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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Separability and public policy: selecting law of arbitration agreement does not disapply conflicting non-mandatory provisions of English Arbitration Act 1996 and “fresh evidence…is particularly important” for challenging an Award on public policy grounds

An arbitration agreement is understood in most, but not all, jurisdictions to be a separable or distinct agreement from the contract or agreement of which it forms part.  This is confirmed in s7 of the English Arbitration Act 1996 (the Act).

In National Iranian Oil Company (NIOC) v Crescent Petroleum Company International Ltd (CP) & Crescent Gas Corporation Ltd (CG), the English Court rejected NIOC's challenge to an award issued in a London seated arbitration on grounds of jurisdiction and public policy.

NIOC argued that the contract – which was governed by Iranian law – was procured by corruption and therefore invalid.  It also argued that this meant that the arbitration agreement was also invalid (such that the tribunal had no jurisdiction) because: (i) Iranian law applied to the question of whether the arbitration agreement was separable; and (ii) Iranian law did not recognise the separability of the arbitration.

The Court rejected this argument. As the arbitration was seated in London, s7 of the Act applied unless it was disapplied by the parties by "agreement to the contrary". While s7 is not a mandatory provision, the Court commented that an "agreement to the contrary" in relation to the specific provision is required to disapply it. The choice of Iranian law as the proper law of the contract was not an agreement to the contrary in relation to separability. Furthermore, the parties' arbitration agreement made clear that the issue of validity of the contract was to be determined by the tribunal.  The challenge to the award under s67 was rejected.

The Court also struck out NIOC's challenge based on public policy (which it brought under s68(2)(g) of the Act). NIOC argued that, whilst the tribunal found that the contract was not procured by corruption, the Court, considering English public policy, might take a different view. NIOC was found to have no reasonable prospect of succeeding in its challenge because: (i) the arbitrators had made "a very careful analysis" of the issue in question "after full consideration and evidence"; (ii) NIOC had provided no "fresh evidence"; and (iii) this was not a case of "very exceptional circumstances" that would justify the Court intervening with the arbitrators' decision.

This is a robust, pro-arbitration decision from the English court. In practical terms, it serves as a useful reminder for parties to analyse at the transactional stage the interplay between the different laws that might apply to their disputes and the impact that any conflicting provisions of those laws might have on the procedure for quickly and effectively resolving those dispute. Where potential issues are identified, they should be addressed in the drafting of the dispute resolution provisions. The case further highlights the need to disapply non-mandatory provisions of the Act in clear and specific terms.

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English High Court dismisses section 68 challenge to arbitral award on basis of delay

In its recent judgment in B.V. Scheepswerf Damen Gorinchem v The Marine Institute [2015] EWHC 1810 (Comm) (available here), the English High Court (the Court) dismissed the claimant’s challenge to an arbitral award under s68 of the Arbitration Act 1996 (the Act) on the basis of delay in issuing the award. The award related to a dispute between B.V. Scheepswerf Damen Gorinchem (Damen) and The Marine Institute (TMI) about a vessel that Damen agreed to build and TMI agreed to purchase. TMI alleged that Damen’s errors in commissioning the engines had caused damage to the vessel which necessitated repairs.

The dispute was submitted to arbitration in London before a sole arbitrator under the LMAA Terms. The hearing lasted for 3 days in September 2013, but the award (which was in TMI’s favour) was not issued until September 2014. The arbitrator provided no “proper” justification for this lengthy delay.

Damen brought an application to set aside the award under section 68 of the Act, which allows the court to set aside awards on the basis of a serious irregularity affecting the tribunal, the proceedings or the award. The grounds of the application were that:

  • the lengthy delay in issuing the award amounted to a breach of the arbitrator’s general duties and the procedure agreed between the parties (the LMAA terms); and
  • the arbitrator had failed to deal with all the issues put before him.

The Court rejected the challenge that the lengthy delay, of itself, was not a sufficient ground to justify the setting aside of an award. The most that could be said was that the delay might lead the court to subject the award to greater scrutiny when considering whether it addressed all the issues put to the tribunal. In this case, however, the arbitrator had addressed all the issues.

The judgment is significant for a number of reasons. It shows that a lengthy delay, without more, will not generally support a challenge under s 68 of the Act. However, notwithstanding the outcome in this case, it also demonstrates that a substantial delay in issuing an award could nonetheless lead to additional scrutiny by the court. Further, the Court confirmed that it will not permit challenges to an arbitrator’s factual or legal findings to be “dressed up” as challenges under s68.

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Sonatrach v Statoil: backdoor attempt to challenge the tribunal’s findings of fact receives short shrift from the English Court

In the case of La Societe pour la Recherche La Production Le Transport La Transformation et la Commercialisation des Hydrocarbures SPA v Statoil Natural Gas LLC [2014] EWHC 875 Comm, the Commercial Court considered an application under section 68 of the Arbitration Act 1996 (the “Act”) by the claimant (“Sonatrach”) to set aside an arbitration award.

Sonatrach argued that under section 68(2)(a) of the Act the tribunal had failed to comply with its general duty under section 33 of the Act by overlooking and mischaracterising two pieces of evidence and improperly using an administrative secretary. Sonatrach’s application to set aside the Award for serious irregularity under section 68 of the Act was dismissed on the grounds that Sonatrach was attempting to contest findings of fact made by the tribunal.

Sonatrach also made an application to set aside the Order of Cooke J granting the defendant (“Statoil”) permission under section 66 of the Act to enforce the award in the same manner as a judgment. Sonatrach challenged the award of interest at 8% under the Judgments Act 1838 on the damages and costs awarded by the tribunal from the date of the Order until payment. Sonatrach’s application to set aside the Order of Cooke J was dismissed.

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