Key takeaways
Final award section takes priority
Courts focus on the formal decision, not reasoning
Commercial approach to interpretation upheld
Tribunal’s intent matters more than wording conflicts
LNG disputes highlight contract clarity needs
Buyers and sellers must clearly define responsibilities
Nigeria LNG Ltd -v- Taleveras Petroleum Trading DMCC [2025] EWCA Civ 457
In this case, the Court of Appeal has given guidance on the interpretation of English arbitration awards, particularly in respect of awards where there may appear to be inconsistencies between the reasoning section of the award and the final dispositive section.
The arbitration award in question related to the non-delivery of LNG under a long-term supply contract at the time of the gas price spike that followed the Russian invasion of Ukraine in February 2022.
The award
The UNCITRAL tribunal in this case awarded the buyer, Taleveras Petroleum Trading DMCC (Taleveras), damages and indemnities for the failure of the seller, Nigeria LNG Limited (NLNG), to deliver 19 LNG cargoes under a master sales agreement (MSA) and confirmation notice (CN) between the parties.
As part of this award, Taleveras was awarded an indemnity for any amounts that it was found liable to pay to Vitol SA (Vitol), to whom it had agreed to onward sales of some of the cargoes. Ultimately, in a separate arbitration, Taleveras was ordered to pay Vitol USD 233,259,113.55 for failure to deliver under the sale contract between those two parties. Taleveras accordingly demanded NLNG’s payment of that amount pursuant to the indemnity awarded by the UNCITRAL tribunal.
The claims before the Court
NLNG commenced English court proceedings seeking a declaration of non-liability to Taleveras under the indemnity and an injunction to prevent Taleveras from enforcing the indemnity.
This was on the basis that the reasoning part of the award in Taleveras’s favour provided that,
"eventual enforcement of this indemnity be subject to the endorsement of [the tribunal in the Vitol arbitration] as to its applicability in the context of any award and, in particular, any consent award, made in [the Vitol arbitration]”.
NLNG claimed that such an endorsement by the tribunal in the Vitol arbitration was a condition of NLNG’s liability to Taleveras under the indemnity and that that condition had not been satisfied.
Taleveras denied that such an endorsement was necessary as the final section of the award in its favour, headed “Award”, did not impose this condition. Taleveras accordingly sought permission from the Court to enforce the indemnity against NLNG.
The Commercial Court found in favour of Taleveras. NLNG appealed.
The Court of Appeal decision
The Court of Appeal dismissed the appeal. Its reasoning was as follows.
When interpreting an arbitration award, the assumption should be that there will be no substantial fault and that the tribunal intended to make a coherent decision. Generally, it will not be appropriate to find that language in the reasoning section of an award contradicts the language used in the part of the award that is intended to be the tribunal’s final order. Weight should be given to the question of the substance of the award, and not merely to form. Although there remains a role for form, this is not conclusive.
The final section of the award in Taleveras’s favour was entitled “Award” and began with the words “For the reasons set out above, the Tribunal hereby DECIDES AND AWARDS as follows…”. The Court of Appeal, therefore, held that this section was intended to serve the same purpose as a court order that follows a reasoned judgment and sets out the formal orders made. This final section of the award was intended to be a self-contained and comprehensive statement of the relief granted by the tribunal.
The final section did not cross-refer to the reasoning previously given for the indemnity and there was nothing to suggest that the reasoning sections of the award should add to the final dispositive section. The reference in the reasoning section of the award to an endorsement by the tribunal in the Vitol arbitration did not, therefore, undermine the comprehensive effect of the final “Award” section.
Comment
This decision provides a good summary of the commercial approach that should be taken to interpreting English arbitration awards.
It is also an insight into one of the many claims for non-delivery under LNG sale contracts that arose out of the spike in gas prices a few years ago. Given the significant sums potentially at stake under long-term LNG supply contracts, buyers and sellers must negotiate their MSAs and CNs carefully and be clear on their rights and obligations in case of non-delivery.
