In Nigeria LNG Limited v Taleveras Petroleum Trading DMCC [2025] EWCA Civ 457, the Court of Appeal gave a rare insight into an arbitral award concerning a failure to deliver multiple cargoes under an LNG master spot sales agreement. Although the substance of the award is confidential, it highlights the specific challenges related to ensuring an LNG sales agreement contains a real remedy for buyers and sellers.
Facts
Nigeria LNG Limited (“NLNG”) is an LNG producer exporting LNG from Nigeria. Taleveras Petroleum Trading DMCC (“Taleveras”) is an energy trader domiciled in Dubai.
This case concerns a final arbitral award dated 30 January 2023 following a London arbitration (the “Award”), by which the arbitral tribunal (the “Tribunal”) held NLNG liable for failing to deliver 19 FOB Cargoes of liquefied natural gas to Taleveras under a Master FOB LNG Sales Agreement and a spot confirmation notice.
The Award followed a conventional format, including a section covering the Tribunal’s analysis on relevant issues, a section on the Tribunal’s conclusions, and a “dispositive section” (beginning with “…the Tribunal hereby DECIDES AND AWARDS as follows…”) that set out sums awarded and other remedies granted as a result of the Tribunal’s conclusions. In addition to payment of damages for Taleveras’s loss of profits, the dispositive section of the Award ordered NLNG to indemnify Taleveras (the “Indemnity”) in respect of any amounts Taleveras was found liable to pay in two separate arbitrations with Vitol SA and Glencore Energy UK Limited relating to on-sale arrangements (the “Vitol Arbitration” and the “Glencore Arbitration”, respectively).
Commercial Court Proceedings
In proceedings before the Commercial Court, NLNG disputed liability to indemnify Taleveras in respect of the Vitol Arbitration, on the basis that:
- The “analysis” section of the Award stated (at paragraph 607 of the Award): “The Tribunal further orders that… any eventual enforcement of [the Indemnity] be subject to the endorsement of [the tribunals in the Vitol Arbitration and Glencore Arbitration] as to its applicability in the context of any award and, in particular, any consent award, made in either of those Proceedings.”
- NLNG asserted the award in the Vitol Arbitration did not comply with this requirement, and that this requirement was a condition of the Indemnity.
The Commercial Court rejected NLNG’s arguments and decided that on a proper interpretation of the Award:
- The Tribunal intended that the sums awarded and other remedies granted are confined to those set out in the dispositive section; and
- the Indemnity was not subject to any declaration in the Vitol Arbitration (or the Glencore Arbitration) to the effect that the sums awarded fell within the scope of the Indemnity.
For further information on the Commercial Court’s reasoning, see our Law-Now article summarising the Commercial Court’s judgment here.
NLNG appealed.
Court of Appeal’s Decision
The Court of Appeal dismissed the appeal. Lord Justice Phillips (with whom the rest of the Court agreed) found “no error in [the Commercial Court’s] approach”, and confirmed as follows:
- The Commercial Court was right to take into account the nature of the arbitration, the qualifications of the arbitrators and the structure and formality of the Award when deciding that the dispositive section of the Award was intended to be a self-contained and comprehensive statement of the Tribunal’s orders, akin to an order following trial in English court proceedings.
- The Commercial Court did not place undue weight on form over substance. In fact, the Commercial Court considered the wording of paragraph 607 in the “analysis” section of the Award in detail and found that, in context, it did not augment the Tribunal’s orders in the dispositive section. In this respect, the Court of Appeal considered it relevant that paragraph 607 addressed a subject matter that was also dealt with in the dispositive section. The need for the endorsement of the arbitral tribunal in the Vitol Arbitration (and the Glencore Arbitration) was expressly dealt with in the dispositive section, but it was limited to a situation where there was an award by consent in those arbitrations (which situation did not arise here). The Court of Appeal saw no basis for expanding the scope of the dispositive section due to the reference in paragraph 607 to “any award and, in particular, any consent award”, and confirmed that, in light of the inconsistency, “the dispositive section clearly prevails”.
Comment
Damages for Non-Delivery
The decision of the Commercial Court gives a rare insight into arbitral awards concerning the sale of LNG.
It is not known whether the Master FOB LNG Sales Agreement was governed by English law, New York law or another choice of law.
In the event of a failure to deliver, in English law, the usual measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract. Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver. See the Sale of Goods Act 1979, Section 51.
In this respect, Benjamin’s Sale of Goods 12th Ed., says:
“Where the seller fails to deliver the goods, but there is an available market, the buyer should be able, by buying substitute goods, to avoid consequential losses flowing from the seller’s breach. There may, however, be some incidental expenses which the buyer incurs in buying substitute goods, such as extra expenses in transport or handling: these are recoverable as part of the buyer’s damages, in addition to the measure of damages in s.51(3).
In the absence of an available market, however, the buyer may often wish to claim consequential losses such as: extra expenses incurred by him, e.g. in adapting the nearest equivalent goods which he can obtain; or the loss of profits he would have made under a contract of resale; or the loss of profits which he would have made had the goods been delivered so that he could manufacture them into different articles, as the seller knew he intended to do; or the damages he paid to a sub-buyer. In some circumstances, the buyer may claim both loss of profits and the extra expenses incurred by him which are wasted as a result of the seller’s breach of contract, but the courts will be careful to avoid overlapping of different heads of loss”. (emphasis added).
If the Master FOB LNG Sales Agreement were governed by English law, the inference seems to be that the arbitral tribunal decided that there was no available market such that the buyer was able to obtain what Benjamin’s refers to as its ‘consequential losses’. It is certainly possible that where an LNG delivery does not occur, it is not practical to find available a substitute cargo for delivery at or around the same day.
In turn, that throws an interesting light onto the proper nature of a claim and measure of damages should this occur. The AIEN Model Form Master Spot Sales Agreement says:
“Neither Party shall be liable for any Consequential Loss suffered or incurred by the other Party arising out of, in connection with or resulting from an Agreement, regardless of whether the Consequential Loss is based on tort (including negligence), strict liability, contract (including breach of or failure to perform an Agreement or the breach of any representation or warranty pursuant to an Agreement, whether express or implied), or otherwise. This limitation shall not apply to and shall not limit the liability of either Party for any remedy expressly provided pursuant to an Agreement.”
Consequential Loss is defined as:
“Consequential Loss” means any loss, liability, damage, cost, judgment, settlement, and expense (whether or not resulting from Claims), including interest, penalties, reasonable legal costs, and attorneys’ and accountants’ fees and expenses, regardless of cause, which is not immediately and directly caused by the relevant act or omission. By way of illustration, and subject to the satisfaction of the standard set forth in the preceding sentence,
Consequential Loss will include the following:
(1) …
(4) loss or deferment of bargain, contract, expectation, revenue, profit, use, or opportunity; and
(5) a Claim made or brought by a Third Party for a loss which, had it been suffered by a Party, would have been a Consequential Loss.”
It is not known whether the contract in this case included a similar exclusion. However, it may be of some relevance that Consequential Loss in the AIEN Model Form Master Spot Sales Agreement is defined and specifically will not exclude losses “immediately and directly caused by the relevant act or omission”. As a result, it would be arguable that the AIEN Model Form Master Spot Sales Agreement would allow damages calculated on the basis the arbitral tribunal in this case permitted. That might be capable of contrast with other ‘consequential loss’ exclusion clauses that offer a wider exclusion, which might make it more difficult to mount claims outside the scope of the usual measure of damages. This highlights the importance of ensuring that the drafting of consequential loss exclusion clauses is fit for the purpose of the contract in which they reside.
In addition, as the Commercial Court illustrated in Glencore Energy UK Ltd v Cirrus Oil Services Ltd [2014] EWCH 87 (Comm), properly formulating a claim under a hydrocarbons sales agreement in light of consequential loss exclusions can be critical. A claim for loss of bargain under the Sale of Goods Act 1979 is not a claim for loss of profits, which might be excluded by a consequential loss clause. See, in this regard, CMS Annual review of developments in English oil and gas law (2015 Ed.) page 25 here.
Interpretation of Arbitral awards
This case reaffirms the Commercial Court’s finding that it will not generally be appropriate to allow language used in the narrative reasoning section of an award to contradict the language in the part of the award that is intended to be its final order. This is particularly relevant in circumstances where the majority of an arbitral tribunal are English lawyers, the curial or procedural law governing the conduct of the arbitration is English law, and the arbitral award follows a structured format concluding with a dispositive section. More generally, this case demonstrates that English courts support the finality and integrity of arbitral awards, and will generally look to interpret arbitral awards in a reasonable and commercial manner to avoid ambiguity.
The full judgment can be found here.
Judges: Phillips LJ, Warby LJ, Zacaroli LJ
The authors would like to thank Preeti Bhavra, trainee solicitor at CMS, for her assistance with the preparation of this article.
