A v B  [2020] EWHC 952 (Comm)

On Tuesday, the High Court handed down judgment on an application to set aside an Order enforcing a US $36 million domestic arbitration award.

Richard Power appeared for the successful applicant (“B”) in the hearing before Mrs Justice Moulder. The one day hearing was heard remotely due to the coronavirus pandemic.

Having regard to the parties’ expectation of confidentiality in arbitral proceedings, the court concluded that initials should be used in the judgment to preserve the confidentiality of the parties, but that a public judgment was desirable given the issue which arose in relation to section 66 of the Arbitration Act 1996 which may offer future guidance to lawyers or practitioners.

The background

In October 2019, the Respondent (“A”) obtained an Order from Mr Justice Teare, pursuant to s.101 and s.66 of the Arbitration Act 1996, enforcing the operative part of an arbitration award to the effect that the Applicant (“B”) owed A US $36 million (“the October Order”).

The underlying arbitration award dated December 2018 had provided that B was liable to pay A a principal sum of US $34 million and accrued interest of US $10 million, with the principal sum to be paid by quarterly instalments (on 1 January, 1 April, 1 July and 1 October each year) and that, in the event that an instalment payment date was missed, the outstanding principal sum and accrued interest would become due and payable immediately.

B did not make payment of an instalment on 1 October 2019. A applied to the Court ex parte and obtained the October Order.

The application

B applied to set aside the October Order on the grounds that: (a) s.101 of the 1996 Act was inapplicable; (2) there was no power under s.66 of the 1996 Act for the Court to enter the October Order; and (3) there needed to be a trial of the issue of whether the non-payment on 1 October gave rise to the consequences for which A contended.

The judgment

Mrs Justice Moulder agreed with each of B’s submissions, and held that:

  • Section 101 of the Arbitration Act 1996 was inapplicable as the Award was a domestic award. It was incumbent upon the applicant making an ex parte application on the papers to ensure that all relevant points were drawn to the attention of the judge and to assume that the judge would scrutinise the papers to identify mistakes on the part of the applicant misunderstands the nature of an application on the papers.
  • It was not open to the court to make an order in the terms of the October Order where the circumstances required a further adjudication, namely whether there had been a failure to pay an instalment (see West Tankers Inc v Allianz Spa [2012] EWCA Civ 27). In this case, the Award had not established the “right to payment” of the accelerated sum; there was no statement or finding in the Award that the entire principal sum was due but rather there was only provision in the Award for the sum to become due if certain conditions had been satisfied. The arbitrator had not decided the point i.e. whether the principal sum was now due. Accordingly, it was not open to A to obtain the October Order pursuant to section 66 and it should be set aside.
  • B had shown on the evidence before the court a realistic prospect of establishing a defence to enforcement, on the basis that (inter alia) by reason of Clause 2.3 of the Award payment had not been required by 1 October, and/or A had agreed not to exercise its rights in relation to the 1 October instalment or was estopped from relying on the non-payment, and the factual dispute needed to be resolved before the court could determine whether to make an order granting leave to enforce. There was nothing in s.66 which precluded the Court determining the factual dispute (see Sovarex S.A v Romero Alvarez S.A [2011] EWHC 1661 (Comm) at [46]-[49]). A 2 day trial would be listed.

The judgment can be found here.