AWARD ENFORCEMENT ORDERS FROM THE ENGLISH COURTS: DISPUTED FACTUAL ISSUES

Earlier this year, the English High Court handed down a judgment (A v B [2020] EWHC 952 (Comm)) delivering a stern warning to claimants who were considering the enforcement of an arbitration award which did not establish a clear “right to payment” (see our previous blog post in connection with that decision.) In brief, the claimant’s leave to enforce a tribunal award was set aside on grounds that there was a triable issue of fact in respect to whether the acceleration provisions of the consent award had been triggered for the amount claimed. As a result, the court gave directions for a fresh hearing to hear disputed factual issues and to determine whether or not permission to enforce the award should be given.

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ENGLISH SUPREME COURT DECIDES APPROACH TO DETERMINING GOVERNING LAW OF ARBITRATION AGREEMENT

On 9 October 2020, the English Supreme Court handed down its judgment in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, which is likely to become the leading English law authority on the applicable principles relating to determining the proper law of an arbitration agreement and the role of the courts of the seat in granting anti-suit relief.

The Supreme Court issued the decision following an expedited appeal against a recent judgment of the Court of Appeal ([2020] EWCA Civ 574), which we discussed in our previous blog post. The Supreme Court dismissed the appeal by a majority, with Lords Burrows and Sales dissenting.

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ENGLISH COURT BLOCKS PARTY’S ATTEMPT TO ADVANCE NEW ARGUMENTS IN RESPECT OF POINT ALREADY DECIDED IN PRELIMINARY ISSUE

In the recent decision of Daewoo Shipbuilding and Marine Engineering Company Limited v Songa Offshore Equinox Ltd [2020] EWHC 2353 (TCC), the English Technology and Construction Court (the “Court”) dismissed an application seeking permission to appeal two arbitral awards on identical terms under s69 of the Arbitration Act 1996 (the “Act”) and to set aside the awards for serious irregularity under s68.

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LCAM/HSF MEDIATION IN ARBITRATION SURVEY

Herbert Smith Freehills is joining with the London Chamber of Arbitration and Mediation to conduct a new Mediation in Arbitration Survey.

The survey should provide a valuable opportunity to ascertain the current take-up of mediation in international arbitration. The survey also aims to identify the stages of the dispute at which such mediations most commonly occur, their claim values and settlement rates.

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LCIA RULES 2020 ENTER INTO FORCE

The revised London Court of International Arbitration (LCIA) Rules have now come into force, applying to all LCIA arbitrations commenced on or after 1 October 2020.

The new Rules have been warmly welcomed by the international arbitration community, receiving recognition for the way that they enhance efficiency and flexibility, while staying true to the LCIA Rules’ traditional light-touch approach.

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ENGLISH HIGH COURT CHARACTERISES UNSUCCESSFUL CHALLENGE TO AWARD UNDER S68 AS “SEEKING TO ATTACK AN ARBITRATOR’S FINDINGS OF FACT AND HER EVALUATION OF THE EVIDENCE” UNDER GUISE OF PROCEDURAL IRREGULARITY

In the recent decision in ASA v TL [2020] EWHC 2270 (Comm), the English High Court (the “Court”) rejected an application brought by ASA under s68 Arbitration Act 1996 (the “Act”) that sought to challenge an arbitral award on the basis of two alleged serious procedural irregularities.

ASA had contended that the arbitrator had decided two issues on points which ASA did not have a fair opportunity to deal with, as they had not been raised by either party or their experts, and departed from common ground.

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ENGLISH HIGH COURT GRANTS EXTENSION OF TIME TO BRING CLAIM UNDER S12 ARBITRATION ACT 1996

In the recent case of National Bank of Fujairah (Dubai Branch) v Times Trading Corp [2020] EWHC 1983 (Comm) the English High Court (the “Court”) granted National Bank of Fujairah (”NBF”) an extension of time under s12(3)(b) Arbitration Act 1996 (the “Act”) to bring an arbitration claim against Times Trading Corp (“Times”). The decision follows the recent case of Fimbank PLC v KCH Shipping (“Fimbank”) (see our blog post on this decision here) where an extension of time to bring an arbitration claim was refused on a somewhat similar set of facts.

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English High Court dismisses challenge to enforcement of award where award debtor allegedly unable to engage a hearing advocate

In a recent application (Shell Energy Europe Limited v Meta Energia SpA [2020] EWHC 1799 (Comm)), the English court dismissed a challenge to the court’s previous order under s66 of the Arbitration Act 1996 (“the Act”) granting leave to enforce an award. The challenge was made on the ground that the applicant was not able to participate in the merits hearing in the arbitration, due to difficulty in securing an advocate. In circumstances where the evidence “fell well short” of persuading the Court that the applicant had no choice but to cease its hearing participation, the challenge was unsuccessful.

Background

The applicant in this case, Meta Energia SpA (“Meta”) had participated fully in the underlying LCIA arbitration until the last stage. Less than 10 days ahead of the planned two-day final merits hearing, Meta dismissed its entire legal team, saying this was because it was unsatisfied with the way the legal team had pursued or presented the defence.

Meta was granted a hearing adjournment of two weeks and instructed new solicitors, but said that it was unable to instruct new leading counsel as advocate.

Meta’s new solicitors attended the final hearing, but did not participate other than to make a brief submission that Meta was unable to present its case.

The arbitrators considered whether it was just and appropriate to continue and concluded that it was. The claimant’s legal team reminded the arbitrators of points of substance raised against the claimant, based upon Meta’s written submissions on the merits.

The arbitrators afforded Meta a further period of time to engage with the merits, if it chose to do so after receiving the hearing transcript. Meta did not make any submissions on the merits and did not seek additional time to do so, although it did make a number of comments on costs. The award was then issued in December 2019.

The claimant sought to enforce the award in Italy under the New York Convention, but Meta attempted to resist enforcement there on the basis that Meta had been unable to present its case in the arbitration (Article V.1(b)). The claimant also sought to enforce the award in the UK and in May 2020 had obtained the High Court’s leave pursuant to s66 of the Act to enter judgment in the terms of the award (the “May 2020 enforcement order”). Meta subsequently applied to the Court to set aside the May 2020 enforcement.

S66 of the Act

The summary procedure under s66 of the Act can be used to enforce arbitral awards in arbitrations seated in England and elsewhere. An award creditor can apply to the English court under s66 to enforce an award in the same way as an English court judgment and may also seek judgment in terms of the award. Applications under s66 will be refused either where the award debtor can show that the tribunal lacked substantive jurisdiction (s66(3) of the Act), or where the court refuses the application on discretionary grounds.

In this case Meta sought to persuade the court that there was a “’due process’ complaint”…as a discretionary reason why… [the award] should not be enforced under s.66”.

Court’s decision

The Court was unsympathetic to Meta’s argument that it was not able to participate in the merits hearing because it was unable to be represented by leading counsel.

The Court noted that there was no clarity as to how the applicant’s defence in the arbitration could have been improved or set out differently by any new legal team. In addition, Meta had said it wanted to instruct leading counsel to provide the advocacy at the hearing and ”took the view that it would not participate on the merits unless it could be represented by leading counsel”. Despite this, the Court took the view that Meta could have been appropriately represented at the merits hearing by suitable junior counsel.  The Court went on further to say that Meta did not need to use the Bar and could have instructed suitable solicitors for the advocacy, there being “highly skilled and experienced international arbitration practitioners, not just the Bar”, able to provide advocacy services in arbitration.

No evidence had been put before the court to explain Meta’s decision not to provide written submissions in response to the receipt of the hearing transcript, or to explain how Meta’s position had allegedly been worsened by the hearing having gone ahead.

The Court also noted that no challenge to the award had been made under s68 of the Act, which would be the “normal means to pursue a complaint of lack of due process or other procedural unfairness”. It was in any event clear that there was no arguable basis for any s68 challenge. The arbitrators had been “scrupulously even-handed” and the process “unimpeachably fair”. Meta could have presented and fully developed its case, but simply chose not to do so.

Accordingly, the Court dismissed the challenge, and the May 2020 enforcement order was confirmed.

Comment

This judgment confirms the pro-arbitration stance of the English courts in relation to applications for enforcement under s66 of the Act. While the courts will refuse applications where enforcement would not be in the interests of justice, the courts will not exercise their discretion to deny enforcement on questionable grounds.

For more information, please contact Chris Parker, Partner, Rebecca Warder, Professional Support Lawyer, Peter Chen, Associate, or your usual Herbert Smith Freehills contact.

Chris Parker

Chris Parker
Partner
+44 20 7466 2767

Rebecca Warder

Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418

Peter Chen

Peter Chen
Associate
+44 20 7466 3868

ENGLISH SUPREME COURT TO DECIDE APPROACH TO DETERMINING GOVERNING LAW OF ARBITRATION AGREEMENT

On 27 and 28 July 2020, the Supreme Court heard an expedited appeal against a recent judgment of the Court of Appeal in Enka Insaat ve Sanayi AS v OOO Insurance Co Chubb [2020] EWCA Civ 574, which we discussed in one of our previous blog posts. The Supreme Court is asked to consider two issues: (i) the correct approach to determining the proper law of an arbitration agreement; and (ii) the role of the court of the seat of arbitration in determining whether foreign proceedings give rise to a breach of an agreement to arbitrate.

Background

In June 2020, the Supreme Court allowed OOO Insurance Co Chubb (“Chubb Russia”) to proceed with its appeal against the judgment in favour of Enka Insaat ve Sanayi AS (“Enka”). Chubb Russia was seeking to overturn the decision of the Court of Appeal, which precluded it from pursuing a subrogation claim in the Russian courts (the “Russian Court Claim”). The Court of Appeal had determined that the Russian Court Claim was brought in breach of the arbitration agreement (the “Arbitration Agreement”) in the main contract (the “Contract”).

The decision of the Court of Appeal

The Court of Appeal concluded that: (i) the English court as the court of the seat was necessarily an appropriate court to grant an anti-suit injunction and questions of forum conveniens did not arise; and (ii) the Arbitration Agreement in the Contract was governed by English law. In particular, on issue (ii) the Court of Appeal held that there was nothing to suggest an express choice of Russian law as the governing law of the Contract and/or the Arbitration Agreement. Accordingly, in the absence of any countervailing factors which would point to a different system of law, the parties had impliedly chosen that the Arbitration Agreement was governed by the law of the seat, i.e. English law.

The Court of Appeal emphasised that if there is no express choice of law in an arbitration agreement itself, then it is necessary to review whether the express law of the main contract also applies to the arbitration agreement. However, the law of the contract would apply to the arbitration clause only in the minority of cases. In “all other cases, the general rule should be that the…[arbitration agreement]  law is the curial law, as a matter of implied choice”, unless there are powerful factors to counter this being the implied choice of law. If there is no implied choice of law, the law of the arbitration agreement will be the system of law with which the arbitration agreement has its closest and most real connection.

Russian court proceedings

As noted in our previous blog post, Chubb Russia filed the Russian Court Claim in May 2019. The decision of the first instance court dismissing the claim was published in full in May 2020. Although the Russian Court Claim was dismissed, the court also dismissed Enka’s motion seeking dismissal without considering the merits of the case in reliance on the Arbitration Agreement, noting that the dispute did not fall within the Arbitration Agreement. Both Enka and Chubb Russia appealed, and the Russian appellate court is due to hear the appeal at the end of October 2020.

Supreme Court hearing: brief overview of the parties’ positions

Overview of submissions made by Chubb Russia

Chubb Russia argued that the Arbitration Agreement formed an integral part of the Contract, and therefore, upon the application of the rules of contractual construction, the Arbitration Agreement should be governed by the same system of law as the Contract (i.e. Russian law, being the law impliedly chosen by the parties). Chubb Russia also argued that it would be just and convenient for the English court to stay the English proceedings to allow the Russian court to determine whether it had jurisdiction to hear the Russian Court Claim.

Overview of Enka’s submissions

Enka argued that the Arbitration Agreement was a separate contract, and the starting point should accordingly be the Arbitration Agreement itself (rather than the Contract, as suggested by Chubb). By agreeing to arbitration seated in London, the parties (i) impliedly agreed that the Arbitration Agreement was governed by English law; and (ii) therefore submitted to the jurisdiction of the English courts to grant an injunction to restrain a breach of the Arbitration Agreement and to determine whether there was such breach.

Comment

This case is likely to become the leading English law authority on the applicable principles relating to the approach to determining the proper law of an arbitration agreement. It remains to be seen whether the Supreme Court agrees with the Court of Appeal in relation to the significance of the law of the seat for the purpose of determining the proper law of the arbitration agreement.

For more information, please contact Craig Tevendale, Partner, Rebecca Warder, Professional Support Lawyer, Olga Dementyeva, Associate or your usual Herbert Smith Freehills contact.

Craig Tevendale

Craig Tevendale
Partner
+44 20 7466 2445

Rebecca Warder

Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418

Olga Dementyeva

Olga Dementyeva
Associate
+44 20 7466 7644