ENGLISH COURT UPHOLDS S68 CHALLENGE TO ARBITRAL AWARD AND CRITICISES TRIBUNAL FOR TWO-YEAR DELAY

An arbitral award was recently challenged in the English High Court (the Court) in K v P [2019] EWHC 589 (Comm). In a rare example of a successful challenge under s68 of the Arbitration Act 1996, the Court held that (i) the tribunal had failed to deal with an issue put to it, and (ii) the Claimants had been denied the opportunity properly to present their case. The Court remitted the award back to the tribunal, notwithstanding its review of the tribunal’s handling of the case and criticism of the two years taken to hand down its award.

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ENGLISH HIGH COURT DISMISSES S68 CHALLENGE TO ‘AMBIGUOUS’ AWARD

In Gracie and another v Rose [2019] EWHC 1176 (Ch), the English court dismissed a challenge to an arbitration award under s68 of the Arbitration Act 1996.

While the court found that the Arbitrator’s reasoning in relation to certain topics was ambiguous, it held that this was insufficient for a successful s68 challenge. The judgment contains useful guidance on the scope of s68 and its interplay with other provisions of the 1996 Act. In particular, the court emphasised that the applicant had an obligation to first request the arbitrator to correct, supplement or clarify the award under s57 before bringing a challenge in the courts.

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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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Section 67 and 68 challenges to LCIA award dismissed

In the highly complex and contentious case of Filatona Trading Ltd and another v Navigator Equities Ltd and others [2019] EWHC 173 (Comm), the English High Court dismissed an attempted challenge to an LCIA award brought on the grounds of jurisdiction (s.67 Arbitration Act 1996) and serious irregularity (s.68 Arbitration Act 1996).

In particular, the Court held that an LCIA arbitral tribunal did not exceed the scope of its powers in ordering relief that was not available to an English court.

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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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English Court upholds on paper dismissal of serious irregularity challenge with no prospects of success

The English High Court’s decision in Asset Management Corporation Of Nigeria v Qatar National Bank [2018] EWHC 2218 (Comm), handed down in July 2018 but only recently published, concerned the court’s dismissal on the papers of an application under section 68 of the Arbitration Act 1996 on the basis that the application had no reasonable prospect of success (available here: https://www.bailii.org/ew/cases/EWHC/Comm/2018/2218.html).

The decision serves as an example of the court employing the summary procedure to dismiss a section 68 application on the papers, but the drawn out process highlights the practical difficulties in quickly disposing of meritless applications.

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Arbitrator’s independent inquiries amount to a serious irregularity – English court remits award back to arbitrator

The English High Court has upheld a challenge to an arbitration award on the grounds of serious irregularity, in Fleetwood Wanderers Ltd (t/a Fleetwood Town Football Club) v AFC Fylde Ltd [2018] EWHC 3318 (Comm). The Court held that the sole arbitrator’s conduct in making independent investigations after the substantive hearing, without notifying the parties and without giving them an opportunity to respond, breached the tribunal’s general duty under s33 of the UK Arbitration Act 1996 (the “Act“), and amounted to a serious irregularity under s68 of Act. The award was remitted back to the arbitrator for reconsideration.

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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 upholds s68 serious irregularity challenges to an arbitral award holding that the arbitrator should have ensured that costs are pleaded by all parties

In Oldham v. QBE Insurance (Europe) Ltd [2017] EWHC 3045 (Comm), the Commercial Court held that the arbitrator’s decisions on costs could be challenged on grounds of serious irregularity under Section 68 of the Arbitration Act of 1996 (the Act) on the basis that the applicant had been denied the opportunity to make submissions. This decision is a rare instance of the English Courts intervening in the conduct of an arbitration in order to protect the integrity of the process, and ensure equal treatment of parties to the arbitration. Continue reading

English Court refuses to allow challenge to arbitral award to be discontinued

The English Court has recently held that a party will not be able to discontinue appeal proceedings challenging an arbitral award in circumstances where to allow it do so would: (i) circumvent the jurisdiction of the supervisory court; and/or (ii) rely on the same appeal grounds at the recognition and enforcement stage.

In National Iranian Oil Company (NIOC) v Crescent Petroleum Company International Ltd (CP) & Crescent Gas Corporation Ltd (CG), NIOC had sought to discontinue its appeal and provided an undertaking stating that it would not resist recognition or enforcement of the arbitral award by relying on arguments based on the grounds of the appeal. The Court found that CP and CG (together Crescent) were justified in rejecting the undertaking as the terms allowed NIOC to make the same allegations in another forum. The Court also found that even if a sufficient undertaking was provided, it would not preclude the risk that NIOC could resist enforcement in a New York Convention court.

The Court set aside the notice of discontinuance and considered the grounds of appeal on the merits, even though NIOC did not attend the hearing. The grounds were dismissed and costs were awarded on an indemnity basis.

This decision makes clear that the English Court will not permit grounds of appeal to be preserved as a basis for resisting further enforcement or recognition proceedings.  The Court will carefully consider any undertaking to court to ensure this is not the case. This is in line with the English Court's pro-enforcement bias and the view that the court of the seat is the appropriate forum in which to challenge the award.  

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