In the recent and unusual case of Xstrata Coal Queensland P Ltd (Company Number 098156702) (aka Rolleston Coal Holding PTY Ltd) & Anor v Benxi Iron & Steel (Group) International Economic & Trading Co Ltd [2020] EWHC 324 (Comm), the award creditors challenged an arbitral award under s68 of the Arbitration Act 1996 (the “Act”). The application was made after the award creditors’ attempt to enforce the award in China under the New York Convention had failed. The English Court found that there was uncertainty or ambiguity as to the effect of the award, relating to the identity of a party to the relevant sale contract and the arbitration agreement contained within the contract.
This decision highlights the risk that parties may seek to exploit alleged ambiguities in the identity of a party at the enforcement stage, even if the issue has not been raised in the arbitration itself. The case is accordingly an important reminder of the need to ensure that any known ambiguity in the identification of any party has been dealt with in the course of submissions, and to seek to have this covered in the award.
Background
The dispute arose in relation to a contract for the sale of coking coal. The resulting award was held to be unenforceable in China, as the award debtor successfully argued that one of the claimants named in the award was not a party to the contract or the arbitration agreement.
The English Court then granted the award creditors an extension of time under s79 of the Act to make an application to the tribunal under Article 27 of the LCIA Rules to correct the award (in Xstrata Coal Queensland Pty Ltd v Benxi Iron and Steel (Group) International Economic and Trading Co Ltd [2016] EWHC 2022 (Comm), which we discussed in our earlier blog post here)
However, the Tribunal denied the award creditors’ application for a correction of the award. It was emphasised that the issue of the identity of the relevant party had never been covered during the proceedings and so was not the subject of any finding in the award. The Tribunal also stated that any application under Article 27 “is limited to correction of computational, clerical and typographical errors or errors of a similar nature.” Any subsequent finding in relation to the identity of a contracting party would be an “addition to the Award, not a mere correction.”
High Court decision
The award creditors then made an application to the English Court challenging the award for serious irregularity, under sections 68(2)(f) and 68(2)(c) of the Act, on 19 December 2016. There was a substantial delay at this stage, due to difficulties in effecting service in China. When the case ultimately came before the Court, it considered two key questions; (i) whether the application had been made in time; and (ii) whether s68(2)(f) had been engaged.
Was the application brought in time?
The application was opposed on the basis that the s68 challenge was out of time under s70(3) of the Act.
S70(3) requires any challenge to an Award under s68 to be brought within 28 days of the award or, if there has been any arbitral process of appeal or review, the date when the applicant was notified of the result. The award creditors argued that the s68 application was made within time, as the 28 day period only ran from the date that the tribunal had rejected the application under Article 27 of the LCIA Rules.
The Court assessed whether the relevant date for the purposes of the s70 time limit was the date on which the decision that there should be no correction is made known, or the date of the Award. The Court found that where a material application is made to correct an award under s57 of the Act or an equivalent agreed process, such as Article 27 of the LCIA Rules, the 28 day time period will begin to run from the date when the decision on the application is known to the parties.
The Court was also required to determine whether the application under Article 27 was material to the s68 application. The Court decided that it was material and in this context it was emphasised that the Article 27 application was permitted by the Court in 2016, “specifically in order to seek that the Arbitrator should clarify a matter which rendered the Award unclear or ambiguous.” That Article 27 application was found to be directly relevant to the s68 application, as “had it been successful, there would have been no basis for the present application.”
Accordingly, the s68 application was found to have been brought in time, within the 28 day period specified in s70(3).
Had s68(2)(f) been engaged?
The award creditors argued that there was uncertainty or ambiguity as to the effect of the Award, which had not been resolved by the Article 27 application. They argued that the uncertainty or ambiguity in question had caused, or would cause, substantial injustice by making it either impossible or difficult for the award to be enforced. The award debtor took the position that there was in fact no such uncertainty or ambiguity and that, if there had been any uncertainty or ambiguity this was not in respect of the effect of the award, but only related to its reasoning.
On this point, the Court found in favour of the award creditors, noting that “Section 68 is not…confined exclusively to cases in which the tribunal has gone wrong in its conduct of the arbitration, if that is understood to mean that the tribunal has done something which it should not have done in the circumstances which were presented to it.” The Court determined that if an award was open to being misunderstood by an enforcing court then that award could be uncertain or ambiguous, even where English lawyers would understand the award’s meaning and effect. In this case enforcement had been refused by the court in China, demonstrating that the award was ambiguous.
The award debtor argued that allowing ambiguity or uncertainty under s68(2)(f) to encompass correction of the identity of a party “would open the door to unmeritorious applications”, where the award had a “clear meaning and effect as a matter of the curial law.” However, the Court did not consider this a real danger, as future award creditors would have to show that the ambiguity or uncertainty either had already caused, or would cause, an enforcing court to fail to enforce the award in line with what the English Court would consider to be its true meaning and effect.
Accordingly, the Court granted the Claimants’ application under s68(2)(f), and remitted the award to the tribunal to reconsider the identity of the parties to the contract. Given the successful finding under s68(2)(f), the Court did not see any need to deal with the alternative application under s68(2)(c).
Comment
This is a relatively rare example of a successful challenge under s68 of the Act. The decision demonstrates the English courts’ willingness to deal robustly with ambiguities or uncertainties in awards where these amount to serious irregularity under s68. The judgment also reconfirms the high threshold in respect of a challenge to an award for alleged uncertainty or ambiguity under s68(2)(f).
For more information, please contact Chris Parker, Partner, Rebecca Warder, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.
