ENGLISH COURT OF APPEAL CONSIDERS DISCLOSURE OF ARBITRAL APPOINTMENTS IN RELATED OR OVERLAPPING REFERENCES

In Halliburton Company v Chubb Bermuda Insurance Ltd [2018] EWCA Civ 817, the English Court of Appeal was asked to consider:

  1. whether it is possible for an arbitrator to accept multiple appointments with overlapping reference and one common party, without giving rise to doubts over impartiality?
  2. at what point should an arbitrator disclose these further appointments – if at all?

The Court of Appeal dismissed the appeal, stating that, on the facts of the case, there was no real possibility that the arbitrator was biased when viewed from the perspective of a “fair minded and informed observer”.  Nevertheless, the Court held that, in accordance with English law and best practice in international arbitration, disclosure should have been made. Continue reading

English High Court orders disclosure of arbitration documents by agent to principal

In its recent judgment AMEC Foster Wheeler Group Limited v Morgan Sindall Professional Services Limited & Ors [2015] EWHC 2012 (TCC) (available here), the English High Court (the Court) ordered that arbitration documents be disclosed by a party conducting arbitration to a party with a financial interest and practical involvement in the dispute.

The arbitration arose in relation to construction works at a naval base. The Secretary of State for Defence (SSD) had engaged a contractor (TES) to carry out works. Part of those works was subcontracted by TES to the claimant (AMEC). AMEC then sold its business to the defendants, who were assigned AMEC’s rights and agreed to carry out AMEC’s obligations under the relevant subcontract.

Disputes under the main contract and the subcontract arose, and arbitral proceedings between SSD and TES commenced. Under a name borrowing agreement between TES and AMEC (i.e. an agreement under which a party agrees to pursue or defend a legal claim in the name of another), AMEC, agreed to conduct the arbitration between TES and SSD on behalf of TES. AMEC and the defendants then agreed that the defendants would conduct the arbitration as AMEC’s agents.

The defendants conducted the arbitration without any involvement from AMEC. When AMEC sought copies of the arbitration documents, the defendants refused to provide them. The claimant brought proceedings before the Court for orders that the documents be disclosed.

The Court ordered that the documents be disclosed on the basis that they were held by the defendants as agent for AMEC. In reaching this decision, the Court rejected the defendants’ argument that disclosure should be refused on the basis that the arbitration documents were confidential.

The Court’s decision focussed largely on the relationship between the parties and little attention was given to the issue of confidentiality in arbitration proceedings. This in itself makes the decision noteworthy: the Court made clear that the legal obligation to provide the documents to AMEC (by virtue of the relationship between principal and agent) effectively ‘trumped’ any question of a duty of confidentiality owed to a third party (in this case, the SSD), in arbitration proceedings. Whilst the circumstances of this case were unusual, the decision may have broader application where there is an arbitration between an agent (whether disclosed or undisclosed) and a third party.

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Fiona Trust v Privalov in the High Court

The Fiona Trust case is one of the best known decisions in English arbitration case law, setting out a “fresh start” in English jurisprudence with the strong presumption that commercial parties intend all disputes to be determined in a single forum.

That decision did not, however, prevent related litigation in the English courts. The most recent application to the English courts in Fiona Trust v Privalov [2015] EWHC 527 (Comm) has highlighted the difficult path to be followed for the English court in reaching decisions in concurrent litigation proceedings which could impact upon or be seen to prejudge issues in on-going arbitration. Smith J in this case granted an application to clarify the meaning of an order as it would prevent litigation hampering the arbitral process.

Background

The background to the 2007 House of Lords decision in Fiona Trust involved O, the owners of Russian ships which were chartered to C. O claimed to have rescinded the charterparties (including the arbitration clauses within them) on the grounds they had been induced by bribery.

C sought to refer the matter to arbitration and appointed an arbitrator. O applied to court seeking to restrain the arbitration on the basis that the charterparties (including the arbitration clause) had been rescinded for bribery. In response, C applied to stay the court proceedings in favour of arbitration under s 9 of the Arbitration Act 1996. The Court of Appeal ordered the stay (the “CofA Order“), ruling that the scope of the arbitration clause was wide enough to encompass a fraud claim. This was subsequently upheld by the House of Lords (now the Supreme Court). Following this decision, the parties appointed an arbitral tribunal.

In 2009, O brought fresh proceedings in the English courts. In these proceedings O pleaded that, by causing or permitting the charterparties, certain defendants had acted in breach of fiduciary or other duties owed to O. As part of these pleadings, O continued to plead that the charterparties and their arbitration provisions had been rescinded. The relief sought divided broadly into two types: (1) various heads of damage which were not dependent on the rescission of the charterparties; and (2) monetary claims relating to, or consequential on, rescission of the charterparties.

In 2010, Smith J in the High Court dismissed the claims as they were based on dishonesty and a finding there had been no dishonesty had been made. Counsel was asked to assist in the drafting of an order to that effect (the “2010 Order“).

2015 proceedings

The application in these proceedings came before Smith J again in the High Court. The application was made on the basis that the 2010 Order did not prevent O from bringing monetary claims consequential on rescission of the charterparties in the courts, as it was only the claim for a declaration that the charterparties had been validly rescinded which had been stayed by the CofA Order. The parties sought clarification under the Court’s discretionary powers as to the meaning of the 2010 Order.

Smith J was not persuaded to exercise any discretionary power to enable O to pursue claims for consequential monetary relief. If the claims were stayed under the CofA Order, they could not be pursued as no application had been made to lift the stay. The claims which had not been stayed had come to trial before Smith J in the 2009 proceedings (resulting in the 2010 Order) and no order had been made to allow O to try consequential monetary relief claims separately. It was not open to a party to decide, without reference to the Court, not to argue all their points at trial and then try to bring a separate claim at a later date.

Smith J continued that the only other reason to exercise the discretion sought to clarify the 2010 Order would be if it would assist the arbitration proceedings. Smith J refused to use CPR 3.1 to grant any of the applications to clarify. Neither would he use CPR 40.12 to “correct” the 2010 Order, as there was no accidental ‘slip or omission’ in the drafting of the order. Smith J said that the 2010 Order had not dealt with the specific possibility of consequential monetary claims as it had not occurred to him that the parties believed that those claims had not been stayed by the CofA Order – if he had realised this, he would have included wording to the effect that, in so far as not covered by the stay, such claims were dismissed. Smith J, using the inherent power referred to in CPR 40 BPD4.5, and after concluding that use of the power would not trespass on the arbitrators’ territory because it actually would prevent the litigation hampering the arbitral process, asked counsel to assist in drafting an order to this effect.

Comment

Throughout this judgment, Smith J appears conscious of a tension that he should endeavour not to express a view on questions which might rest within the jurisdiction of the Tribunal or on which the Tribunal might wish to reach its own conclusion. In particular, he did not wish to create a res judicata on the scope of the 2010 Order which might compromise the efficacy of the arbitration agreements. However, while Smith J was conscious of not stepping on the toes of the Tribunal, he accepted that in order to deal properly with the application, he would have to take a view on some matters which had been referred to arbitration.

The case demonstrates the difficulties caused by related claims in different fora. Concurrent disputes such as this one on similar and related issues will provoke difficult questions for both a court and tribunal as to which has the ultimate jurisdiction to determine any particular issue. While such tensions will continue to arise, the Court’s efforts here to continue to support the parties’ choice of arbitration – and to allow space for that arbitration to reach its own conclusions – is extremely welcome.

For further information, please contact Nicholas Peacock, Partner, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

 

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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Lorand Shipping v Davof Trading (Africa) B.V. (MV “Ocean Glory”): when a “creative solution” on the part of the tribunal becomes a serious irregularity leading to substantial injustice

In a rare example of a successful application under section 68 of the English Arbitration Act 1996 (the “Act”), the English Commercial Court has granted an order setting aside part of a final award and remitted the matter to the tribunal.

The circumstances which led to the application concerned a dispute under a charterparty between the Owners (Lorand Shipping) and the Charterers (Davof Trading (Africa) B.V.). The Owners referred a claim for demurrage to arbitration and, in a rather unclear Claim Submission, asked the tribunal to reserve its jurisdiction in relation to other claims which were as yet unparticularised and unquantified. The Charterers asked the tribunal to dismiss all such claims on their merits. The tribunal issued a final award which did neither. Instead, the tribunal refused to reserve its jurisdiction and, without regard to a contractual time bar, envisaged that any other claims would be brought in a new arbitration.

The English Commercial Court found that the tribunal’s approach, which had been without proper notice and without having given the parties opportunity to address the course of action which neither of them had advocated, constituted a serious irregularity. The fact that the Owner’s claims were now shut out constituted a substantial injustice and the offending paragraphs of the award were remitted back to the tribunal.

The case serves as a reminder to arbitrators that parties must be given opportunity to consider and address a course of action not advocated by either of them, even if the course of action may objectively be considered a practical solution to their collective benefit.

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A breakthrough for Financial Services Arbitration?

Nicholas Peacock, Dominic Kennelly and Emily Blanshard consider the arbitral award and judgment of the English High Court in Travis Coal Restructured Holdings LLC v Essar Global Fund Ltd – which suggest that summary procedures may be available to tribunals in appropriate cases – and their implications for the use of arbitration by banks and other  financial institutions.

To read the full article please click here.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803
Dominic Kennelly
Dominic Kennelly
Associate
+44 20 7466 7597

Emily Blanshard
Emily Blanshard
Associate
+44 20 7466 2833

 

 

 

 

 

This article has been reproduced with the kind permission of Global Arbitration Review and was first published in GAR MAGAZINE VOLUME 9 ISSUE 5.

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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Thwarting attempts to avoid execution: English Court orders appointment of receivers over foreign assets to assist enforcement of a London award

In a judgment handed down on 2 October 2014 in Cruz City 1 Mauritius Holdings v Unitech Limited & Ors, the English High Court made an order under s37 of the Senior Courts Act 1981 for the appointment of receivers over the foreign assets of two foreign Defendants, as well as ancillary orders it considered necessary to render that order effective, to assist the Claimant in realising an arbitration award in its favour. In doing so, the English Court emphasized yet again its commitment to the policy that arbitration awards should be enforced.

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English Commercial Court rejects challenge to “conditional” award

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”.

(U&M Mining Zambia Ltd v Konkola Copper Mines plc [2014] EWHC 2374 (Comm))

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“A Delicate Matter”: English Court considers enforcement of awards set aside by the courts of the seat and ability to claim post-award interest in those circumstances

In the case of Yukos Capital SARL v OJSC Rosneft Oil Company [2014] EWHC 2188 (Comm) the English Court considered two preliminary issues relating to the long-running dispute between Yukos Capital SARL (“Yukos Capital”) and OJSC Rosneft Oil Co. (“Rosneft”). The issues were as follows:

  1. Whether enforcement of arbitral awards that have been set aside by the courts of the seat is precluded under common law; and
  2. whether, in principle, interest could be recovered on such arbitral awards under either Russian and/or English law.

In relation to the enforcement issue, the Court considered the “test” was whether it could (in particular and identifiable circumstances) treat an award as having effect notwithstanding a later decision of a court annulling the award. The Court found that, as a general position, it would be unsatisfactory and contrary to principle if a Court were bound to recognise a decision of a foreign court which offended against basic principles of honesty, natural justice and domestic concepts of public policy.

It is clear therefore that, in general terms, the Court has the power to enforce the Awards at common law notwithstanding the set-aside decisions of the courts of the seat. However, it now remains for Yukos Capital to prove the allegations which it has made as to why those set aside decisions should not be recognized by the English Court.

Whilst the claim to interest under Russian law was unsuccessful (as a matter of Russian law), the Court concluded that, in principle, interest on the sums claimed in the English proceedings could be recovered under Section 35A of the Senior Courts Act 1981, notwithstanding the fact that interest had not been awarded by the tribunal.

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