In the case of Coal & Oil Co. LLC v GHCL Ltd  SGHC 65, the Singapore High Court took the opportunity to reinforce that a party seeking to set aside an arbitral award on the grounds of breach of natural justice is a serious matter requiring a high evidential threshold, and will be limited to only “egregious cases where the error is clear on the face of the record.”
The Singapore High Court reiterates its reluctance to set aside arbitral awards except in “egregious cases”
Craig Shepherd and Mike McClure from the HSF office in Dubai have co-edited a TDM (Transnational Dispute Management) Special entitled āArbitration in the Middle East ā expectations and challenges for the futureā, that was published today.Ā
The Special considers a number of issues facing arbitration in the Middle East including the proliferation of new arbitral centres, updated statutory regimes to support arbitration and national courts recognising and enforcing arbitral awards.Ā It also reports on examples of where courts have assumed jurisdiction in spite of arbitration clauses and arbitral awards not being enforced for what appear to be minor procedural defects and public policy considerations that can play a major role in the region.
Ā A link to the Special is here.
For further information, please contact Craig Shepherd, Partner, Mike McClure, Senior Associate or your usual Herbert Smith Freehills contact.
Mike McClureSenior Associate
+971 4 428 6364
Herbert Smith Freehills launches guide on the use of mediation with arbitration within its series of ADR Practical Guides
We are pleased to launch the sixth guideĀ in our series of ADR Practical Guides, designed to provide clients with essential practical guidance on various processes falling under the banner of alternative disputeĀ resolution (ADR), with a particular focus on mediation.
Guide No. 6: āUse of Mediation with ArbitrationāĀ provides a brief description of how mediation and other ADR processes can be used with arbitration, includingĀ some key points to consider at the stage of drafting dispute resolution clauses and during the arbitration process.
PreviousĀ guides in the series can be found on our ADR webpage, together with other materials including our award-winning research into how corporates use ADR.
For more information please contact Alexander Oddy, Partner, Craig Tevendale, Partner, Jan O’Neill, Professional Support Lawyer, Hannah Ambrose, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.
Jan O'NeillProfessional Support Lawyer
+44 20 7466 2202
Staying enforcement of awards: the English Commercial Court offers practical guidance for both sides
In a recent decision Y and S  EWHC 612, the English Commercial Court considered the circumstances in which the Court would (i) make an order suspending the enforcement of an award and (ii) make an order for the provision of security pending an application to set aside an award.
This judgment contains useful practical guidance on both the appropriate grounds on which to make such applications and the factors that the Court will bear in mind when exercising its discretion (see the comment section below).
Businesses may seek to avoidĀ court or arbitration proceedings for various reasons, including the risk of irreparable damage to business relationships, the lack of certainty inherent inĀ legal action and, obviously, costs. This aversion has contributed toĀ the development of alternative dispute resolution mechanisms and it is now relatively common for parties to provide for escalation clauses before initiating proceedings before courts or arbitral tribunals.
On 12 December 2014, the French Supreme Court added to its case law on this type of clauses. The Court is adamant: under French law, conciliation clauses are not a mere formality. They are binding on the parties and claimants who fail to comply with them will see their claims dismissed with no examination on the merits.
The Fiona Trust case is one of the best known decisions in English arbitration case law, setting out a “fresh start” in English jurisprudence with the strong presumption that commercial parties intend all disputes to be determined in a single forum.
That decision did not, however, prevent related litigation in the English courts. The most recent application to the English courts in Fiona Trust v Privalov  EWHC 527 (Comm) has highlighted the difficult path to be followed for the English court in reaching decisions in concurrent litigation proceedings which could impact upon or be seen to prejudge issues in on-going arbitration. Smith J in this case granted an application to clarify the meaning of an order as it would prevent litigation hampering the arbitral process.
The background to the 2007 House of Lords decision in Fiona Trust involved O, the owners of Russian ships which were chartered to C. O claimed to have rescinded the charterparties (including the arbitration clauses within them) on the grounds they had been induced by bribery.
C sought to refer the matter to arbitration and appointed an arbitrator. O applied to court seeking to restrain the arbitration on the basis that the charterparties (including the arbitration clause) had been rescinded for bribery. In response, C applied to stay the court proceedings in favour of arbitration under s 9 of the Arbitration Act 1996. The Court of Appeal ordered the stay (the “CofA Order“), ruling that the scope of the arbitration clause was wide enough to encompass a fraud claim. This was subsequently upheld by the House of Lords (now the Supreme Court). Following this decision, the parties appointed an arbitral tribunal.
In 2009, O brought fresh proceedings in the English courts. In these proceedings O pleaded that, by causing or permitting the charterparties, certain defendants had acted in breach of fiduciary or other duties owed to O. As part of these pleadings, O continued to plead that the charterparties and their arbitration provisions had been rescinded. The relief sought divided broadly into two types: (1) various heads of damage which were not dependent on the rescission of the charterparties; and (2) monetary claims relating to, or consequential on, rescission of the charterparties.
In 2010, Smith J in the High Court dismissed the claims as they were based on dishonesty and a finding there had been no dishonesty had been made. Counsel was asked to assist in the drafting of an order to that effect (the “2010 Order“).
The application in these proceedings came before Smith J again in the High Court. The application was made on the basis that the 2010 Order did not prevent O from bringing monetary claims consequential on rescission of the charterparties in the courts, as it was only the claim for a declaration that the charterparties had been validly rescinded which had been stayed by the CofA Order. The parties sought clarification under the Court’s discretionary powers as to the meaning of the 2010 Order.
Smith J was not persuaded to exercise any discretionary power to enable O to pursue claims for consequential monetary relief. If the claims were stayed under the CofA Order, they could not be pursued as no application had been made to lift the stay. The claims which had not been stayed had come to trial before Smith J in the 2009 proceedings (resulting in the 2010 Order) and no order had been made to allow O to try consequential monetary relief claims separately. It was not open to a party to decide, without reference to the Court, not to argue all their points at trial and then try to bring a separate claim at a later date.
Smith J continued that the only other reason to exercise the discretion sought to clarify the 2010 Order would be if it would assist the arbitration proceedings. Smith J refused to use CPR 3.1 to grant any of the applications to clarify. Neither would he use CPR 40.12 to “correct” the 2010 Order, as there was no accidental ‘slip or omission’ in the drafting of the order. Smith J said that the 2010 Order had not dealt with the specific possibility of consequential monetary claims as it had not occurred to him that the parties believed that those claims had not been stayed by the CofA Order ā if he had realised this, he would have included wording to the effect that, in so far as not covered by the stay, such claims were dismissed. Smith J, using the inherent power referred to in CPR 40 BPD4.5, and after concluding that use of the power would not trespass on the arbitrators’ territory because it actually would prevent the litigation hampering the arbitral process, asked counsel to assist in drafting an order to this effect.
Throughout this judgment, Smith J appears conscious of a tension that he should endeavour not to express a view on questions which might rest within the jurisdiction of the Tribunal or on which the Tribunal might wish to reach its own conclusion. In particular, he did not wish to create a res judicata on the scope of the 2010 Order which might compromise the efficacy of the arbitration agreements. However, while Smith J was conscious of not stepping on the toes of the Tribunal, he accepted that in order to deal properly with the application, he would have to take a view on some matters which had been referred to arbitration.
The case demonstrates the difficulties caused by related claims in different fora. Concurrent disputes such as this one on similar and related issues will provoke difficult questions for both a court and tribunal as to which has the ultimate jurisdiction to determine any particular issue. While such tensions will continue to arise, the Court’s efforts here to continue to support the parties’ choice of arbitration ā and to allow space for that arbitration to reach its own conclusions ā is extremely welcome.
For further information, please contact Nicholas Peacock, Partner, or your usual Herbert Smith Freehills contact.
Giedo van der Garde BV v Sauber Motorsport AG  VSC 80; Sauber Motorsport AG v Giedo van der Garde BV  VSCA 37
The occasion of the Formula One Grand Prix in Melbourne in mid-March 2015 provided a further opportunity for both the Victorian Supreme Court and the Victorian Court of Appeal to demonstrate its support for international commercial arbitration in Australia. The Court enforced a Swiss arbitral award ordering that an F1 team refrain from taking action which would deprive a driver from his entitlement to participate in the 2015 season as one of its nominated drivers.
Stay of enforcement of guarantee on basis that guarantor agrees to be bound by pending arbitration award
In [Stemcor UK Ltd v Global Steel Holdings Ltd and Pramod Mittal] the English High Court (the Court) was required to consider the Claimant’s application for summary judgment in respect of its claim for sums payable pursuant to two guarantees, at the same time as the Defendants’ application for a stay of the court proceedings pending the resolution of related arbitration proceedings regarding the debts underlying those guarantees between Stemcor and Global Ispat Koksna Industrija Lukavac.
The Court found in favour of the Defendants in both applications. Summary judgment was denied on the basis that the Claimant had not established that there was no real prospect of the Defendants’ defence of set off (against the principal debtor’s cross claims in the arbitration proceedings) succeeding. The Court also confirmed that the Defendants were not necessarily required to join the principal debtor to the court proceedings in order to rely on the defence of set-off.
The Court granted the Defendants’ application for stay of the court proceedings, pending the outcome of the arbitration. A persuasive factor in its decision was that the Defendants agreed to be bound by the result of the arbitration, and so the Claimant would have recourse against both the Defendants and the principal debtor in the event that it succeeded in the arbitration, and would still retain the right to pursue the guarantor in the event of an unsuccessful outcome against the principal debtor in the arbitration.
In addition, although the Court proceedings were commenced first, the Court found the relative progress of the arbitration, and delays in progressing the Court proceedings, to be relevant factors.
The case raises a number of important practical points for parties in drafting dispute resolution clauses in agreements with related guarantees, including highlighting the risk that attempts to provide for multiple forum options in related agreements may lead to a stay of proceedings in favour of arbitration. Attempts to provide for speedy recourse against a guarantor may therefore be undermined. The case also demonstrates that commencing Court proceedings prior to related arbitration proceedings is not a conclusive factor in persuading the Court to give precedence to the Court proceedings.
English Court’s reminder that (i) courts will allow the arbitral process to correct itself without intervention where possible and (ii) a party seeking to set aside an Award must do so on the correct basis and in good time
In a recent judgment handed down by Eder J in the case of Union Marine Classification Services LLC v Government of the Union of Comoros, the English Commercial Court rejected a party’s application for an order setting aside and / or declaring to be of no effect a “Correction and Addition to Award” under sections 67(1)(a) and / or (b) of the Arbitration Act 1996 (the “Act“). The decision was based on:
- recognition of the principle behind the Act that courts should be hesitant to interfere with the arbitral process, according room for that process to “correct itself“;
- the fact that the application was made on an inappropriate basis in the circumstances (under s67 rather than s68 of the Act); and
- a timely application on the correct ground would have failed on the merits in any event.
In this short podcast, senior professional support lawyers Hannah Ambrose and Vanessa Naish look at some of the issues surrounding unilateral arbitration clauses. Unilateral arbitration clauses are dispute resolution agreements which provide for either litigation with an option for one party to elect to arbitrate disputes, or arbitration with an option for one party to elect to litigate disputes. This podcast discusses the benefits and risks of such clauses, enforceability issues, and key considerations for drafting.
For further information or to suggest topics for future podcasts, please contact Hannah Ambrose, Professional Support Lawyer, Vanessa Naish, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.
You may also be interested in a our previous podcast “Arbitration in Multi-Party and Multi-Contract Scenarios – What You Need to Know”, which is available here.
Vanessa NaishProfessional Support Lawyer
+44 20 7466 2112