English Court of Appeal reinstates the appointment of an arbitrator on the basis that he qualifies for appointment under the arbitration clause

In Allianz Insurance and Sirius International Insurance Corporation v Tonicstar Limited [2018] EWCA Civ 434, the English Court of Appeal has reversed the decision of the High Court on whether a party-appointed arbitrator met the contractual requirements as to requisite experience. The Court of Appeal held that that an English QC with experience of insurance and reinsurance law was sufficient to comply with a contractual clause requiring arbitrators to have “experience of insurance and reinsurance”.

This decision is of particular interest as such challenges to arbitrators rarely come before the courts. It highlights once again the importance of drafting arbitration clauses clearly, particularly where parties require their arbitrators to possess certain qualifications or experience.

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English court endorses typical use of tribunal secretary in LCIA arbitration

The English Court has rejected an arbitrator challenge under s24 of the English Arbitration Act 1996 (the Act) on the basis of alleged "over-delegation" of their duties to their secretary. The Court's decision was based on a review of the Act, the LCIA Rules 1998, the various guidelines on the use of Tribunal Secretaries, academic commentary and previous English case law. In addition, the Court noted that it should be slow to depart from the conclusions of the LCIA Court on the same grounds of challenge.

This is a valuable judicial discussion of the practical use of tribunal secretaries and demonstrates that the Court will give robust consideration to whether the grounds of s24 are made out with regard to the use of a secretary.  

See P v Q 2017 EWHC 194 (Comm).

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UK Supreme Court rules that no security may be ordered when challenging enforcement of arbitration awards

The UK Supreme Court has overturned a Court of Appeal decision requiring Nigerian National Petroleum Corporation ("NNPC") to provide US$ 100m in security while the case was remitted to the Commercial Court to decide on IPCO (Nigeria) Limited's ("IPCO") challenges to enforcement of an award. The Supreme Court held that while the English courts had the express power to make such orders for security under section 103(5) of the Arbitration Act 1996 (the "Act") in the context of an adjournment pending a challenge to the award in the jurisdiction where it was made, the present proceedings rather concerned a challenge to the enforcement of the award under section 103(3) of the Act. As such, no power to order security was available under the Act or the scheme of the New York Convention 1958 (the "Convention").: IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation [2017] UKSC 16.

The Supreme Court also provided guidance on the relationship between the Act and the New York Convention (the "Convention"), on which the relevant sections of the Act are based.

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Appointment of arbitrators: English Court grapples conflicting case law and clarifies relevant principles when asked to assist with appointments

In its decision in Silver Dry Bulk Company Limited v Homer Hulbert Maritime Company Limited [2017] EWHC 44 (Comm) the English Court has considered and clarified the principles which apply to an application under section 18 of the English Arbitration Act 1996 (the "Act").  Section 18 enables a party to apply to the court to exercise its powers to give directions as to the making of tribunal appointments or make the appointments itself.  The decision confirms, amid conflicting case law, that the applying party must establish a "good arguable case" that a tribunal would have jurisdiction to hear the case, and emphasises that any jurisdictional arguments remain matters for the tribunal to decide in accordance with the principle of kompetenz-kompetenz. The case is also a good reminder of the purpose of section 18, which only applies where there has been a complete failure of the appointment procedure agreed between the parties, and cannot be used to declare or confirm the validity of a tribunal's constitution.

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Separability and public policy: selecting law of arbitration agreement does not disapply conflicting non-mandatory provisions of English Arbitration Act 1996 and “fresh evidence…is particularly important” for challenging an Award on public policy grounds

An arbitration agreement is understood in most, but not all, jurisdictions to be a separable or distinct agreement from the contract or agreement of which it forms part.  This is confirmed in s7 of the English Arbitration Act 1996 (the Act).

In National Iranian Oil Company (NIOC) v Crescent Petroleum Company International Ltd (CP) & Crescent Gas Corporation Ltd (CG), the English Court rejected NIOC's challenge to an award issued in a London seated arbitration on grounds of jurisdiction and public policy.

NIOC argued that the contract – which was governed by Iranian law – was procured by corruption and therefore invalid.  It also argued that this meant that the arbitration agreement was also invalid (such that the tribunal had no jurisdiction) because: (i) Iranian law applied to the question of whether the arbitration agreement was separable; and (ii) Iranian law did not recognise the separability of the arbitration.

The Court rejected this argument. As the arbitration was seated in London, s7 of the Act applied unless it was disapplied by the parties by "agreement to the contrary". While s7 is not a mandatory provision, the Court commented that an "agreement to the contrary" in relation to the specific provision is required to disapply it. The choice of Iranian law as the proper law of the contract was not an agreement to the contrary in relation to separability. Furthermore, the parties' arbitration agreement made clear that the issue of validity of the contract was to be determined by the tribunal.  The challenge to the award under s67 was rejected.

The Court also struck out NIOC's challenge based on public policy (which it brought under s68(2)(g) of the Act). NIOC argued that, whilst the tribunal found that the contract was not procured by corruption, the Court, considering English public policy, might take a different view. NIOC was found to have no reasonable prospect of succeeding in its challenge because: (i) the arbitrators had made "a very careful analysis" of the issue in question "after full consideration and evidence"; (ii) NIOC had provided no "fresh evidence"; and (iii) this was not a case of "very exceptional circumstances" that would justify the Court intervening with the arbitrators' decision.

This is a robust, pro-arbitration decision from the English court. In practical terms, it serves as a useful reminder for parties to analyse at the transactional stage the interplay between the different laws that might apply to their disputes and the impact that any conflicting provisions of those laws might have on the procedure for quickly and effectively resolving those dispute. Where potential issues are identified, they should be addressed in the drafting of the dispute resolution provisions. The case further highlights the need to disapply non-mandatory provisions of the Act in clear and specific terms.

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English Court identifies “weaknesses” in the 2014 IBA Guidelines on Conflicts of Interest when considering challenge of an Award for apparent bias

In the case of W Limited v M SDN BHD [2016] EWHC 422 (Comm) the Claimant, W Limited, sought to challenge two awards in the English Court for serious irregularity under s68(2) of the Arbitration Act 1996. The challenge was founded on apparent bias of the arbitrator based on an alleged conflict of interest. No actual bias was alleged.

The case has wider importance for the international arbitration community because the Claimant referenced the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) to substantiate its position, in particular, paragraph 1.4 of the Non-Waivable Red List.

Having applied the English law test for apparent bias and considered the IBA Guidelines, the English Court identified a number of "weaknesses" in the IBA Guidelines. This included the inability of parties or arbitrators to apply "case-specific judgment" to a Non-Waivable Red List situation. The court also commented that the conflict situation identified in this case was, in many respects, less serious than some of those identified in the Waivable Red List. Despite the conflict situation falling squarely within paragraph 1.4 of the Non-Waivable Red List, the court concluded that there was no apparent bias and dismissed the challenge.

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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.

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English court refuses to enforce New York Convention Award that was set aside at the seat of arbitration and that granted remedies that were not pleaded

In a judgment handed down on 19 February 2015 in the case of Malicorp Ltd v Government of the Arab Republic of Egypt and others, English Commercial Court judge Mr Justice Walker has refused to enforce a Cairo Regional Centre for International Commercial Arbitration award on two separate grounds: first, because the award was set aside by a decision of the Cairo Court of Appeal in 2012, and second, because the award granted remedies on a basis which was neither pleaded nor argued. Walker J also opted not to exercise his discretion under section 103 of the Arbitration Act 1996 to enforce the award in any event. In so doing, the English court has joined other national courts and an ICSID tribunal in dealing yet another blow to Malicorp’s efforts to recover from the Egyptian state.

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English court removes arbitrator based on justifiable doubts as to his impartiality

In its recent judgment in Sierra Fishing Company and others v Hasan Said Farran and others [2015] EWHC 140 (Comm), the English Court granted an application to remove an arbitrator under s24 of the Arbitration Act 1996 (the “Act“), which provides that a party may “apply to the court to remove an arbitrator on [the grounds that] circumstances exist that give rise to justifiable doubts as to his impartiality“.

The Court, applying the relevant test as articulated by the House of Lords in Porter v Magill [2002] and referring to the IBA Guidelines on Conflicts of Interest in International Arbitration (the “IBA Guidelines“), had no difficulty in finding that “the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased“. The Court’s decision provides helpful confirmation that it is the arbitrator’s duty to make voluntary disclosure to the parties of circumstances known to him which might give rise to justifiable doubts as to his impartiality, regardless of whatever steps may be available to the parties to discover their existence.   The judgment also provides helpful guidance on the steps which a party may take without losing their right to object to an irregularity affecting the tribunal or proceedings under s73 of the Act.

For further information on the revised 2014 IBA Guidelines, published on 28 November 2014, see our blog post here.)

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English Court construes arbitration agreement reconciling two conflicting arbitration clauses

In the recent decision Transgrain Shipping BV v Deiulemar Shipping SpA (in liq) & Eleni Shipping Ltd [2014] EWHC 4202 (Comm), the English Commercial Court refused an application under s 67 of the Arbitration Act 1996 to set aside an award on the grounds that the arbitrators lacked jurisdiction.

In determining the question of jurisdiction, the Court needed to decide which of two conflicting arbitration clauses in the agreement governed dispute resolution between the parties.

It considered the general principles of contract construction in the case of inconsistent terms, examining the intention of the parties as evident from the terms of the agreement and relevant factual matrix. The Court focused on the common ground between the clauses, and concluded that the arbitration clause which gave most effect to their objective intentions and in this case the “industry standard” was to be preferred.

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