An Interventionist Approach to Arbitration: A New Way Forward?

On 23rd October 2023, The Hon Mr Justice Robin Knowles CBE handed down the judgment in The Federal Republic of Nigeria v. Process & Industrial Developments Limited [2023] EWHC 2638 (Comm).

This was one of the very rare cases where an arbitration award has been successfully challenged under section 68 of the Arbitration Act 1996, in this case on the grounds of serious irregularity.

Being such a rare breed, it will be the destiny of this judgment to be quoted in every arbitral challenge under section 68 as long as the Arbitration Act 1996 remains in force. It will also undoubtedly be analysed to the final dot and comma for months and years to come. But in this short piece I wanted to give an instinctive response to the judgment as it relates to international arbitration. 

The dispute concerned an Agreement between The Federal Government of Nigeria (“Nigeria”) and Process & Industrial Developments Limited (“P&ID”) for the supply of gas. Nigeria did little to perform the Agreement after signing, and according to them, the same can be said of P&ID. An arbitration tribunal decided in 2017 that Nigeria owed the P&ID in damages the sum of USD 6.6 billion, a sum so vast that it is material to Nigeria’s entire federal budget. The damages awarded exceeded USD 11 billion when accounting for interest at the rate awarded by the Tribunal.

The tribunal who heard the underlying arbitration consisted of Sir Anthony Evans, nominated to the Tribunal by P&ID; Chief Bayo Ojo SAN, nominated by Nigeria; and Lord Hoffmann, appointed Chairman on 29 January 2013.

Mr Justice Knowles overturned the award on the grounds of serious irregularity.

As is apparent from the reported facts, the case is obviously an extraordinary one, and one needs to be careful not to draw too many conclusions from such an outlier.

What is noteworthy is that the judge chose to make what is, in judicial terms, a withering attack on both the work of the tribunal itself, and how tools in the arbitration were not used effectively.

Reading between the lines, it is almost as if the judge is saying ‘how on earth did you let this dreadful miscarriage of justice happen on your watch’.

The judge made the following observations:-

• "The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, and not reach the court."
• …the case has shown examples where legal representatives did not do their work to the standard needed, where experts failed to do their work, and where politicians and civil servants failed to ensure that Nigeria as a state participated properly in the Arbitration. The result was that the Tribunal did not have the assistance that it was entitled to expect, and which makes the arbitration process work.”
• “But what is an arbitral tribunal to do? The Tribunal in the present case allowed time where it felt it could and applied pressure where it felt it should. Perhaps some encouragement to better engagement can be seen as well.”
• “Yet there was not a fair fight. And the Tribunal took a very traditional approach. But was the Tribunal stuck with what parties did or did not appear to bring forward?”
• “Could and should the Tribunal have been more direct and interventionist when it was so clear throughout the Arbitration that Nigeria’s lawyers were not getting instructions, or when at the quantum hearing Nigeria’s then Leading Counsel, Chief Ayorinde, was failing to put necessary points to experts to test their opinion and Nigeria’s own experts (for whatever reason) had not done the work required?”
• “Should the Tribunal have taken the initiative to encourage exploration of new bounds of contract law and the law of damages that may today be required where major long term contracts are involved?”

To put it another way, was the judge asking the rhetorical question of the tribunal: ‘was there not something in your tool box that you could have used to uncover the wrongdoing and avoid such an egregious award?’.

From an arbitration purist’s perspective, it could be argued that the answer to the rhetorical question is ‘no’. If one party presents a case that is prima facie ‘just about credible’, and the respondent’s response is hopeless, either from a procedural and/or evidential perspective, then it isn’t for the tribunal to intervene and help the respondent to run its case, is it?

Whether Mr Justice Knowles’ more interventionist approach will be followed, and whether that approach is restricted to cases where a state is the respondent, only time will tell.  

But if you are an arbitral tribunal involved in a case where one of the parties is a state, if something doesn’t smell right in the way the case is being handled, you are on notice of the need to proactively make enquiries, failing which Mr Justice Knowles [no relative of mine] will intervene.