The Islamic Republic of Pakistan v Broadsheet LLC

JurisdictionEngland & Wales
JudgeMrs Justice Moulder
Judgment Date12 July 2019
Neutral Citation[2019] EWHC 1832 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2019-000055
Date12 July 2019

[2019] EWHC 1832 (Comm)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

THE HONOURABLE Mrs Justice Moulder

Case No: CL-2019-000055

Between:
(1) The Islamic Republic of Pakistan
(2) The National Accountability Bureau
Claimants/Respondents in the Arbitration
and
Broadsheet LLC
Defendant/Claimant in the Arbitration

Mr M Levy QC & Ms K Limond (instructed by Allen & Overy LLP) for the Claimants

Mr B Pilling QC & Mr D Khoo (instructed by Crowell & Moring) for the Defendant

Hearing dates: 28 June 2019

APPROVED JUDGMENT

Mrs Justice Moulder
1

This is the judgment on the claimants' application to challenge part of the Part Final Award (Quantum) dated 17 December 2018 (the “Quantum Award”) pursuant to Section 68 of the Arbitration Act 1996 (the “Act”).

2

In support of their application, the claimants rely on the first and second witness statements of Ms Limond, a solicitor with Allen & Overy LLP, acting for the claimants, dated 28 January 2019 and 20 March 2019.

Background

3

The first claimant is the State of Pakistan and the second claimant is the National Accountability Bureau which came into existence to combat white-collar crime and corruption-related offences.

4

The defendant, a company incorporated in the Isle of Man, is currently in liquidation.

5

The defendant was engaged pursuant to an asset recovery agreement dated 20 June 2000 (the “ARA”) to trace and locate assets taken from the State and other institutions and transfer them back to the State. Under the ARA in relation to assets recovered, the defendant was to receive 20% of the “amount available to be transferred”.

6

By a letter dated 28 October 2003, the second claimant gave notice to rescind the ARA to the defendant and stated that the defendant had committed repudiatory breaches of contract.

7

The defendant commenced arbitration proceedings against the claimants between 2009 and 2011.

8

The liability phase of the proceedings was heard in January 2016 and an award on liability was issued in favour of the defendant dated 1 August 2016.

9

The quantum hearing took place on 16 – 19 July 2018 and the Quantum Award was issued on 20 December 2018.

10

The tribunal awarded the defendant US$21,589,460 plus interest as damages for the breach and repudiation of the ARA by the claimants.

11

The majority of the claim related to the defendant's loss of the chance claim in relation to the Sharif family, namely the value of the chance it lost to receive payment under the ARA in respect of recoveries made from Mr Sharif and his family.

Proceedings under Section 68

12

These proceedings were commenced on 28 January 2019. The proceedings were originally brought primarily pursuant to section 68 (2)(d) of the Act which relates to a failure by the tribunal to deal with all issues that were put to it; namely an alleged failure by the tribunal to apply a “loss of chance” discount to the damages awarded in respect of the “Sharif Family Other Assets”.

13

On 14 January 2019 the claimants made an application to the tribunal under Section 57 of the Act for certain corrections to the Quantum Award including the correction of the omission in relation to the application of the “loss of chance discount” in respect of the Sharif Family Other Assets. The tribunal made a ruling dated 19 February 2019 in which it determined that there was no omission in relation to the “loss of chance discount”.

14

In the light of the Section 57 ruling, part of the claimants' challenge in these proceedings was withdrawn and the challenge was narrowed to a challenge under Section 68 (2)(c) and/or (h) of the Act.

Section 68 of the Act

15

Section 68 provides (so far as material):

“(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

(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

(a) failure by the tribunal to comply with section 33 (general duty of tribunal);

(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);

(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;

(d) failure by the tribunal to deal with all the issues that were put to it;

(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;

(f) uncertainty or ambiguity as to the effect of the award;

(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

(h) failure to comply with the requirements as to the form of the award; or

(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.

“(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may—”

(a) remit the award to the tribunal, in whole or in part, for reconsideration,

(b) set the award aside in whole or in part, or

(c) declare the award to be of no effect, in whole or in part.

The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.

(4) The leave of the court is required for any appeal from a decision of the court under this section.” [emphasis added]

16

Section 70 provides (so far as relevant):

“(1) The following provisions apply to an application or appeal under section 67, 68 or 69.

(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted—

(a) any available arbitral process of appeal or review, and

(b) any available recourse under section 57 (correction of award or additional award).

(3) Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.

(4) If on an application or appeal it appears to the court that the award—

(a) does not contain the tribunal's reasons, or

(b) does not set out the tribunal's reasons in sufficient detail to enable the court properly to consider the application or appeal,

the court may order the tribunal to state the reasons for its award in sufficient detail for that purpose.”

Relevant law

17

The following principles relevant to a challenge under Section 68 were common ground:

i) Section 68 imposes a high hurdle for applicants – Lesotho Highlands Development Authority [2006] 1 AC 221 at [26]:

“a major purpose of the new Act was to reduce drastically the extent of intervention of courts in the arbitral process”;

ii) there will only be a serious irregularity if what has occurred is “far removed from what could reasonably be expected from the arbitral process”: Field J in The Ojars Vacietis [2012] 2 Lloyd's Rep 181 at [30];

iii) the importance of upholding arbitration awards has been repeatedly stressed: Bingham J in Zermalt Holdings SA v Nu Life Upholstery Repairs Ltd [1985] 2 EGLR 14 (cited in The Ojars Vacietis at [34]):

“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 on awards 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.”

iv) The requirement of “substantial injustice” in Section 68 is additional to that of a serious irregularity and an applicant must establish both: Terna Bahrain Holding Co YJJ v Bin Kamel Al Shamzi [2013] 1 Lloyds Rep 86 at [85 (vi)]

Submissions

18

It was submitted for the claimants that:

i) Article 9 of the Chartered Institute of Arbitrators Rules 2000 (which applied to the arbitration in this case) provides that:

“any award… shall contain sufficient reasons to show why the arbitrator has reached the decisions contained in it”

Section 52 (4) of the Act also provides that the award:

“shall contain the reasons for the award unless it is an agreed award or the parties have agreed to dispense with reasons”

ii) the serious irregularity is that sufficient (or any) reasons were not given by the tribunal to enable the claimants to understand why the tribunal valued the loss of chance claim for the Sharif Family “Other Assets” at US$19 million and how the loss of chance discount has been applied; the damages awarded in respect of the Sharif Family Other Assets formed the most significant part of the Quantum Award financially: US$19 million of the US$21.6 million awarded to the defendant; in respect of the other two targets for whom damages were awarded, Mr Sherpao and Mr Ansari, the tribunal provided reasons, identifying the relevant assets and their value, the deductions applied and the loss of a chance discount awarded. By contrast it was submitted that there is no explanation in the Quantum Award as to the “discount” that has been applied to the Sharif Family Other Assets or the method by which this was reached or what...

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