In the latest decision relating to the arbitration between U&M Mining Zambia Ltd (“U&M”) and Konkola Copper Mines plc (“KCM”), the Commercial Court in London rejected challenges to an award made under s67 and s68 of the Arbitration Act 1996 (the “Act”).
The award included an order for KCM to pay certain invoices unless KCM “showed cause, supported by evidence, within 14 days of the Award, why such an order should not be made”. Amongst other grounds, KCM relied on the fact that the award was “conditional” and therefore “legally defective” as a ground to challenge the award under s68. The Commercial Court disagreed, stating that an award can be final and conclusive in its terms where it provides for “specific relief […] which only bites at one point in the future”.
KCM operates a number of copper mines in Zambia. U&M provided KCM with open pit mining and related services at one of KCM’s mines in the Nchanga area. A dispute arose between KCM and U&M (as reported in our previous blog post here) and U&M commenced LCIA arbitration proceedings seated in London. The tribunal ordered in a first award dated 7 November 2013 that KCM pay U&M US$14,619,900.12 and £15,155.23. KCM did not challenge the first award in England but is resisting its enforcement in Zambia and has made no payment to U&M pursuant to the first award. Following a number of applications in the arbitration, the tribunal issued a second award in January 2014 ordering KCM to pay a further US$40m in unpaid invoices (the “Second Award”).
The hearing which preceded the Second Award was held on 9 December 2013. Save for an appearance off the record to seek an adjournment, KCM were unrepresented at this hearing due to their counsel ceasing to act for them as of 8 December 2013. As such, the Second Award was made with a “condition” that KCM be allowed 14 days in which to “show cause” as to why the money was not owed. KCM, having attained alternative representation took 22 days to respond, at which point the tribunal had confirmed the award.
KCM sought to challenge the Second Award on a number of bases, including under s68 of the Arbitration Act 1996 (the “Act”) on grounds that the “second award was legally defective and not truly an award”. It objected to the form of the award and submitted that a “conditional award” was not, “a creature known to the law”. The Court rejected this argument, observing that there is no statutory definition of “an award” in English arbitration law. The tribunal had found that the sums which were subject to the Second Award were due and owing on the evidence presented to them and the form of the award was clearly designed to allow KCM one additional chance to “show cause” as to why the orders in the Second Award should not be operative, which KCM failed to do. It had made decisions in the Second Award which were final and complete and not subject to further decisions on its part or the part of any other body or person, unless a specific contingency occurs. The Court noted that the Second Award was “plainly designed to avoid further delay and expense” which was entirely in line with the statutory definitions for arbitration.
The Court also dismissed the application by KCM premised on a failure by the tribunal to comply with s33 of the Act, in that it was said the tribunal had failed to allow it adequate opportunity to put its case, to deal with the case of U&M and did not adopt procedures suitable to the case. The Court made reference to s41(4) of the Act which provides that “[i]f without showing sufficient cause a party fails to attend or be represented at an oral hearing of which due notice was given, or where matters are to be dealt with in writing, fails after due notice to submit written evidence or make written submissions, the tribunal may continue the proceedings in the absence of that party or, as the case may be, without any written evidence or submissions on his behalf, and may make an award on the basis of the evidence before it”. It also referred to relevant provisions of the LCIA Rules concerning both the tribunal’s general duties (including the duties to act fairly and impartially as between all parties and to adopt suitable procedures, avoiding unnecessary delay or expense so as to provide a fair and efficient means resolution of the dispute) and the parties’ obligation to do everything necessary for the fair, efficient and expeditious conduct of the arbitration. The Court noted that the tribunal “adopted an entirely fair means for resolution of matters which fell to be determined” and that KCM had received more than adequate notice of the substantive matters to be dealt with at the December 2013 hearing and had had reasonable opportunity to deal with them.
Permission to appeal was refused with costs to follow the event, awarded on an indemnity basis.
It is interesting to note that the court has taken a commercial approach to this decision, looking to the substance of the award, and highlighting the consistency of the tribunal’s approach with the obligations on the tribunal and the parties to drive for a fair and timely resolution of disputes.
Whilst Mr Justice Cooke was explicit in his conclusion that the orders in the Second Award were final and conclusive (and he noted that they had been challenged under s67 and s68, which was implicit recognition of their status as part of an award), he did however note that the form of the award “might present difficulties for enforcement purposes”. As noted in our blog post here, KCM’s assets are located in Zambia and therefore U&M will most likely need to enforce the Second Award under the New York Convention.
Mr Justice Cooke sent a further message to parties who seek to undermine the arbitration process or bring unmeritorious challenges to awards, drawing attention to the fact that vast majority of applications under s68 were unfounded and occupy too much of the Court’s time. He then went on to order costs against KCM on an indemnity basis, subject to hearing any submissions on the point.