July 18, 2016

Arbitration - National Iranian Oil Co v Crescent Petroleum (High Court)

Judge holds that arbitration award challenge could not be discontinued.

The claimants sought to challenge an arbitration award on liability in favour of the defendants (the arbitration has continued in order to decide quantum). The claimants then sought to discontinue the challenge proceedings unilaterally. CPR r38.4 provides that where a claimant seeks to unilaterally discontinue its claim, the defendant can apply to set aside the Notice of Discontinuance (although no guidance as to the circumstances when a court will set aside a Notice of Discontinuance is given in the rules). The letter which enclosed the Notice of Discontinuance in this case advised that the decision to discontinue should not be interpreted as an admission with regard to the claimants' grounds for challenging the award.

As a result, the defendants argued that this was a way "of avoiding the consequences of no longer asking the supervisory court to deal with the allegations made, and seeking to preserve them to be heard elsewhere in a less appropriate court".

In Sheltam v Mirambo Holdings (2008), the party which sought to discontinue its challenge of an arbitration award (because it had run out of funds) had offered an undertaking not to challenge recognition and enforcement of the award by using arguments raised in its section 67 application. That undertaking was accepted by the court. A similar undertaking by the claimants in this case was not accepted, because of the way it was worded. Burton J commented that "What might have been capable of consideration was an undertaking in no circumstances whatever to rely on these remaining grounds in any forum". However, since such an undertaking was not proffered (and even if it had, a risk of an attempt to resist enforcement in a NY Convention court remained, since the only sanction would be contempt proceedings), he concluded that the appropriate approach was to set aside the Notice of Discontinuance and to proceed to hear the challenge application (which he went on to dismiss).