THE COURT OF APPEAL CONFIRMS THE JURISDICTION OF ENGLISH COURTS TO RESTRAIN A FOREIGN ARBITRATION IN AN ‘EXCEPTIONAL’ CASE

In Sabbagh v Khoury and others, [2019] EWCA Civ 1219 (available here), the English Court of Appeal partly upheld the injunction granted by the Commercial Court restraining the pursuit of arbitration proceedings seated in Lebanon.  In doing so, the Court of Appeal confirmed the power of English courts to restrain a foreign arbitration on grounds that the foreign arbitration is oppressive and vexatious and provided helpful guidance on the exceptional circumstances in which English courts may exercise this power.

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ENGLISH HIGH COURT OVERTURNS AN ARBITRAL AWARD AS IT HOLDS THAT AN ARBITRAL TRIBUNAL LACKED JURISDICTION OVER A DISSOLVED COMPANY PURSUANT TO SECTION 67 OF THE ENGLISH ARBITRATION ACT

The English Commercial court has overturned an arbitral award under section 67 of the English Arbitration Act 1996, finding that an arbitral tribunal lacked substantive jurisdiction because the respondent company in the arbitration had been dissolved by the time the notice of arbitration was filed (in GA-Hyun Chung v Silver Dry Bulk Co Ltd [2019] EWHC 1147 (Comm)).

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CONTRACTUAL DISPUTE ARISING OUT OF HACKING: ENGLISH COURT CONSIDERS CHALLENGE TO AWARD UNDER s68 AND s69 OF THE ARBITRATION ACT 1996

In a rare example of a successful challenge under s68 of the Arbitration Act 1996 (the Act), in K v A [2019] EWHC 1118 (Comm), the English Court held that there was a serious irregularity when the GAFTA Board of Appeal (the Tribunal) found K liable based on an interpretation of a clause in the contract which had not been argued by A. The Court concluded that the Board may have reached a different view if K had had an opportunity to address the argument, and remitted the Award back to the Tribunal. The application for leave to appeal under s69 of the Act was rejected as the Court found that there was no error of law in the Tribunal’s finding that the payment obligation on K was to make payment into A’s account, not just to A’s bank.

The case arose following the hacking of the intermediary broker’s (V‘s) email accounts. Whilst A had provided the correct account details to V, the details provided to K (purportedly by V but actually by the fraudster), resulted in the payment of the contract price into the fraudster’s account. After discovery of the fraud, a payment shortfall arose out of complications in the eventual payment of the purchase price to A. A sought to recover the shortfall in the arbitration.

The case shows the importance of understanding where the risk passes under a contract for fraud or hacking of the type which can interfere with performance by the parties of their contractual obligations.

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ENGLISH COMMERCIAL COURT GRANTS PERMISSION TO THE CHARTERED INSTITUTE OF ARBITRATORS TO OBTAIN COPIES OF DOCUMENTS ON THE COURT’S RECORDS FOR DISCLIPLINARY PROCEEDINGS AGAINST AN ARBITRATOR

In The Chartered Institute of Arbitrators v B, C, D [2019] EWHC 460 (Comm), the Commercial Court granted an application made by the Chartered Institute of Arbitrators (the CIArb) under CPR 5.4C for permission to obtain copies of certain court records, to be produced in disciplinary proceedings against a CIArb member. The Court found that the public interest in ensuring CIArb members meet their professional standards outweighed the confidential nature of the arbitration, and allowed the disclosure of certain documents which were on the court’s records and which had originally been produced during an arbitral hearing.

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English Commercial Court orders stay of Lebanon-seated arbitration in ‘exceptional’ case

In the most recent decision in the Sabbagh family feud, Sabbagh v Khoury & Ors [2018] EWHC 1330 (Comm), the English Commercial Court ordered the stay of parallel Lebanon-seated arbitration proceedings. This was despite the tribunal in that case having found that it had jurisdiction to hear it. In granting the interim injunction to restrain the pursuit of the arbitration proceedings, Mr Justice Knowles was quick to acknowledge the significance of a court that is not the supervisory court granting an injunction to prevent parties prosecuting a foreign arbitration.

 

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English Commercial Court releases s68 and s69 statistics: the high hurdle remains

On 29 April 2018, the Judiciary of England and Wales published the Commercial Court Users’ Group Meeting Report – March 2018. Contained within that report are some statistics regarding the number and outcome of arbitration claims within the Commercial Court over the past three years. These statistics make interesting reading, and give pause for thought to any practitioner or party considering bringing a challenge to an English-seated arbitral award. Continue reading

English Commercial Court finds “torpedo” action ineffective where parties agreed asymmetric jurisdiction clause

The English Commercial Court has held that an asymmetric jurisdiction clause is an exclusive jurisdiction clause for the purposes of the recast Brussels Regulation. The English court was therefore entitled to continue with its proceedings where it was the chosen court but proceedings had been commenced earlier in Greece: Commerzbank Aktiengesellshcaft v Liquimar Tankers Management and another [2017] EWHC 161 (Comm).

The recast Brussels Regulation, which applies to proceedings commenced since 10 January 2015, contains a number of improvements over the previous version. These include provisions aimed at defusing so-called "torpedo" actions by which a party could seek to delay proceedings in the court the parties had chosen in their jurisdiction clause by commencing proceedings in breach of the clause elsewhere in the EU.

There has been doubt however as to whether these new "anti-torpedo" provisions would be effective where the parties had agreed an asymmetric jurisdiction clause rather than an exclusive jurisdiction clause binding on all parties. An asymmetric clause (also known as a unilateral or one-way clause) provides that one party, typically a borrower, can only sue in one jurisdiction whereas the other party, typically a finance party, can sue in any available jurisdiction.

The English Commercial Court in Perella Weinberg Partners UK LLP v Coder SA [2016] EWHC 1182 (Comm) considered the "anti-torpedo" provisions should apply equally to an asymmetric clause (see blog post here) but the comments were obiter. The present decision is significant in reaching the same conclusion after a detailed analysis of the arguments. In the court's view, however, whether a jurisdiction clause is exclusive for the purposes of these provisions is a question of autonomous interpretation of the Regulation, rather than English law, so until there is CJEU authority on the point there remains a risk of a torpedo action being effective.

The case is also of interest in once again rejecting the approach of the French courts which have held that asymmetric clauses are invalid, at least in some circumstances (see our blog posts on the decisions in Mme X v Societe Banque Prive Edmond de Rothschild 13, First Civil Chamber, 26 September 2012, Case no 11-26022 here, Societe eBizcuss.com v Apple, First Civil Chamber, 7 October 2015, Case No.  14-16898) here and Mauritius Commercial Bank Limited v Hestia Holdings Ltd and Another [2013] EWHC 1328 (Comm) here).

For more detail, please see our Litigation Notes blog post here.

Attempted re-litigation of issues submitted to arbitration: English Court takes a robust approach

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.  

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English Court finds that it is “just and convenient” to grant a worldwide freezing order in support of London-seated arbitration even where all assets are outside England

In a further decision in the case of U & M Mining Zambia Ltd v Konkola Copper Mines PLC [2014] All ER (D) 136 (Oct), the English Commercial Court granted U&M Mining Zambia Ltd (“U&M”)’s application to continue a Worldwide Freezing Order (“WFO”) over the assets of Konkola Copper Mines PLC (“KCM”). U&M had been granted the WFO on an ex parte basis to prevent KCM’s dissipation of assets before it had satisfied the various arbitration awards granted by a London-seated tribunal (the “Awards”). For the background to the case, see our blog posts here, here and here.

The Court upheld the application. Where the seat of arbitration is London, it will ordinarily be appropriate for the English court to issue orders in support of the arbitration, but there may be reasons why, notwithstanding that the seat is in England, that it is not appropriate. A WFO, being an order which operates in personam by requiring the defendant not to dissipate his assets in a way that will render enforcement impossible or more difficult, is conceptually different from enforcement of an award, which requires an asset to be attached. The mere fact that enforcement will take place in Zambia was thus insufficient to make it inappropriate to grant a WFO. Even if the Zambian Court could also grant a freezing order, this did not make it inappropriate for the English court to do so.

This case confirms that a WFO in support of sums awarded by a London-seated tribunal can be granted by the English court, even if the assets against which the award will be enforced are outside the jurisdiction and it may be appropriate for another court to grant that same relief. The willingness of the English court to issue such relief should provide reassurance to parties who choose to seat their arbitrations in London, even where the contractual arrangements and/or the assets against which an award will ultimately be enforced are located outside England.

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English Commercial Court rejects application by U&M Mining Zambia Ltd for security for sums due under award pending challenge

In Konkola Copper Mines Plc v U&M Mining Zambia Ltd [2014] EWHC 2146 (Comm), the English Commercial Court considered two related applications on behalf of U&M Mining Zambia Ltd (U&M) for security for costs and a payment into court, under sections 70(6) and 70(7) of the Arbitration Act 1996 (the Act), in relation to challenges made by Konkola Copper Mines Plc (KCM) under sections 67 and/or 68 of the Arbitration Act 1996 to an arbitration award dated 6 January 2014.

Eder J upheld U&M’s application for security for costs under section 70(6) of the Act; however, he rejected U&M’s application for a payment into court of US$41,259,274.47 under section 70(7) of the Act.

The case highlights the need for an applicant under section 70(7) in particular to put before the Court not only evidence that there is a real risk of dissipation of assets that could be used to satisfy the award, but also evidence that the challenges to the award would prevent, hinder or prejudice enforcement of the award.

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