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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Shri Lal Mahal Ltd v Progetto Grano Spa: Supreme Court of India overrules Phulchand and reduces court interference in enforcement of foreign awards

In a previous e-bulletin, we had reported about the case of Phulchand Export Ltd v OOO Patriot¹ where the Supreme Court of India had set a worrying precedent by allowing parties to challenge enforcement of a foreign arbitral award on grounds of patent illegality. In Phulchand the court applied the controversial previous decision in ONGC v Saw Pipes² and held that a patently illegal award violates the public policy of India and therefore entitled the Indian courts to, in appropriate cases, re-look at the merits of the case even in enforcement proceedings.

The Supreme Court, in its recent decision in Shri Lal Mahal Ltd v Progetto Grano Spa³ expressly overruled Phulchand and declined to consider the merits of a foreign arbitral award in an enforcement proceeding. The decision in Shri Lal Mahal represents another significant pro-arbitration step taken by the Indian Supreme Court in recent times.

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