Fidelity Management SA v Myriad International Holdings BV
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE MORISON |
| Judgment Date | 09 June 2005 |
| Neutral Citation | [2005] EWHC 1193 (Comm) |
| Docket Number | Case No: 2005 FOLIO NO 154 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 June 2005 |
[2005] EWHC 1193 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Hon Mr Justice Morison
Case No: 2005 FOLIO NO 154
IAN CROXFORD QC and THOMAS LOWE (instructed by INCE & CO) for the CLAIMANTS
GRAHAM DUNNING QC (instructed by ALLEN & OVERY) for the DEFENDANTS
Hearing date: 9 June 2005
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
MORISON J:
This is an application issued under section 68 of the Arbitration Act 1996 [the Act]. The arbitral tribunal of the London Court of International Arbitration published a partial award dated 30 November 2004. It is said that the arbitral tribunal committed a serious irregularity, following four weeks of hearings, by failing to deal with an issue within the meaning of section 68(2)(d) of the Act.
When considering arbitral awards the court's approach is, if I may say so, well described by Bingham J in Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] EGLR 14 (a decision under the 1950 Act):
"… as a matter of general approach the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration. Far from it. The approach is to read an arbitration award in a reasonable and commercial way expecting, as is usually the case, that there will be no substantial fault that can be found with it."
I would add to this citation, dicta of Lord Hoffmann in Piglowska v Piglowski [1999] 1 WLR page 1360 at page 1372, citing his own judgment in a different case:
"The need for appellate caution in reversing the trial judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis relative weight minor qualification and nuance … of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation."
The need for caution when a commercial court judge is dealing with an arbitral award is that much greater, because the parties have chosen an autonomous process under which they agree to be bound by the facts as found by the arbitrators and from whose findings of fact there is no appeal. I approach the Award on the basis of an assumption that the arbitrators understood their function and knew how to perform it. In this case the assumption is readily made since the panel comprised most eminent lawyers: Lord Browne- Wilkinson, Professor Dr Albert Van den Berg [a leading Dutch lawyer and experienced international arbitrator] and chaired by Kenneth Rokison QC. And, further, that it would be wrong for this court to undertake a narrow textual analysis of the Award so as to conclude that there has been a serious irregularity of the sort required under section 68 of the Act.
Section 68 requires the applicant to demonstrate both serious irregularity and substantial injustice. The serious irregularity has to be one of the kinds identified in subsection (2)(a) to (i). As was submitted by Mr Dunning QC on behalf of the Defendants to these proceedings, section 68 was designed as a 'long stop' to deal with those extreme cases where for one reason or another something [in terms of subsection (2)] went seriously wrong with the arbitral process. The Departmental Advisory Committee report on clause 68 of the Bill said this:
"Irregularities stand on a different footing. Here we consider that it is appropriate, indeed essential, that these have to pass the test of causing "substantial injustice" before the Court can act. The Court does not have a general supervisory jurisdiction over arbitrations. We have listed the specific cases where a challenge can be made under this Clause. The test of "substantial injustice" is intended to be applied by way of support for the arbitral process and not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the Court to take action. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened simply cannot on any view be defended as an acceptable consequence of that choice. In short, Clause 68 is really designed as a long stop, only available 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."
The application in this case is made under section 68(2)(d) of the Act. The subsection provides as follows:
"(2) 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;"
Thomas J considered this subsection in Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyd's Rep 83 at 97:
"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."
He went on to conclude that the arbitration award did deal with the two main issues that were put to them. "Those were the fundamental issues in the arbitration and they are comprehensively dealt with in the award."
This subsection has most recently been considered by Colman J in World Trade Corp v Czarnikow Sugar [2005] 1 Lloyd's Rep.422. Mr Dunning QC submitted, I think rightly, that the following propositions may be extracted from this decision:
1. Section 68(2)(d) is "designed to cover those issues the determination of which is essential to a decision on the claims or specific defences raised in the course of the reference."
2. HH Judge Humphrey Lloyd was correct in Weldon Plant Ltd v The Commission for New Towns [2001] 1 All ER 264 to state that
"Section 68(2)(d) is not to be used as a means of launching a detailed enquiry into the manner in which the tribunal considered the various issues. It is concerned with a failure, that is to say where the arbitral tribunal has not dealt at all with the case of a party so that substantial injustice has resulted, eg where a claim has been overlooked or where the decision cannot be justified as a particular key issue has not been decided that is crucial to the result. It is not concerned with a failure to arrive at the right answer to an issue."
3. Arbitrators do not have to deal with every argument on every point raised; they should deal with essential issues.
4. "Deficiency of reasoning in an award is … the subject of a specific remedy under the 1996 Act [section 70(4) of the Act]. It is accordingly self-evident that:
(1) failure to deal with an "issue" under section 68(2)(d) is not equivalent to failure to deal with an argument that had been advanced at the hearing and therefore to have omitted the reasons for rejecting it;
(2) Parliament cannot have intended to create co-extensive remedies for deficiencies of reasons one of which (section 68) was a general remedy which might involve setting aside or remitting the award in a case of serious injustice and one of which (s.70(4)) was designed to provide a specific remedy for a specific problem;
(3) the court's powers under s.68(2) being engaged only in a case where the serious irregularity has caused substantial injustice, the availability of the facility to apply for reasons or further reasons under s.70(4) would make it impossible to contend that any "substantial injustice" has been caused by deficiency of reasons."
5. Accordingly, s.68(2)(d) is confined in its application to essential issues, as distinct from the reasons for determining them;
6. "If one simply approaches that provision by asking whether that which has not been dealt with is capable of being formulated as an essential issue of the nature of what would be included in an agreed list of issues prepared for the purpose of a case management conference if instead of an arbitration the matters were to be determined in court, the answer should normally be obvious."
I agree with what Colman J has said. But, at the end of the day, I regard it as the duty of the court to apply the clear wording of section 68, without any judicial gloss, in the light of the scheme of the Act and its legislative purpose. The 'issue' referred to in section 68(2)(d) must be an important or fundamental issue for only a failure to deal with such could be capable of causing substantial injustice; the 'issue' must have been 'put to' the tribunal; there is a difference between a failure to deal with an issue on the one hand and a failure to provide any or any sufficient reasons for the decision. Against this background, I turn to the background to the dispute between the parties and to the award itself.
The dispute arose out of a series of contracts...
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