Sui Northern Gas Pipelines Ltd v National Power Parks Management Company Private Ltd 2023 EWHC 316 Comm - 15 February 2023
This judgment concerns an application by the Claimant ("SNGPL") under Section 68 (2)(a), (b) and (d) of the Arbitration Act 1996 (but primarily Section 68(2)(a)), challenging two Awards in related LCIA arbitrations, both dated 12 December 2021. SNGPL seeks to have the Awards set aside, alternatively remitted to a differently constituted Tribunal. The application is resisted by the Defendant ("NPPMCL"), which was the counterparty to both references.
The disputes arose out of two Gas Supply Agreements dated 29 October 2016 ("the GSAs"), by which SNGPL agreed to supply and NPPMCL agreed to take or pay for gas to be used at two power plants operated by NPPMCL (known as the Balloki plant and the Haveli plant). The GSAs are in materially identical terms. Each had a term of 15 years, extendable for a further 15 years upon NPPMCL's notice.
The GSAs were "take or pay" agreements, meaning that NPPMCL was obliged either to (a) take a specified quantity of gas during every month, in which case it would pay the contractual price, or (b) not take gas but pay anyway, in which case SNGPL could divert the gas not taken to other customers, with NPPMCL being entitled to be reimbursed the sums received by SNGPL from those other customers (less certain costs).
The dispute was referred to LCIA arbitration on 11 October 2019. There being two GSAs, there were two references, the same Tribunal being appointed in each. In each, the Claimant was NPPMCL, which sought a declaration that SNGPL had not been entitled to issue the May 2018 invoices (and others) and an order that SNGPL should repay the monies drawn encashed from the Gas Supply Deposit. It also claimed interest on those monies, at the Delayed Payment Rate of KIBOR +2%.
The outcome of SNGPL's principal challenge
It follows that SNGPL's principal challenge, i.e., in relation to the Tribunal's conclusions on Section 3.6.a of the GSA, fails.
In the light of my view that the Award manifests a degree of confusion regarding the differences between the May 2018 invoice and the later invoices, I should say that this is perhaps not entirely surprising, given that (as I have noted) it was the May 2018 invoices that seem to have received most if not all of the attention in the course of the hearing.
This could possibly have been the subject of an application under Section 57 of the Arbitration Act 1996, or under Section 68(2)(d) and/or (f). However, the application actually made has been entirely different.
The challenge in relation to the Award of interest
SNGPL also challenged the Tribunal's Award as regards the rate of interest. NPPMCL claimed, and the Tribunal awarded, interest at the rate of one-month KIBOR plus (2%) per annum, compounded semi-annually.
NPPMCL claimed interest at this rate on the basis that it was set out in the GSA as the "Delayed Payment Rate". Under the GSA, this rate was to apply contractually in various situation, notably involving late payment by NPPMCL. SNGPL stated that this contractual interest did not however apply, under the GSA, to the claim advanced in the reference by NPPMCL. SNGPL therefore contended that it was wrong in principle for the Tribunal to award interest at this rate.
The Tribunal did not award this rate of interest under the misapprehension that the GSA so provided. It is clear from paragraph 170 of the Award that the Tribunal simply noted that the GSA provided for this rate to apply in a number of circumstances, and then said that it stood to reason that it should also apply on the facts of this case.
This is wholly unexceptionable. The Tribunal had a discretion as to the rate of interest. It was within its power to exercise that discretion as it did, taking into account the rate that the parties had agreed as appropriate in other circumstances.
This challenge therefore also fails
Overall conclusion and costs
SNGPL's application fails and is dismissed.
It follows that SNGPL is the loser and NPPMCL is the winner, and this will be reflected in my order on costs.
However, it is significant that SNGPL's application might have succeeded, at least to some degree, were it not founded upon a false premise; and that SNGPL's faith in this false premise was bolstered by the fact that it was shared by NPPMCL, at least until Mr Landau KC's oral submissions.
I therefore anticipate that I therefore may reduce NPPMCL's recoverable costs, to reflect this, but on this I await the parties' submissions.