Obrascon Huarte Lain SA (trading as OHL Internacional) v Qatar Foundation for Education, Science and Community Development
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Carr |
| Judgment Date | 02 October 2019 |
| Neutral Citation | [2019] EWHC 2539 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000806 |
| Date | 02 October 2019 |
[2019] EWHC 2539 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF AN ARBITRATION
AND IN THE MATTER OF A CHALLENGE UNDER S. 68 OF THE ARBITRATION
ACT 1996
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mrs Justice Carr
Case No: CL-2018-000806
Mr Joe Smouha QC, Mr Roger ter Haar QC and Mr Siddharth Dhar (instructed by Shearman & Sterling LLP) for the Claimants
Mr Simon Lofthouse QC and Mr Zulfikar Khayum (instructed by Quinn Emanuel Urquhart & Sullivan LLP) for the Defendant
Hearing dates: 16 and 17 July 2019
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.
Introduction
This is a challenge by the Claimants (“the JV”) under s. 68(2)(a) of the Arbitration Act 1996 (“the Act”) in respect of a Fourth Partial ICC Award dated 21 November 2018 (“the Award”) issued by a tribunal consisting of the Right Honourable Sir Stanley Burnton (as President), Mr Richard Wilmot-Smith QC and Mr Richard Fernyhough QC (as party appointees) (“the Tribunal”).
The challenge relates to the Tribunal's finding that the Defendant (“QF”) had validly terminated (by notice) a contract for the design and construction of a substantial hospital complex in Doha, Qatar (“the Contract”). The JV has very recently abandoned other challenges to the Award (under s. 68(2)(d) and (f)) of the Act), but a separate challenge to an Addendum to the Award dated 5 March 2019 remains outstanding and is to be heard at a separate hearing on a later date.
Following some refinement of its position, the JV seeks remission of the issue of whether QF had validly terminated the Contract in circumstances where termination was effected by service of a notice and not court (or arbitral) order (“the Termination Issue”) on the basis of serious irregularity. It is said that the Tribunal decided the Termination Issue (in QF's favour) on the basis of a legal analysis which was not explored fairly or properly with the parties.
Background
The JV entered into the Contract with QF in 2009 for the construction of a state-of-the-art hospital complex in Doha. The original Contract Price was approximately £1.9billion. The Contract was governed exclusively by Qatari law and provided for disputes to be resolved via arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC”).
Clause 19 of the Contract (“Clause 19”) provided materially as follows:
“ARTICLE 19 – TERMINATION
19.1 QF shall have the right, by giving notice to CONTRACTOR, to terminate the CONTRACT or all or any part of the WORK at such time or times as QF may consider necessary for any or all of the following reasons:
19.1.1 to suit the convenience of QF;
19.1.2 subject only to Article 19.2, in the event of any default on the part of CONTRACTOR; or …
19.2 In the event of default on the part of CONTRACTOR:
19.2.1 under provisions of Article 33 (Conflict of Interest and Business Ethics), QF shall have the right to issue a notice of termination in accordance with the provisions of Article 19.1, without the need for issuance of a notice of default.
19.2.2 under the CONTRACT other than the provision of Article 33 (Conflict of Interest and Business Ethics), before the issue by QF of a notice of termination QF shall give notice of default to CONTRACTOR giving the details of such default. If CONTRACTOR upon receipt of such notice does not diligently commence and thereafter continuously proceed with action satisfactory to QF to remedy such default, QF may issue a notice of termination in accordance with the provisions of Article 19.1.”
In July 2014, following service of Notice of Default in May 2014, QF (through ASTAD, its project manager,) served Notice of Termination of the Contract under Clause 19.2.2 on the basis of default by the JV under Clause 19.1.2. QF went on to call on a performance and advance guarantee, together worth some £190million, both of which have since been drawn down.
The Qatari Civil Code (“the QCC”)
Using the translation adopted by the Tribunal, relevant provisions in the QCC include the following:
“Article 171(1): The contract is the law of the parties. It is not permissible to breach or amend the contract unless there is agreement between the parties or a good reason determined by law….
Article 172(1): A contract shall be enforced in accordance with its provisions and in such manner consistent with the requirements of good faith.
Article 172 (2): A contractual (sic) not be limited only to binding a party to its provisions but shall also cover whatever is required by law, customary practice and justice in accordance with the nature of the obligations.
Article 183(1): In contracts binding on both parties and imposing reciprocal obligations (synallagmatic contracts), where one of the parties fails to perform his obligation, the other party may, upon formal notice to the former, demand performance of the contract or its rescission, and may claim damage caused by such failure to perform.
Article 183(2): The judge may, mutatis mutandis, determine a period of grace within which the obligator shall perform his obligation. The judge may also reject the application for rescission if the obligation not performed was insignificant compared with the obligations considered in their entirety.
Article 184(1): It is permissible to agree that the contract be considered terminated, automatically, without need for a court judgment when failing to perform the obligations arising from it.
Article 184(2): Such condition and the agreement would not be applicable to limit the authority of the Judge for the termination, unless the expression of the contract is clear to indicate that this is the intention of the parties to that.”
Article 184(3) does not appear in terms in the Award itself (though it was referred to by QF's Qatari law expert, Mr Abu Shaikha, and Mr Lofthouse QC for QF in submission) but provides:
“(3): Other than in commercial matters, the clause considering the contract to be automatically terminated does not exempt from serving notice. Any contrary agreement by the parties shall not be considered.”
References below to Articles 171, 183 and 184 are references to those Articles in the QCC. Both parties have referred to Article 184(1) as “the Automatic Termination Condition” (even though they differ as to what it means or requires) and Article 184(2) as “the Contracting Out Condition”.
It was common ground at all material times that under Qatari law the Contract could only be terminated by QF for breach by application to a court (or tribunal) unless Clause 19 met the requirements of Article 184.
The arbitral proceedings and the Award
The arbitral proceedings in overview
QF commenced arbitral proceedings against the JV in July 2014 claiming damages estimated at over £1billion on the basis that it had validly terminated the Contract when Notice of Termination was served. In response, amongst other things, the JV disputed the validity of QF's termination of the Contract. Albeit late in the day, the JV contended that Clause 19 did not satisfy either the Automatic Termination Condition or the Contracting Out Condition in Article 184. This was an argument not aired by the JV until November 2016 (and then only as a footnote), more than two years after the JV's Answer and Counterclaim to the Notice of Arbitration. At no stage prior to this (on the many occasions when addressing the lawfulness of QF's termination of the Contract) had the JV taken this objection, including in 2014 at the time of Notice of Default and then Notice of Termination. Indeed, and as the Tribunal pointed out in paragraph 113 of the Award, the suggestion that there could not be valid termination of the Contract under Clause 19 without recourse to court (or tribunal) was directly at odds with the position taken by the JV in correspondence in June 2014 with one of its major subcontractors, Kentz-Voltas Consortium, by reference to a materially identical contractual clause. There the JV had positively asserted that Article 183 and 184 of the QCC did not require the contractor to apply to the court before exercising its rights under (the equivalent of) Clause 19.
The relevant procedural chronology can be summarised as follows. Notice of Arbitration was served in July 2014. The JV filed an Answer and Counterclaim in October 2014, to which QF responded with a Reply in November 2014.
Terms of Reference signed on 12 November 2014 provided that the issues to be determined by the Tribunal should be “those resulting from the parties' submissions” and that “…those issues included …[w]as the termination of the Contract by [QF] lawful and valid?”
In May 2015 the JV submitted a Defence and Counterclaim, including its then case on the (un)lawfulness of QF's termination of the Contract. In the light of that Defence, a preliminary issue hearing was held in October 2015 to determine whether or not the parties had reached a binding agreement to settle some of their claims prior to termination. The Tribunal issued its First Partial Award in December 2015, concluding that they had not.
In May 2016 QF requested a preliminary issue hearing on the question of the validity of its termination, an application which the JV successfully resisted. In July and November 2016 the JV issued supplemental and amended supplemental pleadings on delay. Footnote 6 of the Amended Supplemental Pleading on...
To continue reading
Request your trial
-
Asa v Tl
...were recently summarised by Carr J in Obrascon Huarte Lain SA v. Qatar Foundation for Education, Science & Community Development [2019] EWHC 2539 (Comm), [2019] 2 Lloyd's Rep 559: “45. Determining whether or not the duty of fairness has been breached will always be a question of fact and ......
-
The Republic of Kazakhstan v World Wide Minerals Ltd
...was emphasised in Obrascon Huarte Lain SA (t/a OHL International) v Qatar Foundation for Education, Science and Community Development [2019] EWHC 2539; [2019] 2 Lloyd's Rep. 559 at paragraph 44 “S. 68 imposes a high threshold for a successful challenge… It is not to be used simply because ......
-
Livian GmbH v Elekta Ltd
...was, emphasised in Obrascon Huarte Lain SA (t/a OHL International) v Qatar Foundation for Education, Science and Community Development [2019] EWHC 2539; [2019] 2 Lloyd's Rep. 559 at paragraph 44 “S. 68 imposes a high threshold for a successful challenge… It is not to be used simply because......
-
Table of cases
...II.9.85, II.9.88, II.9.102, II.11.35, II.11.111, III.26.142 cccxxx TaBLE OF CaSES Obrascon huarte Lain Sa v Qatar Foundation [2019] EWhC 2539 (Comm) III.25.181, III.25.239, III.25.244 O’Byrne v aventis pasteur Sa [2007] EWCa Civ 939 III.26.59 Oceanbulk Shipping and Trading Sa v TMT asia Ltd......
-
Arbitration
...Authority Finance) Ltd v Seven Seas Dredging Ltd (1989) 49 BLR 31 at 56, per Phillips J; Obrascon Huarte Lain SA v Qatar Foundation [2019] EWHC 2539 (Comm) at [45], per Carr J. See also Giles v GRS Constructions Pty Ltd (2002) 81 SASR 575. here is no duty on an arbitrator to share with the ......