In a dispute between an English company and a Russian company, the English High Court (the Court) refused to set aside an order enforcing a Russian arbitration award on the grounds that the English company had not been given notice of the arbitration or the appointment of arbitrators. The English company claimed that a series of letters in Russian, informing it of the arbitration proceedings, did not constitute proper notice as they were not provided with an English translation. However, as the headings of the letters were in English and contained the English word “arbitration”, and related to a contract in which the company had agreed to Russian language arbitration, the Court held that the English company ought to have known that the documents related to arbitration, and that the letters therefore constituted a valid notice. The Court’s comments suggest that there are a number of practical steps that a party can take when beginning an arbitration against a counter-party which does business in a language different from that of the notice. These are discussed further below.
Background and Facts
Zavod Ekran OAO (Ekran), a Russian glass manufacturing company, and Magneco Metrel UK Ltd. (Magneco), an English company that manufactures refractory materials, entered into a contract containing an arbitration clause providing for arbitration under the International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry under Russian law (the ICAC). The language of the arbitration was to be Russian.
When Ekran referred a dispute to arbitration, the ICAC sent Magneco a letter which enclosed the arbitration claim form and documents annexed to it, and contained the names of an arbitrator and reserve arbitrator that Ekran had nominated as per the ICAC rules. This letter was almost entirely in Russian, and the package did not contain a translation. The parties were not in direct communication, and Ekran did not attempt to notify Magneco directly about the commencement of arbitration proceedings. Magneco admitted that the documents were received and signed for, but it did not translate the documents, and did not take part in the arbitration proceedings. The tribunal having ruled in Ekran’s favour, Ekran made a successful application in the English courts to enforce the award. Magneco sought to set aside the order of the court enforcing the award on the grounds that it did not receive “proper notice” of the arbitration.
Magneco’s application relied on Section 103(2)(c) of the English Arbitration Act 1996 (the Act), which provides that the recognition or enforcement of a New York Convention award may be refused if: “[T]he person against whom it is invoked proves… that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case“.
When considering whether the ICAC letter constituted “proper notice”, the Court noted that although the letter was in Russian, the heading was in English and stated that it came from “THE INTERNATIONAL COMMERCIAL ARBITRATION COURT…” (sic). Furthermore, the courier receipt showed that the documents had been couriered from the “Commercial Arbitration Court” in Moscow. The Court also noted that the documents, although voluminous, included a one-page cover letter that would have been relatively easy to translate, and which contained two email addresses, in both Russian and English, which mentioned the English word “arbitration”. Finally, the Court noted that the parties had agreed that the language of the arbitration was to be Russian.
The Court stated that these circumstances “obviously [raise] the question [as to] what [Magneco] thought the package was“, ruling that it should have been obvious that the letter related to an arbitration. The letter therefore was held to be “proper notice“.
In arriving at its conclusions, the Court commented in general on the language of arbitration notices, stating that “the fact that a notice of arbitration is received in England in a language other than English should not in itself affect the validity of the notice, though…[i]t is easy to envisage some circumstances in which it would not amount to proper notice.”
Applying this principle, and despite holding in Ekran’s favour, the Court criticised its conduct, stating: “[I]t may fairly be said that [Ekran] could have done more to alert [Magneco] to the commencement of the arbitration“. The Court also commented that a lack of a proper notice would generally suggest some unfairness.
The guidance that emerges from this case to minimise the risk of the counterparty alleging a failure to give proper notice for the purposes of the Act is that a party should take reasonable steps to alert the other party to any arbitration proceedings. This may include:
- providing a translation of the notice in the defendant’s language, or at least making sure that the documents contain a statement in the defendant’s language that the documents relate to arbitration.
- a clear reference to arbitration in the heading of the letter or email giving notice, in the defendant’s language.
- a chain of correspondence between the two parties containing threats of arbitration, culminating in an express notice that arbitration is about to be commenced. The Court commented that this is what “one would normally expect“.
These steps may seem burdensome, particularly if they are not contractually required, but they are undoubtedly less onerous than arguing subsequently about whether proper notice was given.
More generally, the advice for enterprises which enter into arbitration agreements is that everyone in the organisation needs to be able to recognise the potential significance of a document which refers to arbitration, even if the rest of the document is in an unfamiliar language.
For more information, please contact Nicholas Peacock, Partner, Hannah Ambrose, Professional Support Consultant, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.