the Subject Matter.

33.

That however, the Sole Arbitrator surprisingly proceeded to ascertain contractual entitlement in relation to adjustment of project cost and tariff at COD under the PPA, and made the following salient findings (“Contractual Assessment): [setting out [514 (a)-(d) of the Award].”

NTDCL concluded at paragraph 36 that the finding as to contractual entitlement would usurp the exclusive jurisdiction of NEPRA and is thus in violation of Pakistani law. It was asserted that the Award was not enforceable by reason of Articles V(2)(a) and (b) and V(1)(a) and (c) of the New York Convention.

It was further asserted in paragraph 38 that SHPL had sought to raise monthly invoices purportedly based on the contractual tariff set by the Arbitrator, contending that it was critically important that the Award be recognised and enforced so that SHPL may be restrained from acting in violation of the PPA and the law of Pakistan.

As for relief, NTDCL prayed that:

“(a)

this Court may kindly pass a judgment and order to recognize and enforce the Award in terms of Para 30 hereof, and in particular Para 514(i) of the Award, by holding that:

(i)

only NEPRA has the power to determine, approve or alter tariff for electric power services under the laws of Pakistan, including in respect of import of electricity generated by a project located in AJK and post-COD indexations, and COD Stage Tariff, being part of Pakistani law, applies to the Project unless altered by NEPRA; and

(ii)

consequently, the assumption of jurisdiction by the Sole Arbitrator vis-á-vis Contractual Assessment of the project cost and tariff at COD is a nullity in the eyes of the law, and accordingly, Paras 514(a) to 514(h) are neither recognizable nor enforceable under the 2011 Act.

(b)

subject to (a) above and in the alternative, this Court may kindly pass a judgment and order by declaring that in terms of Para 35(ii) above, no amounts are payable by [NTDCL] to [SHPL] pursuant to Para 514(d) of the Award.

(c)

[SHPL] be permanently restrained from taking any action, including issuance and processing of invoices under the PPA and commencement of any proceedings directly or indirectly, recognizing or enforcing a tariff that is different in any way to the COD Stage Tariff, as determined by NEPRA for the Project; or in the alternative, contrary to the express findings of the Award as set out in Para 35(ii) of this Application.

Any other relief deem (sic) fit and appropriate by this Honourable Court may also be granted in favour of [NTDCL].”

On 7 August 2024, on the ex parte application of NTDCL, the Lahore High Court made an interim order suspending the operation of a demand notice sent by SHPL to NTDCL for sums in excess of the COD stage tariff determined by NEPRA.

These proceedings

On 23 September 2024 SHPL issued an arbitration claim form in the Commercial Court seeking a final anti-suit injunction against NTDCL. At the same time it issued an application notice seeking interim relief pending the final hearing of its claim.

The application came before the Judge on 29 November 2024. The Judge delivered an ex tempore judgment at the conclusion of the hearing.

Before summarising the Judge’s reasoning, it is appropriate to set out the key provisions of the New York Convention, the Judge understandably not considering it necessary to do so in her short judgment in the circumstances in which it was delivered.

Article I of the Convention provides:

“1.

This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.”

Article III sets out the obligation to recognise and enforce foreign arbitral awards on terms equivalent to those applying to domestic arbitral awards:

“Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”

Article V is the key provision for present purposes, setting out the grounds on which recognition and enforcement of a foreign arbitral award may be refused:

“1.

Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(a)

The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b)

The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

(c)

The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or

(d)

The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e)

The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2.

Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

(a)

The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b)

The recognition or enforcement of the award would be contrary to the public policy of that country.”

Article VI provides for the decision on recognition or enforcement to be adjourned if an application for the setting aside or suspension of the award has been made to a competent authority of the country in which, or under the law of which, that award was made. It further provides that, on the application of the party claiming enforcement, an order may be made that the other party give suitable security.

The Judge considered at [4] that there were three critical questions to be resolved: first, the allocation of jurisdiction under the New York Convention, second, what in substance the application in Pakistan is seeking to achieve and third, whether it is in any event appropriate for the English courts to intervene by way of anti-suit injunction.

On the first question, the Judge started with the following observation:

“6.

…the parties to the New York Convention have necessarily agreed that an award made in one contracting state can, and indeed must, be recognised and enforced in any other contracting state, and that those other contracting states have undertaken a binding obligation to recognise and enforce awards made in accordance with the Convention when asked to do so. It seems to me that it must therefore be assumed that the Court which is being asked to recognise or enforce an award, whether in whole or in part, will comply with its international obligations and do so only in accordance with the provisions of the Convention. The English courts have no policing role in this respect.”

At [7] the Judge stated that a losing party was not bound to bring any jurisdictional or other challenge in the court of the seat, but was entitled to wait until the winning party seeks to enforce or recognise the award, and then resist on the grounds set out in Article V of the New York Convention, a substantive right under the Convention.

The Judge then rejected SHPL’s argument that the losing party could not make a challenge pre-emptively, stating as follows:

“8.

…As I have said, it seems to me that there is a substantive right under the Convention for awards not to be recognised or enforced on the grounds set out in Article V. That being the case, I see no reason of principle why that right cannot be asserted pre-emptively in a particular jurisdiction. This may not be commonly done but there may be any number of reasons why a respondent might want to seek a declaration of non-recognition or non-enforceability, for example on public policy grounds, even if the winning party was showing no immediate signs of seeking to bring recognition or enforcement proceedings of its own. There is nothing in the wording of the Convention itself to limit the right to seek recognition and enforcement to one party or another and, of course, it is not possible to analyse the situation simply in terms of a winning or a losing party because both parties might be winners on some issues and losers on others.

9.

None of the authorities referred to by [SHPL] preclude the possibility of a pre-emptive application. Indeed in none of them, so far as I can see, does the question arise. And I can see nothing to suggest as a matter of principle that if there is a right to challenge recognition or enforcement of an award on certain grounds, such as public policy or non- arbitrability, the party wishing to make such a challenge has to wait until such time as recognition or enforcement is sought by the other party, when it may be suffering adverse consequences immediately. I therefore accept that a pre-emptive application is permissible and is not improper in and of itself.”

At [10] the Judge accepted that it is in principle permissible to seek recognition and/or enforcement of part of an award and noted that SHPL did not dispute this.

The Judge then turned to the second question, noting that SHPL contended that the Lahore proceedings had nothing whatsoever to do with recognition and enforcement but were rather a root and branch attack on the award. The Judge rejected that contention in the following terms:

“12.

Turning then to the substance of the application, [SHPL] argued strenuously that in truth the application had nothing whatsoever to do with recognition or enforcement but was rather a root and branch attack on the award seeking to undermine its reasoning. However, it could be said that any party who resists recognition or enforcement on grounds that the arbitrator had no jurisdiction or because the award was contrary to public policy, or raised non-arbitrable issues, is similarly trying to undermine the award. That, it seems to me, is simply the necessary consequence of permitting challenges to be made on the grounds set out in Article V. But in any event, looking at paragraph 377 of the award, which is the lynchpin of [NTDCL’s] application in Pakistan, it seems to me that this is a determination by the arbitrator of which recognition can properly and legitimately be sought by [NTDCL].

13.

I can certainly see that there is an argument to be had as to the extent to which recognition of paragraph 377 necessarily entails that paragraph 514(d), in particular, is not enforceable. There are arguments both ways. But it is not for me, at least not on an interlocutory application, to determine the matter unless it is so obviously clear one way or the other. But I do not find that to be the case here. What is true, it seems to me, is that [NTDCL] is not seeking, in fact, to undermine the award in any truly fundamental way. It remains open to [SHPL] to enforce the award in any other jurisdiction they choose. The argument of the Respondents here is that the determination in paragraph 377 has the consequence that other determinations made by the arbitrator are either contrary to Pakistani law and public policy, or were determinations on issues which were, in fact, non-arbitrable. Either way, they say, if they are right about that, then they cannot be recognised and enforced. As I say [NTDCL] may be right or it may be wrong about that, but that is an argument which to my mind should be played out before the Lahore court, and it is not for the English court to intervene.”

On the third question, that of discretion and comity, at [14] the Judge considered that in the circumstances it would be wholly wrong for the English court to arrogate to itself the power to determine what issues should and should not be left to the Pakistani courts. The Judge considered that comity demands that the English court assumes that the Pakistani courts will abide by their international obligations and will determine [NTDCL’s] application there on its merits in accordance with the Convention.

The Judge finally noted that she was also satisfied that this is not a case of vexatious or oppressive behaviour by NTDCL.

The supervisory jurisdiction

The starting point is that, as established in C v D [2007] EWCA Civ 1282, [2008] 1 All ER (Comm) 1001, the parties’ agreement to the seat of an arbitration constitutes an agreement as to the “curial law” of the arbitration and is analogous to an exclusive jurisdiction clause in favour of the courts of the jurisdiction of the seat, the “supervisory” jurisdiction. Where that curial law is the law of England and Wales, the parties thereby incorporate the framework of the Arbitration Act 1996 (“the 1996 Act”). This necessarily means that any challenges to the award can be only those permitted by the 1996 Act: see Longmore LJ at [17], where he concluded that “a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award”. Sir Anthony Clarke MR and Jacob LJ agreed.

In C v D the defendant, an insurer incorporated in the United States insuring another US registered corporation on the Bermuda Form, argued that as the policy was governed by New York law (but provided for arbitration in London), it was also entitled to challenge the award against it in New York. The Court of Appeal rejected that contention for the reasons set out above and upheld an anti-suit injunction granted by Cooke J against the insurer, Longmore LJ stating at [16] that:

“….it could not be supposed that the aggrieved party could complain in one jurisdiction and the satisfied party be entitled to ask the other jurisdiction to declare its satisfaction with the award. There would be a serious risk of parties rushing to get the first judgment or of conflicting decisions which the parties cannot have contemplated.”

In Atlas Power Ltd and others v National Transmission and Despatch Company Ltd [2018] EWHC 1052 (Comm), [2019] 1 All ER (Comm) 931,NTDCL mounted a similar argument in seeking to challenge an LCIA award in proceedings in Lahore following a London-seated arbitration pursuant to Article 18.3 of a power purchase agreement with different independent power producers (“IPPs”). Article 18.3 in that case was identical to the equivalent provision in the PPA in the present case. The IPPs applied to the Commercial Court for an anti-suit injunction, resisted by NTDCL on the grounds that, although England and Wales was the primary supervisory jurisdiction, the courts of Pakistan had concurrent jurisdiction.

At [38] to [41] I rejected NTDCL’s argument, applying the reasoning in C v D that the parties’ choice of a London seat was analogous to an exclusive jurisdiction clause in favour of the place so designated. I held at [39] that that was the case even if the law of Pakistan was the governing law of the arbitration and such law provided a right to challenge any award [39], following Longmore LJ’s conclusion in relation to the equivalent argument in relation to New York law in C v D at [20] that, even if that contention was correct:

“… it would not qualify as an “agreement to the contrary” in the 1996 Act. Still less would it entitle the defendant to mount a challenge to the award in a country other than the seat of the arbitration.”

Enforcing the exclusivity of the supervisory jurisdiction

It is well established that where court proceedings are brought in breach of an agreement to arbitrate the court will generally grant an anti-suit injunction to prevent any further breach unless there are strong reasons not to do so. That was recently re-affirmed by the Supreme Court in UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30, [2024] 3 WLR 3 659, Lord Leggatt stating at [71] that:

“…if the parties had chosen an English seat of arbitration, the English court would not hesitate to enforce the parties’ bargain by issuing an injunction to restrain a party over whom it has personal jurisdiction from commencing or continuing foreign proceedings in breach of the arbitration agreement. That has been clear at least since the decision of the Court of Appeal in Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep 87, where Millett LJ said, at p 96, that “the time has come to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution”. He observed that, while such an approach has much to commend it where an injunction is sought on the ground of forum non conveniens, there is no good reason for diffidence in granting an injunction to restrain foreign proceedings brought in breach of an arbitration agreement “on the clear and simple ground that the defendant has promised not to bring them”. As Millett LJ further explained:

“The justification for the grant of the injunction ... is that without it the [applicant] will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy. The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.”

This approach has been endorsed and repeatedly followed in later cases, including by this court in Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, [2020] 1 WLR 4117 at paras 180-184…”

That approach applies with even more force to court proceedings brought to challenge or invalidate an arbitration award in a foreign jurisdiction when England and Wales is, as the jurisdiction of the seat of the arbitration, the supervisory (and therefore exclusive) jurisdiction for such challenges. In granting the anti-suit injunction in Atlas I cited the following passage from the judgment of Cooke J in C v D [2007] EWHC 1541 (Comm), [2007] 2 Lloyd’s Rep 367, from which the Court of Appeal did not dissent in upholding the anti-suit injunction in that case:

“55…Time and again the English courts have granted an injunction to restrain a clear breach of an exclusive jurisdiction agreement or a breach of an arbitration agreement where the rights of the parties are clear. In my judgment the position is even stronger where an award has already been issued and the breach of the agreement to London arbitration consists of an unlawful attempt to invalidate the award.

56.

It matters not at all whether the US courts would or would not ultimately assume jurisdiction and uphold or vacate the award or whether the US Court in question, under its own conflicts of laws rules, is bound to exercise a supervisory jurisdiction….no questions of comity arise because the mandatory exercise of jurisdiction by a foreign court, in such circumstances, only arises by reason of the breach of contract on the part of the party invoking that jurisdiction. An injunction preventing suit in that court is thus not a breach of international comity preventing a court from exercising what it regards as a mandatory jurisdiction but merely restrains a party to a contract from doing something which it has promised not to do.”

Challenges to an award under the New York Convention

The New York Convention is to be interpreted in accordance with the principles set out in the Vienna Convention on the Law of Treaties 1969 (“the VCLT”), reflecting customary international law.

Giving the terms of the New York Convention their “ordinary meaning…in the light of [the Convention’s] object and purpose” (as required by Article 31(1) of the VCLT), it is clear that the Convention is solely concerned with recognition and enforcement in a secondary jurisdiction (which is a Contracting State) of awards made in the territory of another Contracting State, the latter being the primary jurisdiction. Each of Articles I and III to VII deals solely with the nature and extent of the obligation of the secondary jurisdiction to recognise and enforce such awards (Article II referring to the recognition of written arbitration agreements more generally). The Convention neither imposes any other obligation nor confers any other jurisdiction in respect of foreign arbitral awards. In particular, the various matters set out in Article V(1), which include proving that the underlying arbitration agreement is not valid under its governing law (V(1)(a)) or that the award deals with matters beyond the scope of the arbitration agreement (V(1)(c)), are solely bases on which “[r]ecognition and enforcement of the award may be refused, at the request of the party against whom it is invoked”. It was not suggested that any other matters forming part of the context of the Convention are to be taken into account (under Article 31 of the VCLT) or any supplemental means of interpretation (under Article 32 of the VCLT) affect that plain reading of its text.

It is apparent, therefore, that “challenges” to an award under the New York Convention are a shield against applications for the recognition and/or enforcement of an award, not a sword by which the award may be attacked pre-emptively.

This is reflected in the manner to which the New York Convention is given effect in this jurisdiction under the 1996 Act. Section 101(1) provides that a foreign New York Convention award shall be recognised in England and Wales or Northern Ireland and section 101(2) provides that such an award may, by leave of the court, be enforced in the same manner as a judgment of the court to the same effect.

Section 103(1) provides that recognition or enforcement of a New York Convention award shall not be refused except “in the following cases”. Then section 103(2) follows Article V of the Convention by providing that recognition or enforcement of the award may be refused if the person against whom it is invoked proves one of six defences, reflecting certain of those set out in Article V(1) of the Convention. The remainder of the defences in Article V are covered in further powers to refuse recognition or enforcement in sections 103(3) and (4).

It is not open to question that the defences set out in section 103 are solely available by way of opposition to an application to recognise and/or enforce a New York Convention Award under section 101 of the 1996 Act. Free-standing challenges to an award can only be made under section 67 (substantive jurisdiction), section 68 (serious irregularity) or section 69 (appeal on a point of law) of the 1996 Act, but those provisions apply only to arbitrations with their seat in this jurisdiction (see section 2(1) of the 1996 Act), and therefore not to foreign New York Convention awards. Consistently with the interpretation of the Convention referred to above, the English courts have no jurisdiction to entertain a challenge to a foreign New York Convention award, otherwise than by way of objection to an application to recognise or enforce.

The above analysis is also apparent from and supported by the following dictum of Lord Collins of Mapesbury JSC in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2009] UKSC 46, [2011] 1 AC 763 at [98]:

“Consequently, in an international commercial arbitration a party which objects to the jurisdiction of the tribunal has two options. It can challenge the tribunal’s jurisdiction in the courts of the arbitral seat; and it can resist enforcement in the court before which the award is brought for recognition and enforcement. These two options are not mutually exclusive, although in some cases a determination by the court of the seat may give rise to an issue estoppel or other preclusive effect in the court in which enforcement is sought. The fact that jurisdiction can no longer be challenged in the courts of the seat does not preclude consideration of the tribunal’s jurisdiction by the enforcing court: see, e g, Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2007] QB 886, para 104 and Paklito Investment Ltd v Klockner East Asia Ltd [1993] 2 HKLR 39, 48, per Kaplan J.”

At [103] Lord Collins rejected the suggestion that only the supervisory court could carry out a re-hearing of the issue of the existence of a valid arbitration agreement. But it is clear that the right to raise that issue in the secondary jurisdiction is where a party is “seeking to resist an award…”.

Partial recognition and enforcement of an award under the New York Convention

The New York Convention recognises in Article V(1)(c) that an award may be recognised and enforced in part if other parts are not within the scope of the submission to arbitration and can be separated. But it has been recognised in this jurisdiction that partial recognition is permissible more generally, both as a matter of the interpretation of the Convention and of the 1996 Act. In IPCO (Nigeria) Ltd v Nigerian National Petroleum Corp [2008] EWCA Civ 1157, [2009] 1 All ER (Comm) 611 Tuckey LJ analysed the issue as follows:

“[14] So do the Convention and the 1996 Act prevent part enforcement of an award in a case such as this…? I start by thinking this is unlikely because the purpose of the Convention is to ensure the effective and speedy enforcement of international arbitration awards. An all or nothing approach to the enforcement of an award is inconsistent with this purpose and unnecessarily technical. I can see no objection in principle to enforcement of part of an award provided the part to be enforced can be ascertained from the face of the award and judgment can be given in the same terms as those in the award.

[15] The purpose behind the Convention is reflected in the language of the 1996 Act. Enforcement ‘shall not be refused’ except in the limited circumstances listed in s 103(2) where the court is not required to refuse but ‘may’ do so. Under sub-s (5) the court may adjourn but only if it considers it ‘proper’ to do so. The enforcing court’s role is not therefore entirely passive or mechanistic. The mere fact that a challenge has been made to the validity of an award in the home court does not prevent the enforcing court from enforcing the award if it considers the award to be manifestly valid…..

[16] …. There is nothing which expressly prevents part enforcement in the language of the Convention or the statute. At first sight s 103(4) supports [NNPC’s] argument. It does allow for part enforcement where the tribunal has strayed beyond the limits of its jurisdiction. But this provision was necessary to make it clear that such an error does not give grounds for saying that no part of the award should be enforced. No such provision is required for the other cases in s 103(2) which contemplate all or nothing challenges to the whole of the award.

[17] The statute refers of course to ‘an’ or ‘the’ ‘award’. Does this mean the whole award and nothing but the whole award…? I do not think so. Such a construction would have absurd commercial consequences and cannot have been intended…. IPCO gave the example of an award for £100m and a challenge only to a £5m part of it. On NNPC’s case the court could not enforce the £95m part of the award until after the challenge had been determined. This would encourage unscrupulous parties to mount minor challenges to awards so as to frustrate their speedy and effective enforcement. [NNPC’s] answer to this example was to say that in such a case the court could enforce the whole award. But if the challenge was a good one that would not be a sensible or fair solution either. ..

[18] In these circumstances I think that the word ‘award’ in this part of the 1996 Act should be construed to mean the award or part of it. To be enforceable it must be possible to enter judgment ‘in terms of the award’ but in this case there is no difficulty about that as the exact correspondence between the award and the judgment shows. Put less formally if one were to ask whether enforcement of part of an award in accordance with its terms was enforcement of the award the answer would be ‘of course’.”

I agree

I also agree.