UK: Uk Supreme Court: Security Deposit Not A Pre -Condition To Challenge Enforcement On Public Policy Grounds

Last Updated: 26 April 2017
Article by Mohammad Kamran, Payel Chatterjee and Vyapak Desai

The UK Supreme Court held that:-

  • Power to order security is only given to the English courts under Section 103(5) of the English Arbitration Act when challenge proceedings are pending before courts of seat of arbitration;
  • Enforcing Courts cannot impose security as a condition to decide issues under the grounds of Public Policy and Arbitrability for resisting enforcement;
  • English Procedural rules vest no power to direct payment of security to allow challenge to enforcement of New York Convention Awards

The UK Supreme Court ("UKSC") in its recent ruling of IPCO (Nigeria) Limited ("IPCO") v. Nigerian National Petroleum Corporation ("NNPC")1 held that security cannot be imposed as a condition to hear issues resisting enforcement of the award on grounds of public policy and arbitrability. However, courts may adjourn enforcement in light of on-going setting aside proceedings in the country where the award was made, upon taking appropriate security from the award debtor (which is statutorily prescribed under Section 103(5)) of the English Arbitration Act, 1996 ("Act").

Factual Background:

NNPC had engaged IPCO to design and construct a petroleum export terminal. Pursuant to certain disputes between the parties under Contract dated March 14, 1994, arbitration proceedings were commenced and an arbitral award was passed in favor of IPCO on October, 2004 ("Award"). The Award directed NNPC to pay USD 152,195,971/- and an additional 5 million Naira plus interest at 14% per annum to IPCO.

The overview of the developments that took place between the parties have been summarized below:-

S. No.



Nature of Proceedings



Nigeria Federal High Court


NNPC challenged award on "non-fraud" grounds



UK High Court of Justice

29 Nov 2004

IPCO filed application for enforcement of award

Justice Steel passed an ex parte enforcement order in favor of IPCO


UK High Court of Justice

27 Apr 2005

Pursuant to the enforcement order being passed, NNPC filed an application for setting aside the 2004 Enforcement Order based on two grounds under Section 103 (2) and (3) of the Act or alternatively for its enforcement to be adjourned under Section 103(5), pending the resolution of the non-fraud challenges in the Nigerian Courts.

NNPC was directed to pay IPCO a sum of $13 million and provide security of $50 million for the adjournment sought. ("First Security/Adjournment Order").

This amount was paid and security was duly deposited by NNPC.


UK High Court of Justice

17 April 2008

IPCO challenges decision arguing that Nigerian proceedings will go on for years.

IPCO, applied for reconsideration of the First Security/Adjournment Order as it seemed difficult for the Nigerian proceedings to be determined for several years.

IPCO's argument was rejected and it was held that delay was not sufficient to justify complete re-opening of the earlier order.

The High Court therefore, directed NNPC to pay a further amount of USD 52m plus USD 26m by way of interest.

The High Court gave permission to appeal and stayed the order pending the appeal, conditional upon NNPC providing to the value of USD 30m and adjourned any decision regarding enforcement of the balance of the award under Section 103(5). ("Second Security/Adjournment Order"). The additional security was also deposited by NNPC.

The Court of Appeal upheld Second Security/Adjournment Order, but it was further stayed pending the outcome of a petition to appeal to the House of Lords.


UK High Court of Justice

16 Dec 2008

NNPC sought to revise the order dated 17 April 2008 on the ground of newly discovered evidence of fraud.

The grounds given for refusal of recognition or enforcement were that there had been a material change of circumstances and/or the Court had been misled into believing that the Award had been properly obtained and/or public policy.

The ground given for the alternative of adjournment was that the Nigerian courts would or might set aside the Award for fraud, false evidence or forgery.

The High Court stayed the Second Security/Adjournment Order. In light of the new evidence, NNPC was allowed to challenge the enforcement of award on basis of public policy (Section 103(3)) of the Act and for further adjournment of enforcement under Section 103 (5) of the Act.

NNPC was directed to maintain the security of $80 million.


Nigeria Federal High Court

27 Mar 2009

NNPC amended its pleadings in the ongoing challenge proceedings in Nigeria to raise the fraud challenge. It came to NNPC's knowledge that the Award was obtained by fraudulent inflation of the quantum of claim using fraudulently created documents by IPCO.



UK High Court of Justice

17 June 2009

NNPC sought to get the earlier order dated April 17, 2008 modified which directed payments to be made to IPCO.

By a consent order, NNPC undertook the obligation to maintain $80 million security until further notice of the court. NNPC's obligation to pay sums to IPCO was set aside and "the decision on enforcement of the Award" was adjourned pursuant to section 103(5) of the Act.


UK High Court of Justice

1 April 2014

IPCO once again made an application seeking enforcement of arbitration award on the basis of a delay in Nigerian proceedings.

Application was dismissed and UK High Court held that even if it had been appropriate to start enforcement proceedings afresh, it would have still dismissed it given that NNPC had a good prima facie case of fraud and the same should continue to trial in Nigeria.


UK Court of Appeal

10 Nov 2015

IPCO challenged the order dated 1 April 2014.

The appeal was allowed due to material change in circumstances and ordered:-

(1) The proceedings shall be remitted to the Commercial Court for determination as to whether the Award should not be enforced, in whole or in part, because it would be against the English public policy under Section 103(3);

(2) Any further enforcement of the Award shall be adjourned, pursuant to Section 103(5) of the Act, pending determination of the Section 103(3) Proceedings;

In the event of failure of NNPC to comply with the conditions, the adjournment shall lapse and IPCO may enforce the Award in the same manner as a judgment or Order of the Court and demand payment of the amounts provided by way of security.

NNPC was directed to provide a further security of USD 100m in addition to the security already provided under the First and Second Security/Adjournment Order.

The parties agreed that not only the fraud issue, but also the non-fraud issues should be decided in the English enforcement proceedings.

Relevant Provisions

The entire crux of the matter lies in the interpretation of Section 103 of the Act. The relevant provisions are reproduced hereunder:

  1. Section 103(2) (f)

(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves –

(f) that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made." ("Non-Binding Challenge")

  1. Section 103(3) of the Act;

Recognition or enforcement of the award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognise or enforce the award. ("Public-Policy Challenge")

  1. Section 103 (5) of the Act;

Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2) (f), the court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award.

It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security. ("Security Provision")

Current Proceedings:

NNPC challenged the 2015 Court of Appeal Order before the UKSC in March, 2017. The issue before the Court was whether NNPC, should have deposited further $100m security in the English enforcement proceedings by reference to Security Provision provided under the Act; and secondly, whether the reference to general English procedural rules was justified.

NNPC challenged the order on the ground that it was passed without jurisdiction or wrong in principle and/or was illegitimate in circumstances. NNPC argued that it has a good prima facie case of fraud entitling it to resist enforcement of the whole award.

IPCO argued that on the basis of the English Procedural Rules and the New York Convention there was nothing in the Act that interfered with the court's general power to make conditional orders, including orders on its own motion. IPCO argued based on joint reading of Article III of the New York Convention and the provisions of the Act applicable to award debtors. Section 70(7) of the Act allows imposition of security in such cases. IPCO also contended that the Court of Appeals by not imposing security on the party (NNPC) challenging the award for Non-binding Award Challenge and Public Policy Challenge, is putting "substantially more onerous conditions" on IPCO which is not permitted under the New York Convention.

Decision and Analysis:

The UKSC analyzed the provisions in relation to the Non-binding Award Challenge and Public Policy Challenge in light of the Security Provision to determine the issues.

  • Non-binding Award Challenge- It is enshrined in Section 103(2) (f) of the Act which provides that an award cannot be enforced in cases where the award has yet not become binding on the parties or is challenged before a competent authority of the country in which it was made.
  • Public Policy Challenge- It is enshrined in Section 103(3) of the Act which prohibits enforcement of the award in cases where the matter is not capable of settlement by arbitration or that the award is contrary to the public policy.
  • Security Provision- It is enshrined in Section 103 (5) of the Act allows the Court to adjourn proceedings and direct payment of security if an application for the setting aside or suspension of the award has been made to such a competent authority as mentioned in Section 103 (2) (f).

Section 103 (2) and 103 (3) give effect to Article V, while Section 103 (5) gives effect to Article VI, of the New York Convention.

The UKSC held that there was an error in the Court of Appeal's Order as nothing in the Public Policy Challenge provision (or in the underlying provisions of Article V of the New York Convention) provides that an enforcing court can decide an issue pending before it under Section 103 (2) (f) conditional upon payment of security. The UKSC further clarified that with the change in circumstances and decision on issue of fraud being dealt by English Courts itself, any further adjournment or payment of security under Section 103 (5) was misused and misplaced.

The UKSC distinguished the power conferred under Section 103 (5) of the Act. It was clarified that this provision deals with cases where the enforcing court adjourns its own decisions in light of pending proceedings in the foreign jurisdiction where the award was made and direct the debtor to deposit suitable security (on the Non-binding Award Challenge). There is no power under Section 103 (5) to order security except in connection with such an "adjournment", which ceased to be applicable when the Court of Appeal held that the fraud challenge should be decided by the Commercial Court. Delays in hearing issues under enforcement before courts are part of decision making process and cannot be interpreted to mean 'adjournment' as envisaged under Section 103 (5) of the Act.

The UKSC held that the Court of Appeal erred in directing deposit of further security to decide issues under Section 103 (3) and not for adjournment under Section 103 (5) which relates specifically to Section 103 (2) (f) of the Act. It was clarified that courts have no power under Section 103 (3) to make decisions on issues conditional on providing security. This landmark decision clarifies that a Section 103 challenge under the Act, does not entail providing security for the award under the Section 103 (5) of the Act, which is only specific to Section 103 (2) (f) of the Act.

The UKSC rejected IPCO's application of the New York Convention and general rules of English procedure to the present dispute. It observed that the New York Convention was a separate code in itself intended to establish a common international approach. The UKSC was of the opinion that if the right to properly argue or resist enforcement under the Act in enforcement proceedings was made conditional to security, the legislature could and would have done so and as such providing security cannot be used as a means of improving an award creditor's prospects. The Convention reflects a balancing of interests, with a prima facie right to enforce being countered by rights of challenge.

UKSC further clarified that Section 70(7) of the Act was only applicable in cases where the seat of arbitration is in England, Wales or Northern Ireland and it cannot be invoked in international disputes. Further, the power under the said provision is limited to cases where the challenge appears "flimsy or otherwise lacks substance" and this was not the case of IPCO. Therefore, the UKSC held that the order for security was not within the scope of any jurisdiction or power conferred on the Court of Appeal by Section 103 of the Act, nor could it be justified by reference to general English procedural rules.

The court's incisive analysis of the various provisions of the Act has accurately balanced the interest of both the parties and has adopted a pragmatic approach. In international disputes, it is crucial that the rights of the creditor be protected but the zeal to protect these rights cannot be at the detriment of the other party. The imposition of additional security, in this case, for arguing fraud issues in the enforcement proceedings would have been an unnecessary financial burden on NNPC. IPCO's own submissions tantamount to imposing 'substantially more onerous conditions' as not only NNPC had deposited a reasonable amount of security in the past but also had a prima facie claim of fraud.


1. [2017] UKSC 16

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions