English High Court orders indemnity costs in discontinued s.68 proceedings to challenge awards

In Koshigi Ltd and another company v Donna Union Foundation and another [2019] EWHC 122 (Comm) the English High Court considered an application for costs arising from discontinued proceedings under s.68 Arbitration Act 1996 to challenge two arbitral awards. The claimant in the underlying arbitration had successfully obtained two awards in its favour from the tribunal, which the respondents then sought to challenge in the English courts through two related sets of proceedings for serious irregularity under s.68, alleging bias on the part of the chairman of the tribunal. The respondents then discontinued the s.68 proceedings before they reached a hearing, asserting that the awards which they were seeking to challenge had become unenforceable.

In considering the claimant’s application for costs in relation to the discontinued proceedings, the Court decided that the liability for the costs rested with the applicants (the respondents in the arbitration) and that the costs should be assessed on an indemnity basis rather than the usual – and typically lower  – standard basis. The Court’s approach, which disincentivizes the pursuit of s.68 applications without a strong substantive basis, is consistent with other attempts by the English courts to block applicants who bring weak s.68 appeals.

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NSW Supreme Court refuses indemnity costs on successful application for referral to arbitration

Justice Hammerschlag of the New South Wales Supreme Court (the Court) has refused to award indemnity costs to parties which successfully obtained a stay of proceedings in favour of arbitration: John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd (No 2) [2015] NSWSC 565.

The decision was made in the context of a domestic arbitration regulated by the Commercial Arbitration Act 2010 (NSW), although, as his Honour noted in the course of the judgment [t]he International Arbitration Act and the suite of State and Territory Commercial Arbitration Acts enacted since 2010 are generally intended to give effect to the UNCITRAL Model Law on International Commercial Arbitration.  Good policy suggests that absent clear legislative intent to the contrary, construing them so as to result in incongruent outcomes should be avoided. 

In rejecting the application for indemnity costs, the Court declined to follow the approach taken in other regional jurisdictions.

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Commencing court proceedings in breach of an arbitration agreement: The risk of indemnity costs

In the recent decision of Pipelines Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 (S), his Honour Chief Justice Martin of the Supreme Court of Western Australia ordered Pipeline Services WA Pty Ltd (Pipeline) to pay, on an indemnity basis, the costs incurred by ATCO Gas Australia Pty Ltd (ATCO) in applying for a stay of proceedings under section 8 of the Commercial Arbitration Act 2012 (WA) (2012 Act).

In making this order, his Honour confirmed the application in Western Australia of the principle in the English case of A v B [2007] EWHC 54 that indemnity costs will generally be awarded where a party commences legal proceedings in breach of a contractual obligation to refer a dispute to arbitration.

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