Shell Egypt West Manzala GmbH & Anor v Dana Gas Egypt Ltd [2009] EWHC 2097 (Comm)

[2009] EWHC 2097 (Comm)

Case No 2009 Folio 462

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 7 th August 2009

Before

MRS JUSTICE GLOSTER, DBE

Between

(1) Shell Egypt West Manzala GmbHClaimants

Dana Gas Egypt LimitedDefendant

IN THE MATTER OF AN ARBITRATION CLAIM BETWEEN

Between

(1) Shell Egypt West Manzala GmbHClaimants

Dana Gas Egypt LimitedDefendant

John McCaughran Esq, QC (instructed by Herbert Smith LLP) for Claimant

Robert Hildyard Esq, QC and Richard Hill Esq

(instructed by Ashurst LLP) for Defendant

Hearing Hearing dates: 24 th July 2009

Judgment

[1]This is my judgment in relation to two applications before the court in this matter: i) an application by the claimants (together “Shell”) for permission to appeal, pursuant to section 69 of the Arbitration Act 1996 (“the 1996 Act”), on points of law arising out of a Final Partial Award dated 11 March 2009 (“the Award”) in the matter of an arbitration between Shell and the defendant to the arbitration claim, Dana Gas Egypt Limited (formerly Centurion Petroleum Corporation) (“Centurion”), under the UNCITRAL Rules (“the appeal application”); and ii) an application by Centurion for an order that this court has no jurisdiction to hear Shell’s application for permission to appeal or any substantive appeal, under section 69 of the 1996 Act (“the jurisdiction application”).

Background

[2]The Award was made by an UNCITRAL arbitration tribunal (“the Tribunal”), consisting of Ali Malek QC (Chairman), Michael Brindle QC and Stephen York, in Centurion’s favour.

[3]The dispute arose in connection with a Farm-In and LNG Cooperation Agreement dated 17 March 2006 between Shell and Centurion in relation to two concessions for crude oil and gas exploration in the Nile Delta in Egypt (the “FIA” and the “Concessions”). Under the FIA Shell was to acquire a 50% interest in the Concessions.

[4]The FIA was subject to a mandatory arbitration provision at clause 14. That provided:

“The construction, validity and performance of this Agreement shall be governed by English Law. Any disputes arising out of or in connection with this Agreement or the application, implementation, validity, breach or termination thereof shall be settled by arbitration in London, under the UNCITRAL Arbitration Rules. The number of arbitrators shall be three. The appointing authority shall be the London Court of International Arbitration. The arbitration shall be conducted in the English language. The arbitrators shall not award consequential, punitive or other similar damages in connection with the decision of any dispute hereunder. 14.3 The dispute shall be submitted to the arbitrators in such manner as they shall deem appropriate and the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties, and the judgment upon such decision may be entered in any court of a country having jurisdiction.”

[emphasis added]

[5]On 22 December 2006 Shell sent a letter to Centurion giving it 30 days’ notice to terminate the FIA (the “Termination Letter”) pursuant toits contractual right of terminationunder clause 3.1.8 of the FIA. Clauses 3.1.8 and 3.1.9 provided as follows:

“3.1.8 Without prejudice to Clause 3.1.6 and 3.1.9, if the Closing Date has not occurred within nine (9) months following the Agreement Date, then Shell may elect, by thirty (30) days notice in writing to Centurion to terminate this agreement. In such event: (a) Shell shall pay, in accordance with the terms of the JOAs, its share of any and all costs incurred in respect of Joint Operations up to the date of withdrawal; (b) Centurion shall not be obliged to repay to Shell any amounts paid under Clause 3.1.1; (c) Shell shall pay, in accordance with the JOAs, its participating interest share of any costs relating to completing the Concession Work Programmes. Shell shall have the benefit of any cost recovery of any sums paid by Shell pursuant to this Clause 3.1.8(c). Notwithstanding the foregoing, Shall shall have no liability of whatsoever nature for, and Centurion shall indemnify Shell against, any losses or damages arising out of any operations performed following termination of this Agreement; and (d) Other than as provided for in this Clause 3.1.8, Shell shall have no obligations or liabilities under this Agreement of whatsoever nature. 3.1.9 If the Closing Date has not occurred within the nine (9) months referred to in Clause 3.1.8 because the condition precedent described in Clause 2.2(e) has not occurred and Shell has elected to terminate this Agreement in accordance with the terms of Clause 3.1.8, then the provisions of Clause 3.1.8(a),(b) and (c) shall not apply and the termination will be treated as if Government Consents had not been received under Clause 3.1.6. Accordingly Centurion shall refund any and all payments made to Shell.”

In such event: (a) Shell shall pay, in accordance with the terms of the JOAs, its share of any and all costs incurred in respect of Joint Operations up to the date of withdrawal; (b) Centurion shall not be obliged to repay to Shell any amounts paid under Clause 3.1.1; (c) Shell shall pay, in accordance with the JOAs, its participating interest share of any costs relating to completing the Concession Work Programmes. Shell shall have the benefit of any cost recovery of any sums paid by Shell pursuant to this Clause 3.1.8(c). Notwithstanding the foregoing, Shall shall have no liability of whatsoever nature for, and Centurion shall indemnify Shell against, any losses or damages arising out of any operations performed following termination of this Agreement; and (d) Other than as provided for in this Clause 3.1.8, Shell shall have no obligations or liabilities under this Agreement of whatsoever nature.

[6]Thus, as appears from the relevant provisions of the clauses, Shell had a right to terminate the FIA if the Closing Date (as defined) had not occurred within nine months of the date of the FIA; such right was not dependent upon any breach of contract on the part of Centurion, but simply upon non-occurrence of the Closing Date within the relevant time.

[7]In the Termination Letter Shell asserted that the CTIP Acquisition had not been completed, and that, accordingly, pursuant to clause 3.1.9, Centurion was required to refund all payments made by Shell. So far as material the Termination Letter was in the following terms:

“Following our meeting of the 18 December 2006 ... and the various communications between our companies since then, we have further reviewed Shell’s interest in the Concessions. We note that the Closing Date has not occurred within nine months of the Agreement Date and Shell now issues notice of its election to terminate the FIA. Termination will become effective thirty days after the date of this letter. We also note that we have not received information from Centurion that Centurion has received formal notification from the Government of its consent to the CTIP Acquisition and we therefore understand that the CTIP Acquisition has not been completed. In the circumstances, in accordance with the terms of clause 3.1.9, Centurion shall refund any and all payments made by Shell.”

[8]However it was common ground that, as at the date of the Termination Letter, the CTIP Acquisition had in fact completed. Shell’s understanding, as set out in its letter, was, therefore, mistaken. The Tribunal held that when the Termination Letter was sent, Shell mistakenly believed that the CTIP Acquisition had not yet completed; see paragraph 100 of the Award, which states:

“when the Termination Letter was sent, as explained by Mr. Eggink in his written evidence, Shell mistakenly believed that the CTIP Acquisition had not yet been completed. We accept that evidence and find that Mr. Eggink and Mr. Crichton were acting under a mistake (Mr. Bloomfield of Shell had been informed of the true position and given the relevant documents at the meeting in Egypt on 15th November 2006 )…. It is therefore common ground in this arbitration that Centurion was under no obligation to Shell to refund any payments pursuant to clause 3.1.9 of the FIA as Shell had asserted.”

[9]The following day, 23 December 2006, Centurion responded to the Termination Letter pointing out that the CTIP Acquisition had completed earlier in the year and waiving the 30 day notice period. It was common ground that the FIA terminated on 23 December 2006.

[10]There then followed more than a year of negotiations in which Shell asserted various different grounds for seeking to recover monies that it had paid under the FIA, or other compensation.

[11]On 19 February 2008,Shell served a Notice of Arbitration under clause 14 of the FIA. Shell contended in its Notice of Arbitration that Centurion had been in repudiatory breach of the FIA in December 2006, in two material respects: i) that Centurion was in breach of certain provisions dealing with change of control contained in the FIA and two associated joint operating agreements between the parties (“the JOAs”), which respectively required Centurion a) in the event of a direct or indirect change of control of Centurion, to advise Shell as soon as reasonably practicable of such change of control and to give Shell the option to assume the “operatorship” of the Concessions; b) in the event that it was subject to a direct or indirect change of control, to give to Shell a right of pre-emption, i.e. the opportunity to acquire Centurion’s Participating Interest in the Concessions, upon the same terms and conditions as had been agreed with the party which was proposing to take over control; ii) that Centurion was in breach of certain provisions relating to the carrying on of sole risk operations (i.e. operations undertaken other than for the account of all the co-venturers)

[12]The Notice of Arbitration went on to claim that “16. In view of Centurion’s serious breaches of the terms of the FIA and the JOAs, Shell terminated the FIA on 22 December 2006 …. 18. As a consequence of each of the repudiatory breaches set out above, both individually and cumulatively Shell were entitled to terminate the FIA on 22 December 2006 and are entitled to damages.” Shell also made a claim on the basis of breach of warranty by Centurion as a result of its conduct of the sole risk operations. Shell claimed that, in the light of such breach of warranty, Shell was entitled to rescind the FIA under clause 5.2 (b). The relief sought included a claim for a declaration that Shell were entitled to terminate the FIA for repudiatory breach of contract, and/or to rescind the FIA under clause 5.2 (b) and for damages.

[13]The Tribunal held that Centurion was in breach of the conditions of the FIA and JOAs relating to change of control and that such breach was repudiatory. In relation to the sole risk operations, the Tribunal held that Centurion was in breach of the warranties contained in the FIA and, by implication, that Shell would have been entitled to have rescinded the FIA pursuant to clause 5.2 (b) on the grounds of such breach. However the Tribunal said that:

“… the key issue is whether Shell elected to keep the FIA alive or whether it accepted Centurion’s conduct as a discharge of the FIA.”

It held that Shell had not accepted Centurion’s repudiatory breach, nor had it elected to rescind the FIA for breach of warranty. In paragraphs 143 and following of the Award the Tribunal held that Shell had affirmed the FIA for the following reasons: “143. We find that Shell affirmed the FIA for the following reasons. (1) Shell gave 30 days notice of termination (as required by Clause 3.1.8 of the FIA). It thereby affirmed that the FIA remained in existence during this period. It also made it clear that the FIA would terminate contractually after 30 days in accordance with its terms. This is something quite different from the immediate discharge of all primary obligations which occurs on the acceptance of repudiation. (2) The contractual right under Clause 3.1.8 did not depend in any way upon any breach of contract, but rather applied irrespective of breach. It did not correspond with any right to terminate under the general law. The present case is quite unlike cases such as Boston Deep Sea Fishing, where a bad reason for terminating the breach will not be fatal if a good reason in fact exists. (3) Moreover, it invoked Clause 3.1.9 of the FIA (dealing with reimbursement of Shell’s costs in circumstances where the CTIP Acquisition had not completed). That clause depends upon Clause 3.1.8 and is also independent of any breach. Clauses 3.1.8 and 3.1.9 have different consequences, but neither is related to breach of contract or to loss suffered thereby. (4) There is nothing in the Termination Letter suggesting that Shell thought it was accepting a breach of contract on the part of Centurion as discharging the contract or that it intended so to accept any breach. Indeed, the fact that the sole risking breach (now alleged to be repudiatory) is referred to but not relied upon in order to terminate is telling. If the change of control breach had anything to do with the termination, Shell would have said so. Shell was clearly and deliberately choosing a wholly different basis on which to terminate, not immediately but on notice. (5) It follows that far from asserting that the FIA had come to an end as a result of an accepted repudiation, Shell was explicitly relying on the terms of the FIA and recognising their continuing force and effect to terminate the FIA. (6) Shell contends that its election was based on a mistake or was not a fully informed consent because it did not know the position concerning CTIP and erroneously believed that it had rights under Clause 3.1.9. However this is not relevant. Shell knew of the breaches relating to the change of control provisions. It chose not to invoke those breaches or indeed any breaches by electing to terminate the FIA with immediate effect. It would be remarkable if Shell could escape from a clear election not to terminate for breach, simply because it went on thereafter to terminate on notice under Clause 3.1.8 and mistakenly sought to add the benefit of Clause 3.1.9. 144. We conclude therefore that rather than accepting a repudiation of the FIA, Shell elected to rely on the FIA and its continued existence, even if that continued existence was only for a comparatively short time. This conclusion is reached without resort to the evidence of Shell’s motivation in invoking Clauses 3.1.8 and 3.1.9. The evidence establishes that Shell wanted to cut its losses and get out of the FIA. As far as we can see, Shell had no serious concerns about any of the breaches of contract for the simple reason that, in the absence of renegotiated terms, it wanted for commercial reasons to exit. 145. It follows that the FIA came to an end on 23 December 2006 when Centurion waived the 30 day notice period. The FIA terminated by operation of its provisions.” (1) Shell gave 30 days notice of termination (as required by Clause 3.1.8 of the FIA). It thereby affirmed that the FIA remained in existence during this period. It also made it clear that the FIA would terminate contractually after 30 days in accordance with its terms. This is something quite different from the immediate discharge of all primary obligations which occurs on the acceptance of repudiation. (2) The contractual right under Clause 3.1.8 did not depend in any way upon any breach of contract, but rather applied irrespective of breach. It did not correspond with any right to terminate under the general law. The present case is quite unlike cases such as Boston Deep Sea Fishing, where a bad reason for terminating the breach will not be fatal if a good reason in fact exists. (3) Moreover, it invoked Clause 3.1.9 of the FIA (dealing with reimbursement of Shell’s costs in circumstances where the CTIP Acquisition had not completed). That clause depends upon Clause 3.1.8 and is also independent of any breach. Clauses 3.1.8 and 3.1.9 have different consequences, but neither is related to breach of contract or to loss suffered thereby. (4) There is nothing in the Termination Letter suggesting that Shell thought it was accepting a breach of contract on the part of Centurion as discharging the contract or that it intended so to accept any breach. Indeed, the fact that the sole risking breach (now alleged to be repudiatory) is referred to but not relied upon in order to terminate is telling. If the change of control breach had anything to do with the termination, Shell would have said so. Shell was clearly and deliberately choosing a wholly different basis on which to terminate, not immediately but on notice. (5) It follows that far from asserting that the FIA had come to an end as a result of an accepted repudiation, Shell was explicitly relying on the terms of the FIA and recognising their continuing force and effect to terminate the FIA. (6) Shell contends that its election was based on a mistake or was not a fully informed consent because it did not know the position concerning CTIP and erroneously believed that it had rights under Clause 3.1.9. However this is not relevant. Shell knew of the breaches relating to the change of control provisions. It chose not to invoke those breaches or indeed any breaches by electing to terminate the FIA with immediate effect. It would be remarkable if Shell could escape from a clear election not to terminate for breach, simply because it went on thereafter to terminate on notice under Clause 3.1.8 and mistakenly sought to add the benefit of Clause 3.1.9.

[14]Accordingly the Tribunal rejected all Shell’s claims against Centurion.

The jurisdiction application

[15]Logically, although later in time, Centurion’s jurisdiction application precedes Shell’s appeal application. Accordingly I deal with the former first.

[16]Section 69(1) of the 1996 Act provides that:

“Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.”

[17]It was not in dispute that section 69 permits the parties to an arbitration agreement to exclude any right of appeal to the court under the section. The argument focused on whether clause 14 of the FIA (as quoted above) indeed excluded the right of appeal.

Centurion’s submissions

[18]Mr. Robert Hildyard QC and Mr. Richard Hill, on behalf of Centurion, submitted that the parties had agreed to exclude the jurisdiction of the Court under Section 69 by virtue of the words. “… and the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties, and the judgment upon such decision may be entered in any court of a country having jurisdiction” [ emphasis added] in Clause 14 of the FIA. They submitted that the combination of words “final, conclusive and binding” showed that the parties had agreed in unequivocal terms that there should be no ability to appeal against the Award. The plain intent and meaning of that wording was that any award should be final and binding on the parties, and conclude all matters in issue between them without further argument or recourse.

[19]Mr. Hildyard accepted that the effect of different arbitration or exclusion clauses will turn on the construction of those clauses in their factual matrix and that there was a risk in drawing conclusions from how different clauses have been interpreted in previous case-law. He submitted that much of the Commonwealth and English case-law emphasises that the decision being reached is one that arises from the individual clauses in the individual circumstances.

[20]However, subject to that caveat, he submitted that it was fair to say that English and Commonwealth case law was to mixed effect as to whether the mere words “final and binding” would constitute an effective exclusion provision. Although there was Commonwealth authority to suggest that it would (see e.g. White Constructions (NT) Pty Ltd v Mutton

(1988) 91 FLR 419

(Australia), LIUNA, Local 183 v Carpenters and Allied Workers Local 27 (1997) 34 OR (3d) 472 (Canada), he accepted that there was other Commonwealth authority to suggest that it would not (see American Diagnostica Inc v Gradipore Ltd (1998) 44 NSWLR 312, and Angela Raguz v Rebecca Sullivan [2000] NSWCA 240); and Merkin on Arbitration Law at paragraph 22.10(g). He referred to the recent case of Essex County Council v Premier Recycling Ltd

[2006] EWHC 3594

, where Ramsey J reviewed some of the Commonwealth authorities, and considered that the words “final and binding” were insufficient by themselves to amount to an exclusion of the right of appeal, although whether a clause containing those words would operate as an exclusion would depend on the remainder of the relevant clause and the circumstances. He submitted that, where, however, the word “conclusive” was also used, that plainly was intended to add to the words “final and binding”, and on its natural meaning made it clear that any right of appeal was excluded; and that a provision, which provided that an award was “conclusive”, as well as final and binding, could only sensibly be construed as restricting all rights of appeal or review so far as the parties were contractually able to do so.

[21]Mr. Hildyard also relied upon a recent English case, Al Hadha Trading Co v Tradigrain SA

[2002] 2 Lloyd’s Rep 512

, where HHJ Havelock-Allan, (albeit obiter) expressed certain views in relation to clause 22 of the then current edition of the GAFTA Arbitration Rules No. 15., which provided that “Any decision [of the GAFTA board of appeal] made pursuant to this Rule [which related to non-compliance with time limits and rules] shall be final, conclusive and binding.” HHJ Havelock-Allan said at paragraph 34:

“These difficulties of construction are reason enough to be cautious in attributing to the last sentence of r.22 the status of an agreement excluding the right of appeal. There are certain Commonwealth cases in which it has been considered whether the words ‘final and binding’ in an arbitration agreement operate to exclude the right of appeal. They are referred to in Merkin on Arbitration Law at para 20.10(g). In Ontario they have apparently been held to have effect, but in New South Wales they have not. Much must depend on the context. The last sentence of r.22 also contains the word ‘conclusive’. This points more strongly towards it being an exclusion agreement.”

However, in the event, the judge did not need to decide whether the last sentence of r.22 did or did not exclude any right of appeal under section 69.

[22]Mr. Hildyard submitted that such an approach (namely that the addition of the word “conclusive” pointed more strongly towards an exclusion agreement) also accorded with the approach taken in the authorities to the words “final and conclusive” in the context of whether a ruling with those characteristics excluded a right of appeal. He referred to cases such as Lyon v Morris 19 QBD 139 (following Waterhouse v Gilbert 15 QBD 569) and Van Laun v Barings Brothers & Co. Ltd

[1903] 2 KB 277

, where the words “final and conclusive” by themselves were held to exclude a right of appeal in the context of section 17 of the Common Law Procedure Act 1860.

[23]He submitted that such an approach was consistent with the dictionary definition of “conclusive”: he referred to the fact that the Oxford English Dictionary defines “conclusive” as follows:

“3. Of an argument, statement etc: “That closes or decides the question; decisive, convincing. 4. Law: That concludes or debars, binding.”

He also referred to the definition of “conclusive” in theShorter Oxford English Dictionarywhich stated:

“Concluding; occurring at or forming the end; final. Ending all argument; decisive; convincing.”

Ending all argument; decisive; convincing.”

[24]He also relied upon the case of Re Hadleigh Castle Gold Mines Ltd

[1900] 2 Ch 419

, 421-3, where Cozens-Hardy J regarded “conclusive” as a “clear word” which meant what it said, and (in the circumstances of that case) held that evidence could not be received to impeach a chairman’s conclusive declaration that a resolution had been challenged. Mr. Hildyard submitted that, in the present case also, the word “conclusive” should be construed as “preclusive” or “exclusive” of any right of appeal.

[25]Finally, he placed emphasis on the fact that the parties in this case had gone out of their way to modify the usual provisions of the UNCITRAL Rules (which refer to an award being final and binding, but do not state that it is “conclusive”) by inserting the word “conclusive” into the provisions of clause 14 of the FIA. He submitted that that made it particularly important to ensure that the word “conclusive” was given meaningful effect. The word could not be dismissed as merely boiler-plate. The parties must be taken to have intended to provide for the arbitral process to conclude all matters in issue without recourse to the Court. Accordingly he invited the Court to dismiss Shell’s claim on jurisdictional grounds.

Shell’s submissions

[26]Mr. McCaughran QC, on behalf of Shell, submitted that Centurion’s argument (namely that the words in clause 14.3 that the decision of the arbitrators “shall be final, conclusive and binding on the parties” have the effect of excluding the jurisdiction of the Court pursuant to section 69), should be rejected.

[27]He referred to the fact that section 58(1) of the 1996 Act provides that, unless otherwise agreed by the parties, an award made by a tribunal pursuant to an arbitration agreement was “final and binding” on the parties; and that section 58(2) expressly provides that this does not affect the right of a person to challenge the award in accordance with the provisions of Part 1 of the Act (which includes section 69). Accordingly, he submitted, there was nothing in the use of the words “final and binding”, which connoted any intention to exclude a party’s rights under section 69 of the Act. Use of those words merely indicated, as was to be expected in any event, that an award made by an arbitral tribunal should be res judicata between the parties (or any persons claiming through or under them). That said nothing about whether a party had a right of appeal, or a right to seek permission to appeal.

[28]He submitted that it only made sense for section 69 of the 1996 Act to apply to an award which was final and binding. In the unusual event of the parties having agreed that an award should not be final and binding, it was difficult to see why either of them should need or want to appeal against it. Accordingly, he submitted, it was difficult to see the sense in an argument that, by agreeing that an award should be final and binding, it was to be taken outside the ambit of section 69: it was only if the award was final and binding that section 69 had any application or utility.

[29]He also relied upon Essex County Council v Premier Recycling Limited, supra, (TCC) where Ramsey J had to decide whether agreed terms of the appointment of an arbitrator, to the effect that his decision should provide a “final and binding decision”, excluded the parties’ rights under section 69 of the 1996 Act and held that they did not. He referred to the fact that Ramsey J further held (paragraph 24 of the judgment), that, for the purposes of section 69(1), any agreement to exclude the effect of that section had to be clear, and said:

“Whilst I accept that no express reference to section 69 is necessary, the intention to exclude a process of appeal by the Court must be clear.”

[30]Mr. McCaughran submitted that it must be right that the agreement to exclude a party’s statutory rights under section 69 should be in clear terms and that it was not difficult to draft such terms; he referred to the fact that examples that achieved such a result could be found in the Rules of the LCIA and of the ICC. He referred to the LCIA Rules (Rule 26.9), which provide:

“All awards shall be final and binding on the parties. By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay …; and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made.”

He also referred to the current ICC Rules (Article 28.6), which have been in force since 1 January 1998, and which similarly provide that:

“Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.”

[31]He pointed out that, by way of contrast, the UNCITRAL Rules, adopted by the parties in this case, simply provide (by Article 32(2)) that:

“The award shall be made in writing and shall be final and binding on the parties. The parties undertake to carry out the award without delay.”

He submitted that it had never been previously suggested that the effect of this provision in the UNCITRAL Rules was to exclude the parties’ rights under section 69. He referred to “The UNCITRAL Arbitration Rules: A Commentary” (2006) by Caron, Caplan and Pellonpaa, at page 797, where the authors say:

“That the award is “final and binding” merely restates the established principle that an award rendered by an international tribunal is res judicata.”

[32]Mr. McCaughran also referred to the case of Reliance Industries Limited v Enron [2002] 1 All ER (Comm) 59,where an application was made for permission to appeal under section 69 of the Act, in relation to an award given in an arbitration that had been conducted under the UNCITRAL Rules. Although permission was not given in that case, it was not suggested that the Court lacked jurisdiction to entertain the application because the UNCITRAL Rules provided that an award should be “final and binding”.

[33]He submitted that, although the relevant part of the arbitration clause in the present case also included the word “conclusive”, that, in context, added nothing to “final” or “binding”. In effect the word “conclusive” was synonymous with the phrase “final and binding”. The addition of such word did not amount to the clear words that would be needed to exclude the parties’ statutory rights pursuant to section 69, such as those which are to be found in the LCIA Rules.

[34]He referred the court to the GAFTA Arbitration Rules (GAFTA 125), where provision is made for a first tier arbitration process, and for an appeal to an arbitral board of appeal. Clause 12.6 of the GAFTA Arbitration Rules provides that:

“The award of the board of appeal, whether confirming, varying, amending or setting aside the original award of arbitration, shall be signed by the chairman of the board of appeal, and, when so signed, shall be deemed to be the award of the board of appeal, and shall be final, conclusive and binding.”

(emphasis added) He referred, in this context, to the case of Fleming and Wendeln v Sanofi

[2003] EWHC 561 (Comm)

, where the Commercial Court (Cresswell J) heard an appeal under section 69 of the Act from a decision of the GAFTA appeal board in an arbitration which had been conducted under the GAFTA Arbitration Rules. Permission to appeal had been granted by Thomas J. Mr. McCaughran pointed out that the parties in that case had been represented by eminent and very experienced Counsel and solicitors, but it did not appear to have been suggested that the Court lacked jurisdiction to hear the appeal because of the wording in the GAFTA Rules that the award should be “final, conclusive and binding”.

[35]Thus, he submitted, the words “final, conclusive and binding”, which appeared in clause 14.3 of the FIA, fell far short of the clear words that would be needed to exclude the parties’ statutory rights pursuant to section 69. Such a conclusion was, he submitted, supported by Australian authority, in particular, American Diagnostica v Gradipore (supra); and Raguz v Sullivan (supra), although it appeared that the position in Canada may be different.

Conclusion

[36]In my judgment, the phrase “final, conclusive and binding”, as it appears in the context of clause 14.3 of the FIA, is not to be construed as an agreement excluding the parties’ rights of appeal, in relation to a question of law, under section 69 of the 1996 Act. My reasons for preferring the submissions of Shell to those of Centurion are as follows.

[37]In order to amount to an agreement as envisaged by section 69 (1) of the 1996 Act, sufficiently clear wording is necessary, albeit that no express reference to section 69 is required; see the comments of Ramsey J in Essex County Council v Premier Recycling Ltd, supra, at paragraphs 24 to 26, with which I agree.

[38]In the context of a fairly standard governing law and arbitration clause, such as clause 14 of the FIA, the use of the words “final, conclusive and binding” in isolation would not, in my judgment, “… convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract” (see per Lord Hoffmann in Investors Compensation Scheme Ltd V West Bromwich Building Society

[1998] 1 WLR 896

, at 912), that the parties had agreed to exclude all rights of appeal on points of law under section 69. Although, on their face, the words “final, conclusive and binding upon them” are words of considerable width, which might, in an appropriate context, appear to be sufficient to exclude a right of appeal, the reality is that the expression “final and binding”, in the context of arbitration, and arbitration agreements, has long been used to state the well-recognised rule in relation to arbitration, namely that an award is final and binding in the traditional sense and creates a res judicata between the parties. The expression was used for such purpose in section 16 of the Arbitration Act 1950, which was re-enacted in section 58(1) of the 1996 Act, with the added provision contained in section 58(2), that the finality and binding nature of an award does not exclude the possibility of challenging an award, by any available arbitral process of appeal or review or otherwise in accordance with Part 1 of the 1996 Act. As stated at page 342 of the 2001 Companion to Mustill and Boyd’s The Law and Practice of Commercial Arbitration in England, Second Edition, this provision was inserted because the reference to finality in section 16 of the Arbitration Act 1950 was sometimes assumed “wrongly” to exclude the possibility of challenging an award.

[39]In relation to the meaning of the words “final and binding”, in the context of an arbitration agreement, I agree with the conclusion reached by Ramsey J, at paragraph 22 of his judgment in Essex County Council v Premier Recycling Ltd, supra, who, having reviewed certain of the Commonwealth authorities, said:

“However, in summary, I conclude that the use of the words ‘final and binding’, in terms of reference of the arbitration are of themselves insufficient to amount to an exclusion of appeal. Such a phrase is just as appropriate, in my judgment, to mean final and binding subject to the provisions of the Arbitration Act 1996.”

[40]I reject Centurion’s submission that, by adding the word “conclusive”, the parties must be taken to have gone out of their way to modify the usual provision of the UNCITRAL Rules, so as to exclude any statutory right of appeal on a point of law under section 69. In my judgment, the addition of such word does not connote, either by its normal meaning, or, if different, by the meaning it would convey to the “… reasonable person having all the background knowledge etc.”, that the parties were agreeing to exclude their statutory right of appeal on points of law. It certainly does not do so with sufficient clarity to amount to an exclusion agreement.

[41]I am not assisted by the dictionary definitions to which Mr. Hildyard referred. I have to decide what the phrase means in its context. The definitions do not support the argument that the word “conclusive”, in the context of clause 14 of the FIA, should be read as precluding, or excluding, any appeal to the Court. To do so, would require the word “conclusive” to work too hard, i.e. to have an extended meaning far beyond its ordinary meaning in its context.

[42]Nor do I find any assistance from the obiter dictum of HHJ Havelock-Allan in Al Hadha Trading Co v Tradigrain SA supra, at paragraph 34, where he said that the fact that the last sentence of the relevant rule also contained the word “conclusive” pointed “… more strongly towards it being an exclusion agreement.” Apart from the fact that it was not necessary for him to decide the point, the first sentence of the paragraph clearly shows that he would in any event have been very cautious about construing the relevant clause as one excluding any right of appeal. Nor do I agree with him that the word “conclusive” necessarily points “… more strongly towards it being an exclusion agreement.” It all depends on the context.

[43]In the course of his oral argument, Mr. Hildyard fairly accepted that the old cases ofLyon v Morris (supra), Waterhouse v Gilbert (supra) and Van Laun v Barings Brothers & Co. Ltd (supra) in fact provided no assistance to the issue of construction of the phrase “final, conclusive and binding” in the present case. In those old cases, section 20 of the Appellate Jurisdiction Act, 1876 expressly provided that:

“where by Act of Parliament it is provided that the decision of any Court or judge whose jurisdiction is transferred to the High Court is final, an appeal shall not lie from the decision of the High Court of Justice to the Court of Appeal.”

Section 17 of the Common Law Procedure Act 1860 was a statute which did so provide. It stated that particular types of judgment “… shall be final and conclusive against the parties”. Thus, as Mr. Hildyard accepted, it could not be said that the words “final and conclusive” in the latter statute by themselves were sufficient to exclude a right of appeal. I comment that, in any event, the statutory context of those cases was entirely different from the context of the FIA.

[44]Likewise no assistance can be derived from the decision of Cozens-Hardy J in Re Hadleigh Castle Gold Mines Ltd (supra), relied upon by Mr. Hildyard. That was a decision on the construction of section 51 of the Companies Act 1862. That section provided:

“… unless a poll is demanded by at least five members a declaration of the chairman that the resolution has been carried shall be deemed conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the same.”

Perhaps not surprisingly, Cozens-Hardy J construed the section as imposing an evidential bar on the court receiving evidence to impeach the chairman’s declaration that the resolution had been carried by the requisite majority on a show of hands.

[45]I accept Mr. Hildyard’s submission that meaning has to be given to the word “conclusive” in the phrase “final, conclusive and binding on the parties”. However, in my judgment all three words, in context, are apt to describe the effect of a valid arbitral award on the parties, even in the absence of any agreement excluding the right of appeal. To some extent the meanings conveyed by each of the three words overlap; but this does not, in my view, point to a conclusion that the clause, let alone the word “conclusive”, should be construed as an agreement to exclude rights of appeal. The effect of a valid arbitral award is described at some length at pages 412 to 414 of The Law and Practice of Commercial Arbitration in England, Second Edition, Mustill and Boyd; (see also the 2001 Companion, page 209, to the effect that the earlier text is not affected in substance by the 1996 Act). An award can be said to be “binding” in that each party promises to abide by the award and to perform it; it is not a mere expression by the arbitrator of his view as to the referred dispute, which a party is at liberty to disregard. An award is “final” in the sense that the successful claimant is precluded by the award from bringing the same claim again in a fresh arbitration or action. An award can be said to be “conclusive” of issues of fact and law, in that an award prevents a party in a subsequent arbitration or claim from disputing for a second time an issue of fact or law on which he has failed. Moreover an award can also be said to be “conclusive” in that it precludes a party from reopening in a later dispute individual issues of law or fact which had been necessarily decided by the award.

[46]In Corner v C and C News Pty Ltd (unreported, 17th of March 1989, (Supreme Court of New South Wales)),Yeldham J, obiter, said as follows at page 5:

“Although, on the face of it, the words final, conclusive and binding upon them, being words of considerable width, would appear to be sufficient to exclude a right of appeal, the reality is that the expression final and binding is to be found in s28, and in the old Arbitration Act 1902 in the second schedule, as well as in s16 of the Arbitration Act 1950 (UK). Such expression was employed to bring finality, subject to well-recognised methods of challenging awards, to arbitral proceedings. Certainly such expressions (and the word ‘conclusive’ does not alter the situation) do not constitute an attempt to oust the jurisdiction of the court – see Ford v Clarkson’s Holidays Limited [1971] 1 WLR 1412. I think it is correct to submit, as counsel for the plaintiff in the present case did, that the words here employed in CL7(e) merely restate what has long been the rule in relation to arbitrations, namely that an award is final and binding in the traditional sense, and such an award creates a res judicata and an issue estoppel, subject to judicial review by the court. … In my opinion both these comments properly reflect what is required in order that there may be a valid exclusion agreement. Such an agreement must demonstrate that the parties have adverted to the right of appeal which, within the limits of the legislation, would otherwise exist, and they must expressly exclude it. I do not think it is sufficient merely to say, as was said in CL7(e), that the award should be final, conclusive and binding.”

That passage was cited with apparent approval, and applied, by Giles CJ in American Diagnostica (supra)at page 38, although the latter made it clear that there was no need for an exclusion agreement expressly to identify the relevant statutory appeal provision in terms.

[47]I agree that the word “conclusive” does not alter the position, and that a phrase such as “final, conclusive and binding” in the context of an arbitration agreement such as clause 14 of FIA does no more than restate what has long been the rule in relation to arbitrations, namely that an award is final, conclusive and binding in the traditional sense, in that it creates a res judicata and issue estoppel. Such words, by themselves and absent any other contextual indicators, are not sufficient, in my judgment, to amount to an agreement to exclude rights of appeal under section 69 of the 1996 Act.

[48]Accordingly, I dismiss Centurion’s jurisdiction application.

The appeal application

[49]Both Mr. Hildyard and Mr. McCaughran agreed that, consistently with the current practice of this Court, I should not give detailed reasons for my conclusion in relation to Shell’s application for leave to appeal pursuant to section 69; see generally the notes at 2E-266 at Volume 2 of the Civil Procedure Rules.

[50]Despite Mr. Hildyard’s arguments, I am satisfied that the proposed appeal indeed raises questions of law and that the statutory criteria set out in paragraphs (a), (b), (c)(ii) and (d) of sub-section 69 are satisfied.

[51]Accordingly, I give leave to Shell to appeal the questions of law arising out of the Award, as identified in the Particulars of Claim attached to its arbitration claim form.