Lloyd's Maritime and Commercial Law Quarterly
PRE-EMPTIVE CHALLENGES TO RECOGNITION OF FOREIGN ARBITRAL AWARDS
Paul MacMahon*
Star Hydro v National Transmission and Despatch Co
A party that loses in arbitration may apply to the courts at the seat to set aside the award. Alternatively, the losing party may wait until the victor tries to have the award recognised and raise objections to the award defensively.1 But may the losing party affirmatively seek a declaration from a court outside the seat that the award should not be recognised there?
The Court of Appeal has taken a stand against pre-emptive challenges to recognition and enforcement in Star Hydro Power Ltd v National Transmission and Despatch Co Ltd.2 The court concluded that proceedings in Pakistan instituted by the losing party in a London arbitration to determine whether the award should be recognised in Pakistan would be tantamount to interfering with the English courts’ exclusive power to set aside the award. The court further ruled that an anti-suit injunction should be issued to stop the Pakistan proceedings.
The Supreme Court has since granted National Transmission and Despatch Co Ltd (“NTDC”) permission to appeal. While commentary by London lawyers on the Court of Appeal’s decision appears to be uniformly positive, this note will argue that the Pakistan courts should be allowed to decide now whether the award should be recognised or enforced in Pakistan. The parties’ agreement does not bar one of them from seeking a declaration of non-recognition, and the New York Convention does not explicitly preclude it. In finding an implicit bar, the court’s decision exaggerates the importance of the seat of arbitration, upsets the balance between the seat court and enforcement courts, and purports to impose on foreign courts a highly contestable interpretation of the New York Convention.
Background
The contract in Star Hydro is a 30-year electricity supply agreement between Star Hydro Power Ltd and NTDC. Star Hydro is ultimately owned by a Korean company; NTDC is a Pakistan state entity whose function is to buy electricity. The parties agreed that Pakistan law should govern the contract. They got into a dispute over pricing, with NTDC contending that the tariff it should pay for electricity should be determined exclusively by Pakistan’s National Electric Power Regulatory Authority (“NEPRA”). NTDC refused to pay more than the sums NEPRA had decided were due. As permitted by the contract, Star Hydro commenced arbitration in London. The arbitrator ruled that he had jurisdiction and that the formula set forth in the contract took precedence over NEPRA’s determination. Accordingly, he ordered NTDC to make up for the shortfall in its payments to Star Hydro.
* Associate Professor of Law, LSE Law School.
1. Dallah Real Estate and Tourism Holding Co v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46; [2010] 2 Lloyd's Rep 691; [2011] 1 AC 763, [28].
2. [2025] EWCA Civ 928; [2025] 2 Lloyd's Rep 215; [2025] BLR 455.
Case and comment
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