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Crescent v. National Iranian Oil Company (NIOC) (I) (PCA)

Why it matters

This partial award is one of the largest ever in a commercial arbitration, awarding over USD 2.4 billion. It clarifies the interaction between Iranian law and English procedural law on damages, particularly the recoverability of lost profits under Article 515 of the Iranian Civil Procedure Code. The case also illustrates the complexities of long-term gas supply disputes and the calculation of consequential losses.

Summary

Crescent Petroleum and its affiliate Crescent Gas Corporation (collectively 'Crescent') entered into a Gas Sales and Purchase Contract (GSPC) with National Iranian Oil Company (NIOC) in 2001 for the supply of gas from Iran to the UAE. NIOC failed to deliver gas from the start, leading to a lengthy arbitration seated in London. In a 2014 award on jurisdiction and liability, the tribunal found NIOC liable for breach. The 2021 Partial Award on Remedies determined the quantum of damages. Crescent claimed lost profits from on-sale of gas and liability to its downstream affiliate CNGC. NIOC argued that Iranian law (Article 515 of the CCP 2000) precluded recovery of lost profits. The tribunal rejected that argument, finding that Note 2 to Article 515 did not apply to this arbitration. It awarded CGC USD 1,344.70 million for lost profits on gas sales and USD 1,085.27 million for liability to CNGC, totaling USD 2,429.97 million, plus post-award interest. Pre-award interest was denied. The tribunal deferred Crescent's claim for declaratory relief regarding indemnification of third parties. The award is notable for its size and for its analysis of Iranian law on damages.

The detail

Parties: Crescent v. National Iranian Oil Company (NIOC) (I)

Case number: PCA Case No. 2009-20

Outcome: NIOC ordered to pay USD 2,429.97 million to CGC for breach of gas supply contract, plus post-award interest.

Quantum: USD 2,429.97 million

Applicable law: Gas Sales and Purchase Contract (GSPC) dated 25 April 2001; Iranian law as governing law; English Arbitration Act 1996 (seat in London).

Issues in play: Iranian law (Article 515 of the CCP 2000) on recoverability of lost profits versus English law on damages; the tribunal held that Note 2 to Article 515 did not preclude lost profits in this arbitration.

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