In the recent case of CPC Construction Hong Kong Limited v Harvest Engineering (HK) Limited and another (HCA 2096/2013), a series of loan agreements set out for litigation to resolve disputes, while a broader, related subcontract, set out for disputes to be resolved by arbitration instead.Â
The Hong Kong Court of First Instance reserved its position to allow the plaintiff to consider if it would like the court to stay its claim pending arbitration. This would not be the same as acting to stay the claim in favour of arbitration â€“ rather, it would be a case management solution, avoiding a duplication of time and resources, and possible inconsistent results between the arbitration and litigation proceedings.Â Continue reading
In Swallowfalls Limited v (1) Monaco Yachting & Technologies S.A.M. and (2) Mr Peter Landers JR, the English Commercial Court (the Court) rejected an attempt to resist summary judgment by the defendants (Monaco and L), on the basis of counterclaims for set-off in respect of alleged breaches of a construction agreement. Monaco and L had submitted the counterclaims to arbitration and the tribunal had dismissed those claims following failure by Monaco to comply with orders (including peremptory orders) for security for costs. The tribunal had not reached a decision on the merits of those claims.
In an unusually strongly worded judgment, the Court held that for Monaco and L to litigate the counterclaims that had already been the subject of an arbitration would be an abuse of process and that any other conclusion on the facts would be “offensive to justice” and “would not serve the public interest“.
This is a sensible decision: any other conclusion would have offered the defendants a second chance to prosecute claims against Swallowfalls in the court, in circumstances in which they had agreed to arbitrate them, insisted that they should be arbitrated, and agreed to be bound by the outcome of that arbitration. Whilst the tribunal had not reached a decision on the merits of the claims, the arbitration had reached a final outcome which was the dismissal of the claims given Monaco’s failure to provide security for costs.
The case demonstrates that a party must comply with orders for security for costs or risk being unable to prosecute its claims. The defendants were given a number of chances to provide security and offered a number of methods by which it could be provided. The scant reasons provided for failing to comply with the tribunal’s orders did not impress the Court. Whilst the tribunal’s course of action may seem draconian, the Court noted that proceedings in the Commercial Court would ultimately be dismissed after enduring non-compliance in the same way.
The case also shows that a party is not able to “hop” between forums, as convenience or circumstance dictate. The defendants had argued before the Court that the claims should be arbitrated, and having repeatedly failed to comply with the tribunal’s orders, the defendants were not at liberty to raise those claims as counterclaims in the litigation. Â
In its recent judgment in B.V. Scheepswerf Damen Gorinchem v The Marine Institute  EWHC 1810 (Comm) (available here), the English High Court (the Court) dismissed the claimant’s challenge to an arbitral award under s68 of the Arbitration Act 1996 (the Act) on the basis of delay in issuing the award. The award related to a dispute between B.V. Scheepswerf Damen Gorinchem (Damen) and The Marine Institute (TMI) about a vessel that Damen agreed to build and TMI agreed to purchase. TMI alleged that Damen’s errors in commissioning the engines had caused damage to the vessel which necessitated repairs.
The dispute was submitted to arbitration in London before a sole arbitrator under the LMAA Terms. The hearing lasted for 3 days in September 2013, but the award (which was in TMI’s favour) was not issued until September 2014. The arbitrator provided no “proper” justification for this lengthy delay.
Damen brought an application to set aside the award under section 68 of the Act, which allows the court to set aside awards on the basis of a serious irregularity affecting the tribunal, the proceedings or the award. The grounds of the application were that:
- the lengthy delay in issuing the award amounted to a breach of the arbitrator’s general duties and the procedure agreed between the parties (the LMAA terms); and
- the arbitrator had failed to deal with all the issues put before him.
The Court rejected the challenge that the lengthy delay, of itself, was not a sufficient ground to justify the setting aside of an award. The most that could be said was that the delay might lead the court to subject the award to greater scrutiny when considering whether it addressed all the issues put to the tribunal. In this case, however, the arbitrator had addressed all the issues.
The judgment is significant for a number of reasons. It shows that a lengthy delay, without more, will not generally support a challenge under s 68 of the Act. However, notwithstanding the outcome in this case, it also demonstrates that a substantial delay in issuing an award could nonetheless lead to additional scrutiny by the court. Further, the Court confirmed that it will not permit challenges to an arbitrator’s factual or legal findings to be “dressed up” as challenges under s68.
In a recently published decision, the German Federal Supreme Court (“Bundesgerichtshof”) ruled that an arbitral award can even be set aside if one of the arbitrators was successfully challenged in the courts only after the tribunal reached a unanimous decision and the award has been handed down. Further, the Bundesgerichtshof held that the mere possibility that the arbitral tribunal may have ruled differently without the participation of the challenged arbitrator suffices to have the award set aside. Since the relevant provisions of German law are based on the 1985 UNCITRAL Model Law on International Commercial Arbitration, this decision is potentially of general interest (decision of 11.12.2014; docket number: I ZB 23/14).
Filed under Awards, Europe
Justice Hammerschlag of the New South Wales Supreme Court (the Court) has refused to award indemnity costs to parties which successfully obtained a stay of proceedings in favour of arbitration: John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd (No 2)  NSWSC 565.Â
The decision was made in the context of a domestic arbitration regulated by the Commercial Arbitration Act 2010 (NSW), although, as his Honour noted in the course of the judgment [t]he International Arbitration Act and the suite of State and Territory Commercial Arbitration Acts enacted since 2010 are generally intended to give effect to the UNCITRAL Model Law on International Commercial Arbitration.Â Good policy suggests that absent clear legislative intent to the contrary, construing them so as to result in incongruent outcomes should be avoided.Â
In rejecting the application for indemnity costs, the Court declined to follow the approach taken in other regional jurisdictions.
Filed under Australia, Costs
On 29 June 2015, the London Court of International Arbitration (“LCIA“) published guidance notes designed to facilitate the “diligent and timely conduct of arbitrations” under the LCIA Rules 2014 (the “Rules“). There are three separate notes: (i) for the parties to the proceedings; (ii) for arbitrators; and (iii) focussing on emergency procedures. A good example of the LCIA’s user-friendly approach to arbitration, the notes provide helpful advice which allows both arbitrators and parties to assist the LCIA Secretariat in ensuring arbitrations run smoothly. They provide a fascinating insight into the operation and approach of the LCIA to a number of important issues. It is likely that the notes will be referred to frequently in proceedings.
Below is a brief comment on each of the three notes; summarising the purpose and highlighting areas of particular interest.
To read the notes in full, please click here. Herbert Smith Freehills has produced a Step by Step Guide to Arbitration under the LCIA Rules 2014. To request a copy, please contact Arbitration.Info@hsf.com.
It has been announced in Global Arbitration Review that Ukraine has been the first state to have an emergency arbitrator award enforced against it (albeit that enforcement is currently stayed pending appeal). The Pechersk District Court in Kiev upheld an application by London-listed JKX Oil & Gas and two subsidiaries to enforce a Stockholm Chamber of Commerce award issued in January under the SCC’s 2010 Rules emergency arbitrator procedure.
In Hashwani v OMV Maurice Energy Ltd  EWHC 1811 (Comm), the English High Court (the Court) dismissed an application by reference to section 72 of the English Arbitration Act 1996 (the Act) challenging the jurisdiction of the International Chamber of Commerce (ICC) to arbitrate the dispute.
The Court considered two arbitration provisions contained within two transaction documents, the Joint Operating Agreement and the Farmout Agreement (both defined further below). The Joint Operating Agreement, on its face, appeared to only apply to two of the parties to the arbitration that was the subject of the reference. The Court held that the ICC arbitration provision in this Agreement was valid and binding on two of the parties and that, in spite of an inconsistent arbitration provision contained in the Farmout Agreement which was subsequently entered into between all three parties to the dispute providing for domestic arbitration, such provision did not oust the former nor render it invalid. The Court then proceeded to take a purposive approach to the arbitration provision in the Joint Operating Agreement, looking at the intention of the parties. The Court expressed the view that the Joint Operating Agreement clearly contemplated that there would be further parties to the Agreement in future and, as such, the arbitration provision should be construed to allow the resolution of disputes between all such future parties. If such an approach were followed, the third party to the dispute would therefore also have been bound by that provision.
However, the Court did not reach a ruling on this point, stating that when a court cannot be sure of jurisdiction but there would in any event be an arbitration between closely-related parties as to the same matters in issue, the sensible course would be to leave the question of jurisdiction in relation to the claim to be finally decided by the arbitrators in question.