Disposing of Claims with Certainty in Arbitration Awards
Arbitration awards typically fall into two parts: first, a section where the tribunal sets out its reasons for its findings on the issues before it and, second, a “dispositive” section where the tribunal formally states its decisions on the issues and specifies the relief granted. The former is like a judgment and the latter like an order in court proceedings.
But what if there is a discrepancy between the reasoning and the dispositive sections? And an opponent keen to avoid the consequences of losing?
In Nigeria LNG Limited v. Taleveras Petroleum Trading DMCC and others [2025] EWCA Civ 457, the Court of Appeal provided guidance on the proper interpretation of arbitral awards. The technical issue before the court was whether orders made by an arbitral tribunal were (a) limited to those contained in the final dispositive section of its award, often (as in this case) headed “Award”, or (b) also encompassed matters the tribunal stated that it was ordering in an earlier section (in this case, headed "Analysis") but which were not to be found in the final dispositive section.
In short, Nigeria LNG failed in breach of contract to deliver 19 cargoes of liquefied natural gas (LNG) to Taleveras, causing Taleveras in turn to breach onward supply contracts with Vitol and Glencore. In January 2023, the arbitral tribunal awarded Taleveras USD 24m in damages and an indemnity for liabilities which might be incurred to Vitol and Glencore. Paragraph 607 of the tribunal’s reasons suggested that the tribunals dealing with arbitrations with Vitol and Glencore should state in their awards whether the indemnities responded to the sums they awarded. But the dispositive section, while dealing carefully with issues such as compromise, referred to no such requirement.
In December 2023, an award was issued in separate arbitration proceedings by which Taleveras was liable to pay Vitol over USD 233m (excluding interest and costs). But the award made no mention of the indemnity. Taleveras demanded payment in full from Nigeria LNG under the indemnity.
In early 2024, Nigeria LNG applied to the High Court to prevent enforcement of the indemnity on the basis that the indemnity did not respond to the Vitol award because the arbitral tribunal dealing with Vitol’s claim had not dealt with the indemnity.
Talevera then secured a further award from the Vitol tribunal to the effect that all the sums awarded were within the scope of the indemnity – but Nigeria LNG disputed that the tribunal had any power left after delivery of its final award. In the time-honoured phrase, having done its job, it was functus officio.
At first instance, HHJ Pelling KC dismissed Nigeria LNG’s arguments. The Court of Appeal left open the question of the validity of the second award by the Vitol tribunal because it was not necessary to decide it.
Phillips LJ found that the key issue was whether the indemnity granted in the dispositive section was qualified by language in the reasoning section of the award. Like any other document, an arbitral award should be interpreted as a whole and in a reasonable and commercial manner.
Where an award (like the award in the present case) includes a clear dispositive section that contains a comprehensive list of relief granted by the arbitral tribunal, that is highly likely to be the end of the matter. Phillips LJ held that the final section of the award (actually entitled “Award” and beginning with the words “For the reasons set out above, the Tribunal hereby DECIDES AND AWARDS as follows …”) was intended to serve the same purpose as a court order following a reasoned judgment and set out the relief granted in formal terms. This section was intended to be a self-contained and comprehensive statement of that relief. The fact that the tribunal had used directive language (such as “The Tribunal further orders that…”) in the earlier analysis section of the award did not mean that the reader had to refer back to that section. If the tribunal had wished to refer back, it would have done so clearly – and it had not.
In many respects this will seem an obvious response to an attempt by a party to evade its obligations. However, the Court of Appeal is adopting a principled approach to the distinction between awards and their reasons, which (in accordance with a long-standing policy to encourage arbitration) promotes the enforceability of awards, reduces the risk of messy disputes about interpretation and seeks to ensure that arbitral awards are indeed final.
Simon Winter, Partner