Diverging views on jurisdiction between ICC arbitrators and the English Commercial Court

Diverging views on jurisdiction between ICC arbitrators and the English Commercial Court

Tecnicas Reunidas Saudia for Services and Contracting Ltd -v- Petroleum Chemicals and Mining Company Ltd [2025] EWHC 1785 (Comm)

This dispute illustrates the importance of carefully considering whether a contractual agreement that comprises more than one document incorporates potentially inconsistent dispute resolution provisions.

If it does, the parties should ensure that they make clear which provisions prevail. Paying close attention to this issue, and addressing it clearly at the time of contracting, can save time and costs that may subsequently be wasted on arguments as to what applicable dispute resolution regime applies to the parties’ contract.

This case was unusual in that there was clear disagreement between an ICC tribunal seated in Riyadh and the English Commercial Court in London as regards the proper jurisdiction by which disputes should be resolved.

It is a not infrequent problem when parties may exchange short recap contracts and then follow up with more detailed wordings or they refer to other documents containing conflicting law and jurisdiction clauses.

As the Court highlighted in this case, there are fundamental differences between ad hoc and institutional arbitration, specifically ICC arbitration. Amongst other things, a detailed set of institutional rules governing arbitration removes a degree of party autonomy in deciding the architecture of the arbitration. Importantly, parties to an ICC arbitration waive their right to appeal an award on a point of law which is a fundamentally different contractual bargain with potentially far-reaching consequences.

Thus, the type and form of arbitration can be crucial to the parties’ rights and should be expressly agreed.

The background facts

The contract in question related to a gas programme project in Saudi Arabia run by Saudi Aramco. In 2015, Saudi Aramco appointed Tecnicas Reunidas Saudia for Services and Contracting Ltd (Tecnicas) as the head EPC contractor for various aspects of the project works.

In 2016, Technicas subcontracted certain electrochemical elements of the works to a Saudi company, Petroleum Chemicals and Mining Company Ltd (PCMC).

The sub-contract

The sub-contract was made up of a series of documents concluded over the course of two days in December 2016. The Purchase Order set out this order of precedence of the documents forming the sub-contract:

Purchase Order signed and executed by the parties on 14 December 2016.

Deviation List to the General Terms and Conditions for Construction Subcontracts (GTCCS) signed on 13 December 2016. The Deviation List memorialized the parties’ negotiating process. Items 1 to 18 made amendments to the draft Purchase Order. Items 19 to 26 made amendments to the GTCCS.

Purchase Order Requisitions signed on 14 December 2016.

GTCCS signed on 14 December 2016.

The Court subsequently found that the only contractual document, and the document which took precedence over the others, was the Purchase Order that was signed on 14 December 2016. Therefore, even if there was any inconsistency between what was agreed in Items 1 to 18 of the Deviation List, the Purchase Order would trump the Deviation List for two reasons:

It was the contractual document that contained the contractual terms in relation to matters the subject matter of the Purchase Order; and

In any event, it had precedence over the Deviation List.

Consequently, the Deviation List could only amend the GTCCS, it could not amend the Purchase Order.

Arbitration agreement

The Purchase Order provided at Clause 11.1 as follows:

11.1. The arbitration proceedings shall take place in London (England) and the arbitration shall be held in English, and will be governed by the laws of England and Wales".

This was provision for a London seated arbitration and, in the absence of a reference to any particular arbitration rules, amounted to an agreement to ad hoc arbitration.

However, Section G, Clause 32 of the GTCCS provided for Saudi Arabian law and ICC arbitration governed by the ICC arbitration rules and seated in Riyadh, Saudi Arabia.

Item 18 of the Deviation List provided for “Arbitration under ICC Laws”.

Arbitration proceedings

When a dispute arose between the parties, PCMC (after a few missteps) filed a request for ICC arbitration, which Tecnicas challenged on the basis of lack of jurisdiction. The ICC tribunal dealt with jurisdiction as a preliminary issue and, in a Partial Award, held that it did have jurisdiction.

In the tribunal’s view, when read together with the other documents containing references to arbitration, namely the Purchase Order and the GTCCS, Item 18 of the Deviation List recorded a clear and unambiguous confirmation of the parties’ agreement to arbitrate under the ICC Rules as comprehensively set out in Article 32 of the GTCCS, subject only to the change of the arbitral seat from Riyadh (Saudi Arabia) as per Article 32 of the GTCCS to London (England) as per Clause 11.1 of the Purchase Order.

The tribunal thought there was nothing in Item 18 of the Deviation List that suggested the parties had any intention to abolish the provisions on arbitration contained in Clause 32 of the GTCCS altogether or to (merely) replace the agreement on ICC arbitration contained in Clause 32 of the GTCCS by ad hoc arbitration. On the contrary, Item 18 confirmed the parties’ agreement to arbitrate under the ICC Rules. Moreover, there was nothing to be found in the sub-contract that suggested the parties intended Clause 11.1 of the Purchase Order to establish a standalone arbitration clause superseding or eradicating all other references to arbitration in the subordinate documents.

Appeal to the Court

Tecnicas applied to the English Commercial Court, seeking to challenge the award pursuant to s.67 Arbitration Act 1996 (the Act). As PCMC failed to acknowledge service of these proceedings in due time and there was no good reason for the substantial delay in doing so, the Court decided that it was not entitled to participate in the proceedings as a party. However, it was permitted to take part on a conditional basis in order that the Court should be aware of any counterarguments that PCMC wanted to make to Tecnicas’ case.

The Commercial Court decision

S.67 or s.68 of the Act?

The Court dismissed PCMC’s argument that the ad hoc v. ICC arbitration point was a procedural, not jurisdictional, issue that did not engage s.67 of the Act and that the appeal should instead have been brought under s.68 of the Act. This issue was not one of procedural irregularity, it went to the terms of the agreement to arbitrate itself and was as such jurisdictional.

There were fundamental differences between the two types of arbitration. Additionally, in order to decide the issue, the Court had to consider: (i) whether there was a valid arbitration agreement; and (ii) whether the tribunal was properly constituted. These were jurisdictional issues that fell within s.67.

There was also no, as PCMC had sought to argue, requirement for Tecnicas to show it had suffered prejudice in order to bring a s.67 appeal. This was because s.67 was not concerned with irregularity or substantial injustice, it was aimed at upholding and giving effect to the parties’ contractual bargain.

Timeliness objection

Pursuant to s.31 of the Act, a party that seeks to challenge a tribunal’s jurisdiction at the outset of the proceedings must do so no later than the time that party takes the first step in the proceedings to contest the merits. However, appointing an arbitrator does not preclude a party from challenging the tribunal’s jurisdiction. Furthermore, the arbitral tribunal may admit an objection later than the time specified if it considers the delay to be justified.

Pursuant to s.73(1)(a) of the Act, if a party continues to participate in an arbitration without making an objection in due time that the tribunal lacks substantive jurisdiction, that party may lose its right to object.

PCMC argued that Tecnicas should have raised the ad hoc v. ICC arbitration point much earlier in the arbitration proceedings and that because it did not do so, it had waived the right to object to the ICC arbitration. PCMC also referred to the fact that Tecnicas had participated in the ICC arbitration, having appointed an ICC arbitrator and submitted to ICC rules, as being indicative of its failure to make a timely objection.

Court

The Court dismissed this argument. Firstly, Tecnicas had made a reservation of rights from the outset and had made it clear at the beginning of the arbitration proceedings that it was going to challenge the ICC tribunal’s jurisdiction. Secondly, it took the specified ad hoc v. ICC arbitration challenge to jurisdiction in due course and the tribunal permitted it to do so. The Court concluded that Tecnicas had made its challenge within the time permitted by the tribunal and had not waived its right to object.

The Court added that appointing an arbitrator was not a bar to challenging jurisdiction. In order for a tribunal to rule on a jurisdictional challenge, there has to be a constituted tribunal.

Furthermore, PCMC itself engaged on the merits in seeking to rebut that jurisdictional challenge without objecting that it had been made too late. Pursuant to s.73, therefore, PCMC was barred from subsequently raising the timeliness objection before the Court.

The contractual agreement

The Court was in no doubt that the parties had agreed to ad hoc arbitration seated in London, not ICC arbitration. The tribunal, therefore, had no jurisdiction.

Specifically, the Purchase Order took precedence over the remaining documentation. If there was any inconsistency, the Purchase Order prevailed. Items 1 to 18 of the Deviation List merely recorded the parties’ negotiating position. What was finally agreed was reflected in the executed Purchase Order. The Deviation List could not alter the Purchase Order.

Clause 32 of the GTCCS was clearly inconsistent with Clause 11.1 of the Purchase Order but the latter took precedence. The Court rejected PCMC’s argument that the two provisions could be read together and thereby provide for arbitration in London but governed by ICC Rules. This was untenable. The parties had agreed English (not Saudi Arabian) law, a London (not Riyadh) seat, and ad hoc not institutional arbitration. A “pick and mix” approach was inappropriate, particularly as ICC arbitration was fundamentally different from ad hoc arbitration.

The award was, therefore, set aside.

Comment

This is not the first recent case to raise issues of timely objections under ss.31 and 73 of the Act. It remains important for parties to arbitration proceedings to carefully consider what jurisdictional or procedural objections they may wish to make and to raise them early on and at the appropriate time and to reserve all rights as appropriate.

Where a contract comprises a number of documents, it is critical to express which document will prevail in the event of conflicting terms. In this case, the precedence between contractual documents ultimately ensured that a party could best protective its arbitral rights, including rights of appeal, before an ad hoc London arbitral forum.