The English Commercial Court’s recent decision in the Primera Maritime case is a useful review of the Court’s approach to section 68 of the Arbitration Act 1996 (“the Act”). The Claimants had challenged the award on the alleged basis that the tribunal had failed to consider certain issues it had raised. On analysis, the Court found that the Claimants’ real complaint was the correctness of the tribunal’s decision. Their appeal was rejected.
In the judgment, Flaux J sets out some guiding principles for parties considering the question of whether arbitrators have failed to “deal with all the issues that were put to it”. The judgment shows that the court will not intervene in the correctness of a tribunal’s decision. A dissatisfied party must not nitpick and look for inconsistencies or faults in an award. The focus of section 68 is due process. The court will be critical of parties using this provision to challenge a tribunal’s award on the basis of its findings of fact.
The Claimants were the buyers under two shipbuilding contracts with the Defendants dated 12 July 2007 in relation to two Kamsarmax bulk carriers to be built at the Defendants’ yard in China. Disputes arose under the contracts and these were referred to arbitration in London.
The basis of the Claimants’ claim was that from 19 October 2007, the Defendants had been in anticipatory breach of contract by refusing to perform contracts in accordance with their terms, specifically in relation to delivery by the contractual delivery dates in 2011. The Claimants asserted that the Defendants had hence renounced the contracts.
Under the tribunal’s Interim Award in November 2012 (“the Award”), the tribunal dismissed the claims, holding that although the Defendants had renounced the contracts, the Claimants thereafter affirmed the contracts.
The Claimants applied under section 68(2)(d) of the Arbitration Act 1996 (“the Act”) to set aside the Award on the grounds that the tribunal had failed to deal with two issues which the Claimants had put before it, namely (i) that the renunciation by the Defendants was continuous; and (ii) that the Claimants would have “flipped” the contracts in relation to the quantum of their claim, i.e. that the buyers would have resold the contracts to a third party for profit.
Section 68 of the Act provides that a party to arbitral proceedings may apply to the court to challenge an award on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
Section 68(2)(d) specifically states:
“Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant - ...(d) failure by the tribunal to deal with all the issues that were put to it”.
The Claimants were unsuccessful in setting aside the Award.
The Claimants’ application under section 68 was associated with two of its submissions:
- There had been a number of repetitions of the Defendants’ renunciation including in their email of 19 October 2007, at a meeting on 6 November 2007 and in a Prospectus issued on 11 December 2007. Therefore, even if there had been an affirmation by the Claimants prior to 11 December 2007, that would not preclude the Claimants from relying on the renunciation in the Prospectus;
- The Defendants’ renunciation was continuous and an affirmation at one stage is not an irrevocable affirmation for all time in the future. Therefore, an affirmatory act at an earlier stage did not preclude the Claimants from terminating when they did on 22 January 2008.
The Claimant’s case was that the tribunal had dealt with the first of these arguments but had failed to deal with the second.
The leading judgment is by Flaux J. He found that the Claimants’ written submissions, far from making separate arguments about repeated renunciation on the one hand and continuing renunciation on the other, essentially dealt with them as aspects of the same overall issue. The issue was whether the Defendants had renounced the contracts subsequent to the affirmation, reviving the Claimants’ right to terminate. Flaux J held that the tribunal had dealt with this issue. It was clear that the tribunal did have continuing renunciation in their mind.
On analysis, Flaux J found that the real complaint of the Claimants was not that the tribunal had failed to deal with the issue or argument about continued renunciation, but that it had rejected the argument on the facts. That finding of fact by the tribunal was not susceptible to review by the Court. There was no scope for the application of section 68(2)(d) once it was recognised that the tribunal had dealt with the issue. Provided that the issue had been dealt with, it did not matter whether it had been done so well, badly or indifferently.
With regard to quantum, Flaux J held that the tribunal was correct to find against the argument that the Claimants would have “flipped” the contracts. This issue had been dealt with by the tribunal. In addition, the Claimants could not point to any evidence of a firm buyer for the ships.
The judgment contains some useful extracts which deal with the Court’s approach to section 68. These are a useful reference point for any party raising or defending an argument based on this section.
Some pertinent points are:
- The focus of an enquiry under section 68 is due process. It is not the correctness of the tribunal’s decision. The section is designed to be a long-stop available only in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.
- Referring to Smith J’s judgment in Petrochemical Industries Co v Dow Chemical  EWHC 2739 (Comm);  2 Lloyd’s Rep 691, Flaux J noted that a tribunal does not have to “set out each step by which they reach their conclusion or deal with each point made by a party to an arbitration” (Hussman Europe Ltd v Al Ameen Development and Trade Co and ors  2 Lloyd’s Rep 83).
- A tribunal does not fail to deal with an issue which it decides without giving reasons (Margulead Ltd v Exide Technologies  EWHC 1019 (Comm)).
- A tribunal does not fail to deal with an issue if it does not answer every question that qualifies as an “issue”. It can deal with an issue by making clear that it does not arise in view of its decisions on the facts or their legal conclusions.
- A tribunal may deal with an issue by so deciding a logically anterior point that the issue does not arise.
- The Court has an obligation to read an award in a reasonable and commercial way and not by nitpicking and looking for inconsistencies and faults (Zermat Holdings SA v Nu-Life Upholstery Repairs Ltd  EGLR 14)
- Flaux J quotes from Thomas J in the Hussman case: “I do not consider that s.68(2)(d) requires a tribunal to set out each step by which they reach their conclusion or deal with each point made by a party in an arbitration. Any failure by the arbitrators in that respect is not a failure to deal with an issue that was put to it. It may amount to a criticism of the reasoning, but it is no more than that.”
- Flaux J concluded by saying that it is clearly not appropriate to use an application under section 68 to challenge the findings of fact made by the tribunal. Matters of fact and evaluation of the evidence are for the arbitrators.
In conclusion, any party that is considering making an application under section 68(2)(d) should think carefully about whether its complaint is one that this section is intended to deal with, to avoid being subject to criticism from the court.