PETROCHEMICAL INDUSTRIES CO (KSC) V DOW CHEMICAL CO

[2012] EWHC 2739 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Andrew Smith, 11 October 2012

Arbitration - Serious irregularity - Remoteness of damage in contract - Whether arbitrators had failed to consider the issue of assumption of responsibility - Whether arbitrators had acted unfairly - Arbitration Act 1996, sections 68(2)(a) and 68(2)(d)

The parties entered into a Joint Venture Formation Agreement in November 2008 under which PIC agreed to pay US$7.5 billion for a 50 per cent interest in certain petrochemical assets of Dow. The JVFA contained an arbitration clause providing for ICC arbitration in London, and the clause excluded any right of appeal for error of law under section 69 of the Arbitration Act 1996. PIC failed to pay on the due date, and a claim was brought in arbitration. The arbitrators issued a partial award which included damages of US$2,050.95 million for loss of opportunity. The claim arose because in July 2008 Dow had agreed to purchase R&H for US$15 billion, and had intended to use the sum payable by PIC for that purpose. Following PIC's default Dow had to make alternative financing arrangements. PIC challenged the award on the basis that the arbitrators had not dealt with PIC's argument that it was not enough for Dow to show that the loss was one which the parties had contemplated but that Dow also had to show that PIC had assumed responsibility for that loss: see the test in Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] 2 Lloyd's Rep 275.