Factual summary
The dispute arose from a Power Purchase Agreement (PPA) entered into in 2012 between Star Hydro Power Limited (SHPL), a Pakistani-incorporated power producer ultimately owned by South Korean shareholders, and the National Transmission and Despatch Company Limited (NTDCL), a Pakistani state entity responsible for electricity transmission. The PPA provided for the construction and operation of a hydroelectric plant with NTDCL agreeing to purchase electricity generated by SHPL for 30 years.
The PPA included a detailed tariff adjustment mechanism and an arbitration clause, which provided for disputes to be referred to a London-seated arbitration under the rules of the London Court of International Arbitration (LCIA). The PPA was governed by Pakistani law.
A dispute arose regarding the correct tariff to be applied at the plant’s commercial operation date. SHPL claimed entitlement to a higher tariff under the PPA, while NTDCL argued that the National Electric Power Regulatory Authority had exclusive statutory authority to determine tariffs, and had set a lower tariff. SHPL commenced LCIA arbitration in London, and the sole arbitrator issued a final award in May 2024, finding in SHPL’s favour on the contractual tariff and ordering NTDCL to pay the difference.
NTDCL then commenced proceedings in the Lahore High Court, seeking, under the guise of the New York Convention, partial recognition and enforcement of the award, but in substance challenging the arbitrator’s jurisdiction and seeking to nullify the award’s effect. SHPL sought an anti-suit injunction from the English courts to restrain NTDCL from pursuing the Lahore proceedings. SHPL argued that NTDCL’s application under the New York Convention was, in fact, an attempt to challenge the substance of the award and not an application that sought to recognise or enforce the award.
Decision at first instance
The matter was heard before Dias J at first instance, who identified three critical questions to be resolved: first, the allocation of jurisdiction under the New York Convention; second, what NTDCL’s application in Pakistan was seeking to achieve; and third, whether it was appropriate for an English court to intervene by way of an anti-suit injunction. The key findings of the court were as follows:
- The New York Convention allowed for an award to be recognised in whole or in part and it must be assumed that the court which is being asked to recognise the award (whether in whole or in part) will do so in accordance with the New York Convention and international law. It was held that the English court had no policing role in this respect.
- It was further held that it was open for a party to pre-emptively challenge an award under Article V of the New York Convention in any jurisdiction. In reaching this conclusion, the High Court held that there was nothing in the wording of the New York Convention, or in any of the authorities, which precluded the possibility of a pre-emptive application.
- The application was not a “root and branch” attack on the award. The extent to which recognition of certain parts of the award rendered others unenforceable was a matter to be “played out before the Lahore court” and it is not a matter “for the English court to intervene”.
- In view of the findings above, Dias J concluded that it would be “wholly wrong for the English court to arrogate to itself the power to determine what issues should and should not be left to the Pakistani courts”.
SHPL was granted permission to appeal on the question of whether: (i) an application may be made under the New York Convention preemptively; and (ii) properly characterised, the Lahore proceedings were brought by NTDCL in breach of the arbitration agreement and were an attempt to undermine the arbitration award.
The key issues addressed by the English Court of Appeal were as follows:
Supervisory jurisdiction of the English courts
The Court of Appeal reaffirmed that the choice of London as the seat of arbitration confers exclusive supervisory jurisdiction on the English courts, which it said was analogous to an exclusive jurisdiction clause. Accordingly, any challenge to the validity of the award must be brought in England and Wales. This was the case even where the governing law of the arbitration was a foreign law (including where that foreign law itself provided a right to challenge an award).
As a result of the English court having exclusive jurisdiction in relation to proceedings challenging the award, the English court was entitled to consider whether a party challenging the arbitral award in a foreign jurisdiction was doing so in breach of the arbitration agreement and should be restrained. The fact that NTDCL’s application in Lahore was labelled as being made under the New York Convention had no bearing on the exercise by the English court of its exclusive jurisdiction.
Article V of the New York Convention
The New York Convention is concerned solely with the recognition and enforcement of foreign arbitral awards in secondary jurisdictions and Articles III to VII deal solely with the nature and extent of the obligation of the secondary jurisdiction to recognise and enforce an award.
It was therefore apparent that “challenges” to an award under the New York Convention are a “shield against applications for recognition and enforcement of an award” and not a sword for pre-emptively attacking an award. This was reflected in sections 101(1) and 103(1) of the Arbitration Act 1996 (giving effect to the New York Convention), which provide that the recognition of a New York Convention award may only be refused on six grounds, reflecting those set out in Article V(1).
The New York Convention does not permit a party to bring a free-standing challenge to an award in a foreign court before enforcement is sought. Free-standing challenges to an award can only be made under sections 67 to 69 of the Arbitration Act 1996 (now as amended by sections 10 and 11 of the Arbitration Act 2025).
Partial recognition and enforcement
Article V(1)(c) of the New York Convention provides that an award may be recognised and enforced in part if other parts are not within the scope of the submission to arbitration and can be separated. More generally, it has been recognised in England and Wales that partial recognition of an award is permissible. Therefore, NTDCL’s approach of applying to recognise certain parts of the award, but not others, was permissible.
Nature of the Lahore proceedings
Although NTDCL framed its Lahore application as one for “recognition and enforcement” of part of the award, the Court of Appeal found that the true substance was a pre-emptive challenge to the award’s validity and effect. In particular the prayer for relief sought a determination that every one of the substantive orders made in the dispositive section of the award was null.
The Court of Appeal concluded that the application was “undoubtedly a full-throated challenge to the Award and its effect” and was therefore brought in breach of the arbitration clause and the exclusive jurisdiction of the English court in relation to such challenges. The Court of Appeal granted an anti-suit injunction restraining NTDCL’s application.
Commentary
The Court of Appeal’s judgment makes it clear that the English court will adopt a robust approach in the exercise of its supervisory jurisdiction. The judgment sends a clear message that parties cannot seek to circumvent the exclusive jurisdiction of the supervisory court by pre-emptively challenging an award in a foreign court. The decision provides certainty for parties to London-seated arbitrations, reinforcing that their choice of seat will be respected and protected by the English courts.
In practical terms, the judgment highlights the importance of parties carefully considering the seat of arbitration in cross-border contracts. In particular, parties should pay close attention to whether, and to what extent, the law of the seat permits parties to challenge the validity of an award.
Further, the decision underscores the court’s approach of focusing on substance rather than form. In particular, the judgment makes clear that parties will not be able to circumvent the exclusive jurisdiction of the supervisory court by framing “challenges” to an award under the banner of the New York Convention.
Client Alert 2025-239
