Arbitration Law Monthly

The Arbitration Act 1996 draws a distinction between fact and law: alleged errors in factual findings can never be appealed to the court, although the court has the power to give permission for an appeal for an error of law under s69 of the Act. Accordingly, there has been some attempt by disaffected parties to argue that a point of fact was a point of law so as to establish jurisdiction under s69, and one particular means by which this has been done is to assert that an award is wrong in law if there is no evidence, or inadequate evidence, for the arbitrator’s conclusions. That approach would in effect allow every award to be reopened and it has been firmly rejected by Peter Smith J in House of Fraser Ltd v Scottish Widows plc [2011] EWHC 2800 (Ch), following the most recent authorities on the point.

Ever since the decision of the European Court of Justice in Allianz SpA v West Tankers Inc (The Front Comor) Case C-185/07 [2009] 1 Lloyd’s Rep 413, ruling that a court may not grant an anti-suit injunction to prevent a person from pursuing judicial proceedings elsewhere in the European Union where those proceedings are in breach of an English arbitration clause, the search has been on to find a device which removes the risk that a foreign judgment given in breach of the clause has to be recognised and enforced in England under the Brussels Regulation, Council Regulation (EC) No 44/2001. A partial solution has now been found. Rather than seeking to restrain the foreign proceedings, the claimant in the arbitration must press ahead with the arbitration, obtain an award and then apply to the English court for an enforcement order. Such an order operates as a judgment of the English court, which means that any subsequent inconsistent judgment from another EU court does not have to be afforded recognition. The main difficulty with this procedure is that the party bringing the arbitration proceedings may be the natural defendant, in which case the award can consist of no more than a declaration that that party is under no legal obligation to the other. The question for the Court of Appeal in West Tankers Inc v Allianz SpA (The Front Comor) [2012] 1 Lloyd’s Rep 398 was whether it is possible to obtain a judgment enforcing a declaratory award. That question, much to the relief of the UK arbitral community, was given an affirmative answer.

Hong Kong has adopted the UNCITRAL Model Law as the basis of its arbitration law. The grounds for setting aside an award are much the same as the grounds for refusal of recognition of enforcement of New York Convention awards. For that reason, the decision of Saunders J in Pacific China Holdings Ltd v Grand Pacific Holdings Ltd [2011] HKCFI 424 is of general interest. In this case the Hong Kong court exercised its discretion to set aside an arbitral award on the basis of violations of art 34(2) of the Model Law. The case is discussed by Edward Yang Liu Legal Assistant, Reed Smith Richards Butler, Hong Kong.

BNP Paribas SA v Open Joint Stock Company Russian Machines and Anr [2011] EWHC 308 (Comm) raised the unusual question of whether an order seeking to protect an arbitration could be made against a third party as well as the defendant in the arbitration. The allegation was that the defendant and the third party had colluded in bringing judicial proceedings in Russia, in breach of the arbitration clause. Blair J explored at length the complex question of whether the English court actually has jurisdiction to give permission for the service of proceedings out in such circumstances, a matter on which there is inconclusive and conflicting case law.