In the recent Commercial Court case of Shell v Dana Gas Egypt, Mrs Justice Gloster determined that the court had jurisdiction to hear Shell's application for permission to appeal an UNCITRAL arbitral award on a point of law, and went on to grant Shell permission to launch such an appeal. In reaching this decision, the judge examined the question of how section 69 of the Arbitration Act 1996, which is a non-mandatory provision enabling the appeal of English arbitral awards on a point of law, may be excluded by the parties to an arbitration agreement. John McCaughran QC instructed by Herbert Smith represented Shell at the hearing.

Facts

In 2006, Shell and Dana (formerly Centurion Petroleum Corporation) entered into an agreement pursuant to which Shell was to acquire a 50% interest in two concessions to explore for hydrocarbons in the Nile Delta. The agreement was expressly governed by English law and contained a clause by which the parties submitted all disputes to arbitration under the UNCITRAL Rules in London. The arbitration clause provided that "the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties" (emphasis added).

On 22 December 2006, Shell wrote to Centurion giving 30 days' notice of termination in accordance with its contractual right to do so in the event of non-occurrence of a defined "Closing Date". Shell also claimed repayment of the sums it had paid to Centurion under related contractual terms. That claim was based on a factual misunderstanding by Shell regarding whether certain of the conditions precedent to the Closing Date had occurred. In any event, Centurion waived the 30-day period and the parties' agreement terminated on 23 December 2006. Shell commenced arbitration in 2008 contending that Centurion had been in repudiatory breach of the agreement in December 2006 as it had breached provisions in respect of change of control and sole risk operations. Shell also claimed that it had an express right to rescind the agreement for Centurion's breach of a warranty not to carry out sole risk operations. Shell claimed that its election to terminate the agreement on 22 December was valid as an acceptance of the repudiation and to rescind the agreement for breach of warranty.

In the arbitration, the tribunal held that Centurion had been entitled to terminate the agreement both for repudiatory breach and breach of warranty. However, it held that Shell had elected to affirm the agreement because, amongst other reasons, its letter of termination was expressed to rely upon contractual termination rights independent of any breach of contract and gave 30 days' notice of termination. The tribunal consequently rejected Shell's claims.

The Commercial Court Applications

Shell applied to the High Court for permission to appeal the tribunal's award on points of law. Centurion applied for an order that the court lacked jurisdiction to hear such an application or the substantive appeal.

The latter application was premised on the argument that the words "final, conclusive and binding" contained in the parties' agreement evidenced an unequivocal agreement to exclude a section 69 appeal. In asserting this argument, particular reliance was placed on the addition of the word "conclusive" to the more usual formulation "final and binding" (to be found, for instance, in the UNCITRAL Rules) which addition it was said could only sensibly construed as an exclusion of any non-mandatory rights of appeal.

In contrast, Shell submitted that clear words were necessary to exclude the jurisdiction of the court. For section 69 of the Act to apply at all, the Act itself required the Award to be final and binding and these words Shell said merely referred to the fact that an arbitral award should be res judicata between the parties. In support of its arguments, Shell referred to articles 28.6 and 26.9 of the ICC and LCIA Rules respectively which, it was submitted, contained clear terms of the kind necessary for section 69 of the Act to be excluded.

In her decision, Mrs Justice Gloster agreed with Shell's contention that the wording of the parties' arbitration agreement was insufficient by itself, and absent any other contextual indicators, to exclude the application of section 69. She held that "a phrase such as "final, conclusive and binding" in the context of an arbitration agreement such as [that agreed by the parties in the present case] 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."

Comments

While it was acknowledged that there is a risk in drawing conclusions from how different clauses have been interpreted in previous cases, this decision would seem to make clear that the words "final, conclusive and binding", in whichever order or combination, are unlikely to be sufficient to exclude an appeal under section 69. Parties who wish to derogate from section 69 should therefore err on the side of caution and include clear wording to that effect in their disputes clauses.

As was mentioned in this case, both the LCIA Rules (Rule 26, under which parties are deemed to "waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority") and the ICC Rules (Article 28.6, under which parties are deemed to have "waived their right to any form of recourse") contain wording designed to exclude all non-mandatory rights of appeal. A submission to arbitration in accordance with either of those rules would therefore suffice to rule out any appeal under section 69. It should be noted, however, that other arbitration rules to which parties may commonly refer, such as the Rules of the ICDR, do not contain such wording. Further clear drafting would therefore be required to oust section 69 if desirable when choosing those rules. Equally, where parties choose ad-hoc arbitration, whether by reference to the UNCITRAL Rules (examined in this case) or otherwise, additional wording to exclude section 69 will be necessary.

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