Sta v Ofy
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 08 June 2021 |
| Neutral Citation | [2021] EWHC 1574 (Comm) |
| Date | 08 June 2021 |
| Docket Number | Case No: CL-2021-000094 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 1574 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF AN ARBITRATION,
CASE NO. 2019-05
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Butcher
Case No: CL-2021-000094
Khawar Qureshi QC (instructed by Volterra Fietta) for the Claimant
Charles Kimmins QC and Mark Tushingham (instructed by Three Crowns LLP) for the Defendant
Hearing date: 25 May 2021
Approved Judgment
THE HONOURABLE Mr Justice Butcher
This is an application by the Government of STA (‘STA’) under CPR r. 62(9) for an extension of time to bring a challenge under s. 68 Arbitration Act 1996 (‘the Act’) in respect of a Final Award dated 26 January 2021 (‘the Final Award’).
The Final Award was made by a Tribunal consisting of three arbitrators (‘the Tribunal’). The arbitration was between STA and the Defendant (‘OFY’), and had been conducted under the 2013 Arbitration Rules of the United Nations Commission on International Trade Law (the ‘UNCITRAL Rules’).
The dispute between the parties arose out of what OFY contended was the wrongful repudiation by STA in February 2018 of a contract, under which OFY was to provide a fast-track power generation solution, involving the relocation of two aeroderivative gas turbine power plants to STA (the ‘Contract’). OFY's case was that, because of STA's repudiation, it was entitled to receive an ‘Early Termination Payment’ (as defined in the Contract). By the Final Award the Tribunal ordered STA to pay to OFY the full amount of the Early Termination Payment, namely US$134,348,661 plus interest and costs, and dismissed STA's counterclaim.
Procedural History
The procedural history of this application is of some importance. As I have said, the Final Award was dated 26 January 2021. The 28-day period prescribed by s. 70(3) of the Act would accordingly have expired on 22 February 2021.
On 19 February 2021 STA applied ex parte on paper for an extension of time until 19 April 2021 to bring a challenge. That has been called on this application ‘the First Extension Application’.
The First Extension Application was made by STA's then solicitors, Omnia Strategy LLP (‘Omnia’), and was supported by a witness statement of Kerris Anna Farren dated 19 February 2021. In that witness statement, Ms Farren gave the following evidence which is relevant to the present application:
(1) She said that Omnia had been instructed on 18 February 2021;
(2) She said that she was still reviewing documents, but given the recent instruction of Omnia, ‘the Claimant will not be in a position to bring a challenge to the Award by 22 February 2021’, and she had accordingly been instructed to make the present application;
(3) She referred to the factors identified by Colman J in Kalmneft v Glencore International AG [2002] 1 Lloyd's Rep 128;
(4) She gave reasons for seeking an extension of 56 days, which she identified as being: (a) that there had been delays in the instruction of Omnia due to ‘the painstaking and bureaucratic decision-making process … [which] is a common feature of working with Government entities in [STA]’, (b) the fact that there had been a recent general election in STA, and STA's Parliament was still vetting newly-appointed ministers, including the Attorney General, (c) that COVID-19 had contributed to the delay in instructing Omnia in particular because ‘key members of the Office of the Attorney General contracted COVID-19, which [had] contributed to the disruption to the Office’, the Office of the Attorney General was operating on a ‘shift basis’, and STA's civil service still relied heavily on paper documents, and (d) that in the arbitration STA had been represented by lawyers from the Office of the Attorney General and Ministry of Justice of STA as well as a local firm and further external lawyers had now had to be retained;
(5) She said that the delay in instruction had been unintentional and that STA had acted reasonably in seeking an extension as soon as Omnia was instructed;
(6) She said that she was unable to identify the grounds of the challenge which A might wish to bring, but said that STA ‘feels strongly that there are good grounds to bring a challenge.’
By order dated 22 February 2021 Andrew Baker J made an order in these terms:
‘1. Time for the Claimant to issue and serve any challenge to the Final Award under Section 67 and/or Section 68 of the Arbitration Act 1996 is extended to 8 March 2021.
2. The Claimant has permission to serve the Defendant with the Application, this Order, any application pursuant to paragraph 3 below, and any challenge issued pursuant to paragraph 1 above, by service upon Three Crowns LLP, 8–10 New Fetter Lane, London EC4A 1 AZ.
3. Any application for a further extension of time must be issued and served by 4.30 pm on 5 March 2021, and must be supported by evidence identifying in outline the nature of any challenge to the Final Award that the Claimant seeks additional time to prepare, as well as explaining why further time is required.
4. Costs reserved.
5. The Defendant has the right to apply to set aside, vary or discharge this Order under rules 23.10 provided such application is issued and served within 7 days of service of this Order on the Defendant.’
Andrew Baker J had thus not granted the extension sought by STA, and while granting a shorter extension, had also laid down a timescale for the filing of any application for a further extension.
No application was made for a further extension by 5 March 2021, and no challenge under s. 67 or s. 68 of the Act was issued by 8 March 2021.
On 1 April 2021 STA, by its new legal representatives, Volterra Fietta (‘VF’) issued a Claim Form, applying under s. 68 of the Act. The relief sought was the setting aside of the Final Award or its remission to the Tribunal. The application was stated to be made under s. 68(2)(c) and s. 68(2)(d). The basis of the challenge was said to be set out in the witness statement of Peter Flint dated 31 March 2021. In particular it was said that the challenge was based on two particular points:
(a) First, that the Tribunal had failed, within s. 68(2)(c) to conduct the arbitration in accordance with the procedure agreed by the parties, in that the Tribunal had not been ‘guided by the terms and conditions of the [Contract]’; and
(b) Second, that the Tribunal had failed to deal with all the issues put to it, and in particular had failed to consider STA's arguments as to why mobilisation costs were not payable as a result of the non-satisfaction of Conditions Precedent and/or the non-occurrence of the Effective Date as defined in the Contract.
On 1 April 2021 STA also issued an Application Notice seeking an extension of time for the bringing of a challenge to the Final Award.
The witness statement of Peter Flint referred to in the Claim Form was made both in support of STA's s. 68 challenge, and also in support of its application for an extension of time. In relation to the latter, Mr Flint said:
(1) That the new Attorney General of STA, who had previously been deputy Attorney General, had been sworn in on 5 March 2021;
(2) VF had been formally instructed on 15 March 2021 and thereafter received some 10,000 pages of documents, and leading counsel had been instructed on 24 March 2021;
(3) VF and leading counsel had become aware of Andrew Baker J's order on 25 March, and VF had then contacted Omnia, but Mr Flint said that he was not authorised to reveal any privileged matters;
(4) A Notice of Change of Legal Representative had been served on 30 March 2021;
(5) ‘As has previously been addressed in the witness statement of [Ms] Farren’, ‘whilst delay has occurred in this case, the reasons have been provided above and previously…’
On 16 April 2021 OFY served responsive evidence and on 23 April 2021 STA served evidence in reply.
On 5 May 2021 Bryan J, having considered STA's application for an extension of time and relief from sanctions on paper, directed that it should be listed for an oral hearing with a one hour estimate, which should be expedited as it related to an arbitration. The matter was accordingly heard by me on 25 May 2021.
Principles applicable to the application made
It was common ground between the parties that, in light of the fact that STA had not complied with Andrew Baker J's order, it needed to obtain relief from the implicit sanction involved in that order, and that that involved a consideration of the three matters identified in Denton v TH White Ltd [2014] 1 WLR 3926, namely (a) an assessment of whether the failure to comply with the rule, practice direction or court order was serious and significant, (b) the reasons why the default had occurred, and (c) an evaluation of all the circumstances of the case, so as to enable the court to deal justly with the application.
It was also common ground that STA's present application for an extension of time should be assessed by reference to what were referred to as the Kalmneft factors after the case which I have already mentioned. Both parties also referred to Terna Bahrain v Bin Kamil [2012] EWHC 3283 (Comm), [2013] 1 All ER 580. I consider that that case provides a helpful summary of the matters which require consideration on such an application. At paragraphs [27]–[31] Popplewell J said this:
27. The principles regarding extensions of time to challenge an arbitration award have been addressed in a number of recent authorities, most notably in Kalmneft v Glencore [2002] 1 Lloyd's Rep 128, Nagusina Naviera v Allied Maritime Inc. [2003] 2 CLC 1, L Brown & Sons Limited v Crosby Homes (Northwest) Limited [2008] BLR 366, Broda Agro Trading v Alfred C Toepfer International [2011] 1 Lloyd's Rep 243, and ...
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