The Secretary of State for the Home Department v Raytheon Systems Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead: |
| Judgment Date | 17 February 2015 |
| Neutral Citation | [2015] EWHC 311 (TCC) |
| Docket Number | Case No: HT-2014-00056 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 February 2015 |
[2015] EWHC 311 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case No: HT-2014-00056
Roger Stewart QC, Leigh-Ann MulcahyQC, Malcolm SheehanandKatie Powell (instructed by Pinsent Masons LLP) for the Claimant
Joe Smouha QC and Emily Wood (instructed by Clifford Chance LLP) for the Defendant
Hearing date: 16 January 2015
I handed down judgment in this matter on December 2014 ( [2014] EWHC 4375 (TCC)); Due to concerns about confidentiality and to the fact that the challenge was to an arbitral decision which arose out of a confidential process, the names of the parties were initially anonymised. The parties now agree that both this and the earlier judgments can be handed down publicly. I will still below refer to the Claimant as "Y" and the Defendant as "Z". That judgment related to the substance of the Claimant's application under Section 68(2)(d) of the Arbitration Act 1996. Having found that there were two respects in which there was a serious irregularity causing substantial injustice, I left over the issues as to whether the award should be remitted or set aside, in whole or in part, hearing argument on those issues over some 2 hours on 16 January 2015. Both parties sought permission to appeal on issues on which they had "lost"; I indicated that, given the importance of the case and the utility of the Court of Appeal addressing a number of the issues raised, I would grant permission not only on the first judgment but also consequentially on this judgment. Costs were also considered and this judgment will address that matter as well.
Remission or Setting Aside – The Law and Practice
Section 68(3) provides for what the Court may do when serious irregularity has been found to have occurred:
"(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."
It is clear that remission is the "default" option and the Court cannot set aside unless it would be "inappropriate" to remit. It cannot be said however that there is in the wording of Section 68 any "weighting" against or for any of the grounds of irregularity set out in Section 68 such that setting aside cannot or only in extraordinary circumstances be ordered for instance where the serious irregularity ground is that set out in Section 68(2)(d). Whilst the burden of establishing that it would be inappropriate to remit must in effect be on the party seeking relief other than remission, what has to be established in respect of any proven serious irregularity is that in the particular case it would be inappropriate to remit to the existing arbitral tribunal. There is no authority which suggests that it will invariably be inappropriate to set aside the award where the serious irregularity ground is the Section 68(2)(d) one. It is properly common ground that there is little or no difference in practice between the setting aside and declaration of no effect remedies (see Hussman v Ahmed Pharaon [2013] I All ER (Comm) 879 at Paragraph 81).
What the Court needs to do in deciding whether to remit or set aside is to consider all the circumstances and background facts relating to the dispute, the award, the arbitrators and the overall desirability of remission and setting aside, as well as the ramifications, both in terms of costs, time and justice, of doing either. A review of "appropriateness" encompasses a pragmatic consideration of all the circumstances and relevant facts to determine what it is best to do but it necessarily covers the interests of justice as between the parties.
There is no previous authority which substantially mirrors the facts of the current case and, indeed, there are relatively few reported decisions on Section 68(2)(d). Having referred to the words in Section 68(3), Professor Merkin says in Arbitration Law (Service Issue No. 68 12 August 2014) at Paragraph 20.33:
"In a number of the situations set out in the Arbitration Act 1996, s 68(2), remission of the award to the arbitrators is the obvious remedy, eg, where the award is incomplete (ground (d)) or uncertain or ambiguous (ground (f)), where the award does not comply with statutory or agreed formal requirements (ground (h)) or where there is an admitted error in the award (ground (i)). Setting the award aside, possibly coupled with the removal of the arbitrators, may, however, be the only sensible option in exceptional circumstances whether serious irregularity relates to the conduct of the proceedings and there are further aggravating circumstances which render remission inappropriate. The pre-1996 authorities, particularly those under the 1996 Act, establish that the quashing of the award, with or without the removal of the arbitrators, will be appropriate in the following situations:
(a) Where there has been a serious miscarriage of justice affecting evidence and the arbitrators cannot reasonably be expected to be able to approach the matter afresh. The mere fact that the arbitrators have decided the case on inadmissible or undisclosed evidence will not necessarily have this result; much depends upon an objective view of what of what might be expected of the arbitrators on remission.
(b) Where one or both of the parties has justifiably lost confidence in the arbitrators in the light of the manner in which the arbitration has been conducted. The test of this matter, as laid down by the Court of Appeal in Hagop Ardahalian v Unifert International SA, the Elissar, is objective: do there exists grounds on which a reasonable person would think that there was a real likelihood that the arbitrator would not determine the issues according to the evidence? Possibility of lack of impartiality, in that the arbitrator has indicated that he favours one party over the other, is the most common reason for setting aside under this head, and the combined power to set aside the award…
(c) Where the outcome of remission would require a full hearing or re-hearing.
(d) Where remission would inevitably lead to the award being reversed.
(e) Where the conduct of the arbitrator is such as to show that, questions of partiality aside, he is, through lack of talent, experience or diligence, incapable of conducting the reference in a manner which the parties are entitled to expect:[ Bremer Handelsgesellschaft GmbH v Ets Soules ey Cie [1985] 1 Lloyd's Rep 160, 164].
(f) Where the delay between the arbitration hearing and the outcome of the judicial proceedings is such that the parties and the arbitrators cannot reasonably be expected to remember what transpired that the original proceedings, a situation likely to give rise to further dispute in the absence of an entirely fresh hearing.
…An application to remove the tribunal may be successful if the parties have justifiably lost confidence in its ability to conduct the remitted proceedings fairly, although the mere fact that the tribunal is guilty of serious irregularity does not itself mean that confidence cannot be placed in it, particularly where the arbitrators are experienced and of high repute."
There are numerous authorities cross referred to in the above quotation, other than the Bremer case, some 20 relating to the period prior to the coming into effect of the Arbitration Act 1996 and only 6 relating to the period afterwards. Professor Merkel (rightly) does not suggest that the above is in some way an exclusive list. One may have to be somewhat cautious in relation to some cases from the pre-1996 Act period because it was not then a statutory prerequisite in the establishment of misconduct on the part of arbitrators that substantial injustice should have been caused, unlike the 1996 Act regime for serious irregularity.
Pacol Ltd v Joint Stock Co. Rossakhar [2000] 1 Lloyd's Rep 109 was a Commercial Court decision of Colman J in which, in an arbitration relating to contracts for the sale of sugar and non-payment, liability was admitted but the arbitrators on a documents only basis dismissed the claimant's claim on the basis that the respondent was not in breach, having failed to give the claimant the opportunity to address the point. There could be little doubt, given those findings, that serious irregularity this had been established. At Page 115, the judge said this:
"The matter has been debated whether this is a case where the Court should exercise its jurisdiction to set the award aside or merely to remit the award to the tribunal in whole for reconsideration.
I have come to the conclusion, however, that notwithstanding the provisions of s. 68(3), this is a place where it would be inappropriate to remit the matters in question to the tribunal for reconsideration. In practice, the whole arbitration is going to have to be reopened and probably re-pleaded. There is probably going to have to be further evidence of a whole new series of submissions and orders made for the purpose of arriving at a conclusion on the question of liability.
In those circumstances, it seems to me that it would be quite wrong for the arbitrators to build anything on the structure of the award which they have already made and I have no doubt whatever that this is the paradigm of a case where the award ought to be set aside."
It is reasonably clear that this...
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