Crescent v. National Iranian Oil Company

Case summary

At a glance

Parties: Crescent Petroleum Company International Limited (Bermuda) and Crescent Gas Corporation Limited (British Virgin Islands) v. National Iranian Oil Company (Iran)
Case no.: PCA Case No. 2009-20
Forum and rules: Ad hoc arbitration seated in London, administered by the PCA; procedures in Annex 2 to the GSPC, with ICC rules filling gaps; English Arbitration Act 1996
Arbitration agreement: Article 22 and Annex 2 of the Gas Sales and Purchase Contract of 25 April 2001 (GSPC), governed by Iranian law
Tribunal: Murray Gleeson (Chairman), Sir Jeremy Cooke, Lord Phillips of Worth Matravers (as constituted for the Partial Award on Remedies)
Sector: Natural gas supply (oil and gas)
Outcome: Partial Award on Remedies (27 September 2021): NIOC ordered to pay CGC USD 2,429.97 million plus post-award interest. Pre-award interest refused. Third-party indemnity claims deferred and costs reserved. The award was later recognised in the Netherlands and confirmed in the United States.
Amount: Awarded: USD 1,344.70 million for CGC's lost profits and USD 1,085.27 million for CGC's liability to CNGC, total USD 2,429.97 million. Post-award interest at 12-month EIBOR + 1%, compounded annually, from three months after the award. Pre-award interest of USD 1.979 billion was claimed and dismissed. US judgment (30 April 2024): USD 2,756,123,688.

The dispute

Under the GSPC of 25 April 2001, NIOC agreed to sell natural gas to Crescent Petroleum for 25 years from 1 December 2005, for processing and resale in the UAE. Crescent Petroleum assigned the contract to its subsidiary Crescent Gas Corporation (CGC) in 2003. CGC had agreed to resell the gas to its affiliate Crescent National Gas Corporation (CNGC) and to the Sharjah utility SEWA. NIOC never delivered any gas. A majority award of 31 July 2014 upheld jurisdiction and held NIOC in breach from 1 December 2005. In the remedies phase, CGC claimed its own lost profits, damages for its liability to CNGC for CNGC's lost profits, interest, and declarations of indemnity for liabilities to third parties. NIOC argued that its supply obligations were lower than CGC claimed and that the price would have been revised. It also argued that Iranian law bars interest, that the tribunal had no jurisdiction over CGC's liability to CNGC, and that sanctions and other uncertainties reduced any loss.

Key holdings

NIOC had to supply 198 MMscfd from 1 December 2005 to 31 March 2007 and 500 MMscfd from 1 April 2007 to 31 July 2014. Damages are measured by what NIOC contracted to deliver, not by what it might have been motivated to supply. Partial Award ¶¶ 597, 751
Crescent could not use the paragraph 8 option to raise volumes above 500 MMscfd. The gas was not 'available' without substantial new investment by NIOC, and the ultimate allowable capacity of the Pipeline and associated facilities was about 520 MMscfd. Partial Award ¶¶ 602, 614
No price revision under Article 10.7 is to be assumed in the 'but-for' scenario: NIOC started a review but did not pursue it. Sanctions and force majeure could not reduce damages, because they were liability defences foreclosed by the Award on Jurisdiction and Liability. Partial Award ¶¶ 624, 642
CGC may recover damages for its liability to CNGC for CNGC's lost profits. Under Article 515 of the Iranian CCP 2000 that liability was harm directly and foreseeably caused by NIOC's non-delivery, and it is not conjectural, even though CNGC has made no formal claim. NIOC's jurisdictional objection was rejected as misconceived. Partial Award ¶¶ 555, 571–576
Damages are USD 1,344.70 million for CGC's lost profits and USD 1,085.27 million for its liability to CNGC, a total of USD 2,429.97 million. The figures were calculated by the tribunal-instructed experts on the tribunal's findings. Partial Award ¶¶ 775–779, 887
No pre-award interest. Under Iranian law it would be damages on damages and would constitute riba (usury), and it would not be just to award it under section 49 of the English Arbitration Act. Post-award interest was awarded under section 49(4) as a procedural matter for the law of the seat, at 12-month EIBOR + 1%. The claim for indemnity against third-party liabilities was deferred and all costs were reserved. Partial Award ¶¶ 846, 860–863, 869, 876
English High Court (Butcher J): section 73 of the 1996 Act did not bar NIOC's section 67 challenge to the CNGC head of damages, because NIOC had raised the substance of the objection before the tribunal. The challenge nonetheless had no realistic prospect of success: the words 'arising out of or relating to' are wide even under the restrictive Iranian rules of construction. Summary judgment was given for Crescent. [2022] EWHC 2641 (Comm) ¶¶ 38–39, 59, 63

Procedural history

15 July 2009Crescent files its Notice of Arbitration. The proceedings were bifurcated on 25 February 2010.
31 July 2014Majority Award on Jurisdiction and Liability (Griffith and Hossain; Noori did not sign). The English High Court rejected NIOC's challenges on 4 March and 18 July 2016. Between 2016 and 2019 the tribunal was reconstituted several times, including after the ICC upheld a challenge to Dr Griffith on 5 December 2018.
27 September 2021Partial Award on Remedies: NIOC ordered to pay USD 2,429.97 million plus post-award interest. The English High Court (Picken J) dismissed NIOC's section 69 application on 30 June 2022.
9 August 2022US District Court for the District of Columbia authorises service on NIOC by email.
21 October 2022English High Court (Butcher J) gives summary judgment dismissing NIOC's section 67 challenge. According to the Dutch Advocate General's opinion, NIOC's appeal was dismissed on 13 July 2023.
16 November 2022Butcher J gives additional reasons on the party-consent (ratione personae) objection. His conclusions are unchanged.
5 December 2022Rotterdam District Court recognises both awards under the New York Convention and grants leave to enforce the Remedies Award. It rejects NIOC's objections based on corruption, the Iranian Constitution and public policy.
30 April 2024US District Court for the District of Columbia grants default judgment confirming the award and enters judgment for USD 2,756,123,688.
30 October 2024Rotterdam District Court rejects interim claims in NIOC's action against Heuvel Vastgoed B.V., which bought NIOC's Rotterdam building at the execution auction.
24 October 2025Advocate General R.H. de Bock advises the Dutch Supreme Court to dismiss NIOC's cassation appeal against the Hague Court of Appeal decision of 22 October 2024, which had upheld the exequatur.

Tribunal, counsel and experts

Decided by: Murray Gleeson President
Jeremy Cooke Co-arbitrator
Lord Phillips of Worth Matravers Co-arbitrator
G. Griffith Co-arbitrator (Liability Award 31 July 2014 (signed by Griffith and Hossain; Noori did not sign))
K. Hossain Co-arbitrator (resigned; Liability Award signed by Hossain)
A. Noori Co-arbitrator (did not sign Liability Award; resigned August 2016)
For the claimant: McDermott Will & Emery · Permanent Court of Arbitration
For the respondent: Eversheds Sutherland (International) LLP
Experts: Ali Mohammad Mokarrami (respondent)