English Commercial High Court (QB): Can the courts of Pakistan have concurrent supervisory jurisdiction if the seat of the Arbitration is England?

Sally Roberts court case

 

In IPP’s v National Transmission and Despatch Company Limited [2018] EWHC 1052 (Comm), the English Commercial High Court while dealing with the question of whether or not the courts of Pakistan will have concurrent supervisory jurisdiction if the seat of the Arbitration is England granted a final anti-suit injunction restraining the Pakistani entity on a permanent basis from challenging the award in proceedings in Lahore, Pakistan, or anywhere other than England and Wales. It further held the seat of the Arbitration is London and the courts of Pakistan do not have concurrent supervisory jurisdiction. The detailed analysis is given below:

Factual Matrix

The IPPs are companies registered in Pakistan, each in business as an independent power producer, generating and supplying energy solely to NTDC pursuant to a power purchasing agreement (PPA). NTDC, a company registered in Pakistan and owned by the Government of Pakistan, is a National Grid Company licensed by the National Electrical Power Regulatory Authority of Pakistan.

Each of the nine PPAs is expressly governed by the law of Pakistan and contains a provision for the Resolution of Disputes, providing for mutual discussions, expert determination and for arbitration.

Arbitration Clause

The arbitration clause is reproduced below:

(a) Any Dispute arising out of or in connection with this Agreement that has not been resolved [under 18.1 or 18.2] shall be settled by arbitration in accordance with 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.

….

(c) the arbitration shall be conducted in Lahore, Pakistan; provided, however, that if the amount in Dispute is greater than 4 million Dollars ($4,000,000/-) or the amount of such Dispute together with the amount of all previous Disputes submitted for arbitration pursuant to this Section 18.3 exceeds six million Dollars ($6,000,000/-) or an 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.…Notwithstanding the foregoing, either Party may require that arbitration of any Dispute be conducted in London (or such other location outside Pakistan as agreed by the Parties), in which case the arbitration shall be conducted in London (or such other location outside Pakistan as 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 cost that would have been otherwise incurred by such other Party had the arbitration be conducted in Lahore, Pakistan… ”

A dispute arose as to sums owed by NTDC to the IPPs. The IPPs initiated an expert determination process and a retired Judge of the Supreme Court of Pakistan, was appointed as the expert. The expert determination process continued for a period of two years. While that process was still continuing, each of the IPPs filed a request for arbitration with the LCIA. In each case the LCIA, with the agreement of the parties, suspended the arbitration pending the outcome of the expert determination process.

The expert determination process concluded with a finding that NTDC was liable to pay specified amounts to each of the IPPs on the basis that those amounts had been unlawfully withheld (the Determination). The Government of Pakistan, through its Private Power and Infrastructure Board (“the PPIB”), filed a suit in Lahore, seeking a declaration that the Determination was null, void and illegal. The same day the Lahore Civil Court granted an injunction restraining the IPPs and NTDC from “acting upon, utilizing and claiming any rights or interests on the basis of the impugned expert determination till further order” (the 2015 Interim Order)

IPPs’ solicitors wrote to the LCIA to remove the stay from arbitration and thereafter, the LCIA confirmed that the stays on the arbitrations had been lifted and directed NTDC to serve Responses to the Requests for Arbitration. Meanwhile the Government of Pakistan filed a contempt application before the Lahore Civil Court, contending that the IPPs were in breach of the 2015 Interim Order by seeking to resume the arbitrations. But still NTDC filed its Responses in the arbitrations.

Applicable Legal Principles

Article 16(1) of the LCIA Rules 1998

“16.1 The parties may agree in writing the seat (or legal place) of their arbitration. Failing such a choice, the seat of the arbitration shall be London, unless and until the LCIA Court determines, in view of the circumstances, and after having given the parties an opportunity to make written comments, that another seat is more appropriate.”

Section 3 of the English Arbitration Act (the Act) provides:

“In this Part “the seat of the arbitration” means the juridical seat of the arbitration designated -”

(a) by the parties to the arbitration agreement, or

(b) by any arbitral or other institution or person vested by the parties with powers in that regard, or

(c) by the arbitral tribunal if so authorised by the parties,

or determined, in the absence of any such designation, having regard to the parties’ agreement and all the relevant circumstances.”

Contentions of Parties

The IPPs contend that the seat of the arbitration is London and that therefore the courts of England and Wales have exclusive supervisory jurisdiction.

IPPs further contended that they had been entitled to select London as the seat of the arbitrations under the terms of the PPAs, but also pointing out that, if NTDC’s interpretation of arbitration clause was correct, the parties had not agreed any seat. If that was the case, Article 16(1) of the LCIA Rules 1998 (the 1998 Rules) would determine the seat.

NTDC’s contended that (i) the courts of Pakistan have at least concurrent jurisdiction, even if the seat is London, alternatively (ii) if there can be only one supervisory jurisdiction, being exclusively that of the courts of the jurisdiction where the seat of the arbitration is located, the seat must therefore be Lahore, Pakistan.

Lahore Civil Court Proceedings

On the application of the Government of Pakistan in further proceedings, the Lahore Civil Court made an order restraining the IPPs and NTDC from participating in the Arbitration till further order (the 2016 Interim Order). Later, on the application of the IPPs, the District Court in Lahore suspended the effect of the 2016 Interim Order. On the PPIB’s application, the operation of the 2015 Interim Order was extended.

The Lahore Civil Court (a) granted a temporary injunction against the IPPs and NTDC and confirmed the 2015 Interim Order, but also (b) granted an order recording that the IPPs and NTDC could resolve their dispute through any of the modes mentioned in Article 18 of the PPAs other than by impleading the Government of Pakistan or by relying on the Determination.

Arbitration Award

The LCIA notified the parties that the LCIA Court had determined, pursuant to article 16.1, that London should be the seat of the arbitrations. Two days later the LCIA informed the parties that it had been appointed the sole arbitrator for each of the arbitrations (the Arbitrator). The Arbitrator made an order, by consent, consolidating the nine arbitrations into one arbitration.

The Arbitrator issued a ruling on NTDC’s stay application, in which he confirmed that the seat of the Arbitration was London. NTDC’s application for a stay was refused. After hearing further from the parties, the Arbitrator directed the hearing and determination of preliminary issues.

The Partial Final Award was issued where the Arbitrator ruled that section 18.3 of the PPAs granted the parties a conditional option to vary the seat of an arbitration and to fix it somewhere other than Lahore. That conditional option was exercised by the IPPs. But, in any event, the LCIA Court had the right to determine the seat and had done so in a manner that was final and binding. NTDC commenced proceedings in English Commercial High Court against this Partial Award.

Analysis

The challenge to the award was made under Section 69 of Act on the ground that the Arbitrator’s decision to proceed whilst NTDC was unable to participate in the arbitration was a serious procedural irregularity which had caused it substantial injustice.

The Court cited Cooke J in C v D [2007] 2 Lloyd’s Rep 367, where he explained (§24) that section 2(1) of the Act provides that, where the seat of an arbitration is in England and Wales, the provisions of Part 1 of the 1996 Act apply. By virtue of section 4(1) and Schedule 1, certain provisions in that Part are mandatory, including the provisions in sections 67 to 68 relating to challenging an award on the basis of jurisdiction or serious irregularity. The seat therefore determines the “curial law” of the arbitration (which will be English law, and in particular the mandatory provisions of the 1996 Act, in the case of a seat in England or Wales). As Cooke J held at §42:

“.. it does not matter whether English law is or is not the governing law of the agreement to arbitrate. It is the curial law which governs the question of the validity of the award and challenges to it.”

The Court of Appeal in C v D approved Cooke J’s reasoning. The Court of Appeal did not suggest that there was merely a presumption that the parties, by choosing London as the seat, intended that proceedings on the award should be only those permitted by English law. On the contrary, the Court of Appeal made it clear that such a result necessarily followed.

The Court further held that in light of Section 3 of the Act, the seat has indeed been designated by one or more of the above routes, each of those designations being London. The Act provides (in section 30) for an arbitral tribunal to rule on its own substantive jurisdiction, including whether there is a valid arbitration agreement and whether the tribunal is properly constituted. An application challenging jurisdiction or the seat plainly does not amount to an acceptance that there is jurisdiction nor that there has been a valid designation or determination of the seat.

Conclusions

Court held that the seat of the Arbitration is London and that NTDC is wrong in contending that even if the seat of the Arbitration is England, the courts of Pakistan have concurrent supervisory jurisdiction.

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