NDK Ltd v HUO Holding Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 14 October 2022 |
| Neutral Citation | [2022] EWHC 2580 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case Nos: CL-2021-000424, CL-2021-000760, CL-2022-000189, CL-2022-000250 and CL-2022-000485 |
(No 2)
[2022] EWHC 2580 (Comm)
Mr Justice Foxton
Case Nos: CL-2021-000424, CL-2021-000760, CL-2022-000189, CL-2022-000250 and CL-2022-000485
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Cogley KC and Christopher Jay (instructed by Fieldfisher LLP) for the Claimant
Aidan Casey KC and Alexander Cook (instructed by CANDEY Limited) for the Second Defendant
Hearing date: 15 September 2022
Draft sent to parties: 16 September 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Foxton
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday 14 October 2022 at 10:00am.
Introduction
This judgment addresses the next stage in a series of challenges made by NDK to awards of LCIA arbitration tribunals arising from disputes with HUO and KXF. I have set out the background facts in a judgment I gave in respect of a challenge made by NDK to an earlier LCIA Award between the same parties, reported as NDK v HUO and KXF [2022] EWHC 1682 ( the First Judgment). I have adopted the same defined terms in this judgment.
By way of a brief background to the court challenges:
i) Following a hearing, I dismissed NDK's challenge under s.67 of the 1996 Act to the PFA for the reasons set out in the First Judgment.
ii) NDK's challenge to the PFA under s.68 of the 1996 Act was reserved, to be dealt with at the same time as NDK's challenges under ss.67 and 68 of the 1996 Act to the Consolidated Arbitration Award.
iii) On 11 July 2022, I struck out NDK's challenges to the Consolidated Arbitration Award under s.68 of the 1996 Act and parts of its s.67 challenge, pursuant to the jurisdiction to dismiss challenges to arbitration awards which have no realistic prospect of success on a summary basis (see O8.6 of the Commercial Court Guide, 11 th edition).
iv) That leaves outstanding one part of NDK's challenge to the Consolidated Arbitration Award under s.67 of the 1996 Act and a further s.67 challenge brought by NDK on 9 September 2022 to the Costs Award published by the Tribunal on 12 August 2022. If the challenge to the Consolidated Arbitration Award is dismissed, NDK accepts that its outstanding challenge to the PFA under s.68 of the 1996 Act will also be dismissed.
v) This hearing was fixed to determine a threshold issue in NDK's challenge to the Consolidated Arbitration Award under s.67 of the 1996 Act – whether, on the assumption that HUO never became a shareholder in SPV, it nonetheless became a party to the LCIA Arbitration Agreement in the SHA.
vi) If that issue is resolved in HUO's favour, that is decisive of NDK's s.67 challenge to the Consolidated Arbitration Award. If it is resolved in NDK's favour, then it will be necessary to have a further hearing (currently fixed for January 2023) to consider HUO's other responses to NDK's s.67 challenge.
The S.67 Challenge
NDK's s.67 challenge is advanced at paragraphs 21 and 22 of the Arbitration Claim Form as follows:
“[NDK] contends that the Share Transfers were each void and of no effect because they were made in breach of the pre-emption provisions contained in cl. 10 of the SHA …
By reason of the fact that the [HUO] Share Transfer and/or the [HUO] Acquisition Transfer were void and of no effect:
(i) [HUO] is not a member of [SPV] and, accordingly, has not acceded to the SHA for the purposes of cl. 10.6(a) of the SHA and/or is not a Shareholder within the meaning of that term in the SHA and/or is precluded from exercising the rights of a Shareholder (including the right to arbitrate disputes in accordance with the provisions of the SHA) or from taking advantage of its own wrongful conduct.
(ii) In the circumstances, [HUO] is not a party to the arbitration agreement contained in cl. 11.7 of the SHA and/or was not entitled to invoke that agreement by commencing the Consolidated Reference, and the Tribunal has no jurisdiction to determine the disputes that it has referred to the tribunal.”
The Procedural Background
The suggestion that HUO never became a party to the LCIA Arbitration Agreement is a curious one when viewed against the procedural history of the arbitrations between the parties and the subsequent court challenges to them:
i) HUO was joined as an additional party to the Original Arbitration, and NDK did not suggest that, if its case that the SHA had been terminated was rejected, HUO was not a party to the SHA or the LCIA Arbitration Agreement. NDK's termination case in the Original Arbitration failed. NDK argued in the alternative that HUO had breached the SHA (a contention which failed on the facts). The arbitral tribunal issued an award granting relief (inter alios) in HUO's favour. No challenge was brought to that award within the time period permitted by s.67 of the 1996 Act.
ii) HUO was a claimant in the reference which culminated in the PFA. In that case, NDK advanced an argument that particular claims did not fall within the LCIA Arbitration Agreement, that they were not arbitrable, and that the pre-conditions to the commencement of an arbitration had not been satisfied. It also sought to raise a jurisdictional objection that the SHA, and with it the LCIA Arbitration Agreement, had been terminated, submitting (to quote from para. 206 of the PFA) that “if it were to succeed in establishing in the Consolidated Arbitration that it had validly terminated the SHA… it would be wrong for it to continue to be restrained from pursuing the Cyprus Proceedings against the Claimants because the Arbitration Agreement could not be treated as continuing in existence beyond the termination of the SHA”. However, it did not argue that HUO never became a party to the LCIA Arbitration Agreement.
iii) NDK brought a challenge to the PFA under s.67 of the 1996 Act but did not contend in that context that HUO had never been a party to the LCIA Arbitration Agreement. That was a particularly noteworthy omission, because one of the points taken by HUO and KXF was that if there was any arbitration agreement between them and NDK, the court could not review the tribunal's decision to grant anti-suit relief in respect of a breach of that agreement under s.67. It would have been a complete answer to this point, so far as HUO is concerned, if it had never become a party to the LCIA Arbitration Agreement.
iv) In the Consolidated Arbitration, NDK notified its jurisdictional objection in its Response to the Request for Arbitration. The principal focus appeared to be the argument that the SHA had been terminated and with it, the LCIA Arbitration Agreement, albeit it is possible to find wider formulations. The Defence and Counterclaim advanced a jurisdictional challenge on the basis that the rights arising under the SHA (including the right to arbitrate disputes) could only be exercised by “quasi-partners and/or joint venturers”, and that Mr Pink (the ultimate beneficial owner of HUO and KXF) was not a quasi-partner or joint venturer, and therefore not permitted to exercise rights under the SHA (including the LCIA Arbitration Agreement) “through the Claimants”. It was also argued that the SHA and with it the LCIA Arbitration Agreement had been terminated.
v) The absence of any clear argument on NDK's part that HUO never became a party to the LCIA Arbitration Agreement is reflected in the terms of the Consolidated Arbitration Award, which does not identify NDK as having advanced such an argument (but does refer to and reject the suggestion that the effect of the purported termination of the SHA was to deprive the tribunal of jurisdiction).
Nonetheless, I have proceeded for the purposes of determining the issue before me at this hearing on the basis that it is open to NDK to raise the jurisdictional challenges in its Arbitration Claim Form, without deciding whether or not that is the case.
The Factual Position so far as HUO is Concerned
The following facts are not in dispute (or are not disputable):
i) On 17 November 2017, K Co entered into an Instrument of Transfer purporting to transfer 300 SPV shares to HUO.
ii) On the same date, HUO signed a Deed of Adherence agreeing to be bound by the provisions of the SHA (which included the LCIA Arbitration Agreement), and such Deed of Adherence was delivered as required.
iii) On 5 February 2018, the board of SPV resolved to register HUO as the owner of 300 shares.
However, it is to be assumed for present purposes that the steps in i) and iii) did not have the effect that HUO became a shareholder of SPV.
The Separability of Arbitration Agreements
Section 7 of the 1996 Act provides:
“Separability of arbitration agreement.
Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.”
The statutory principle of separability is reinforced in this case by the terms of the LCIA Arbitration Agreement:
i) The LCIA Arbitration expressly extended to “any questions regarding [the SHA's] existence, validity, breach or termination”.
ii) The LCIA Rules are expressly incorporated into the LCIA Arbitration Agreement. Article 23 of the LCIA Rules provides:
“23.1 The Arbitral...
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