Overview

The recent judgment in UMS Holding Ltd & Ors v Great Station Properties SA & Anor [2017] EWHC 2398 saw Mr Justice Teare dismiss challenges to an arbitration award brought under section 68 of the Arbitration Act 1996 (“AA 1996”). The judgment includes valuable guidance on the proper scope and effect of section 68 particularly in the context of a tribunal’s approach to evidence. The court concluded that a failure to address or take into account evidence will almost never amount to a “serious irregularity”.

Background

The claimants, two companies owned by Mr. Vladimir Lukyaneko, had entered into a Joint Venture Agreement (“the JVA”) with the respondents, three companies owned by Mr. Konstantin Grigorishin. The dispute centered around the JVA and an associated Option Agreement. The claimant’s alleged that the respondents had devised an “illicit scheme” whereby they had diverted profits and opportunities away from the joint venture. The claimants further claimed that they had been entitled to exercise a put option under the Option Agreement and so were entitled to sell their shares in the joint venture, Stremvol Holdings Limited. Arbitration proceedings were commenced in 2013 with the claimants seeking $55.8m in respect of the JVA claim and a further $250m in respect of the claim under the Option Agreement. The Arbitral Tribunal, consisting of Sir Gordon Langley, Sir David Steel and the Hon. L. Yves Fortier PC, CC, QC, published its award on 9 May 2016. The claimants were successful on both claims and were awarded the full $305.8m.

The Respondents contested the award and applied to the English High Court to have it set aside under section 68 AA 1996 alleging that there had been 16 serious irregularities falling within section 68(2)(a) or (d) AA 1996. They argued that the tribunal had failed to consider “large chunks of crucial evidence on central points of the case” such that there had been a “wholesale failure” by the tribunal to act fairly as they are required to do pursuant to section 33 AA 1996.

Decision

Does section 68 permit the court to intervene on grounds of failure to address evidence?

The Court held that it was not obliged to adopt views expressed obiter in earlier cases that in principle a failure to take account of evidence could be grounds for a successful challenge to an arbitral award under section 68 AA 1996. A tribunal’s duty is to decide the essential issues put before it and to give reasons for doing so but it is not required to deal with each and every point, or to refer to all of the evidence at hand.

Secondly, the assessment and evaluation of evidence is a matter exclusively for the tribunal, not the court. A review of all the evidence put before the tribunal would involve considering the entirety of evidence which was put before the tribunal which would be an “impermissible exercise for the court to undertake“.[1]

Finally, section 68 AA 1996 is concerned with due process, not whether the tribunal has made a correct finding of fact, just as it is not concerned with whether the tribunal has made the “right” decision in law. In rare circumstances there may be grounds to intervene under section 68(2)(i) but this would only arise in the unusual situation whereby a tribunal admits that there has been a failure to take into account evidence.

The Court held that in the circumstances, whilst some of the evidence had not been referred to, the tribunal had given detailed reasoning for its conclusions. As such, the tribunal had not breached its duties under the AA 1996. The Court also noted that the case before the tribunal had been complex involving a considerable body of evidence and stated that “[i]t is not surprising or exceptional that in such a case the losing party can identify several “chunks” of evidence relied upon by it to which the Tribunal made no reference in its award“.

Further legal issues

The Court rejected the argument that because the tribunal consisted of former judges and a prominent lawyer the court was obliged to hold the tribunal to a higher standard than normal. He stressed that all arbitration awards should be read in a reasonable and commercial manner.[2] As such, the fact that the tribunal had dealt with evidence less comprehensively than a High Court judge would have done was irrelevant.

The Court also held that section 68 AA 1996 did not envisage the courts examining the reasoning of an arbitral tribunal and therefore an allegation that a tribunal’s reasoning was illogical or irrational would not amount to a ground of challenge under section 68 AA 1996.

The judge rejected the claimant’s submission that even if each irregularity was not sufficient to engage section 68 AA 1996, a large number of irregularities combined could amount to a breach of the tribunal’s duty to deal with the losing party’s case fairly. Mr Justice Teare clarified that although it is possible to consider cumulatively a number of section 68 irregularities for the purposes of establishing whether there has been a substantial injustice to the claimant, each of the irregularities must fall within section 68 in and of themselves therefore they could not then be aggregated for the purposes of considering the issue of substantial injustice.

Comment

This case further delineates the scope of section 68 AA 1996 and clarifies that a perceived failure by a tribunal to take into account evidence will not amount to a serious irregularity for the purposes of section 68 as it would require the Court to carry out a significant review of the evidence that was before the tribunal.

Mr Justice Teare ended his judgment on a cautionary note stating, “As has often been said an application pursuant to section 68 should not be used to disguise what are in truth challenges to the Tribunal’s findings of fact.”[3]

[1] Paragraph 28 of the judgment.

[2] Paragraph 36 of the judgment.

[3] Paragraph 143 of the judgment.