Ronly Holdings Ltd. v JSC Zestafoni G Nikoladze Ferroalloy Plant

An arbitral award must finally and completely determine every issue submitted to the tribunal, unless the tribunal is properly proceeding by way of a provisional or interim award. An arbitrator cannot leave an issue for the parties or another tribunal to resolve. Where pleaded credits are withdrawn by an amendment, and no agreement, estoppel or live issue preserves them, they cannot be taken into account in calculating the sum payable. A possible transaction set-off under a separate contract may in principle be considered as a defence, but only where it is properly in issue and the relevant contract is investigated and determined. An arbitrator who withholds an amount already found outstanding, without deciding its fate, commits a serious irregularity.

Ronly Holdings Ltd. applied under sections 67, 68 and, if necessary, 69 of the Arbitration Act 1996 to challenge an award made in its arbitration with JSC Zestafoni G Nikoladze Ferroalloy Plant.

The arbitrator had found that US$16,083,772.40 was outstanding under the Ferro-Alloy Production Agreement but directed immediate payment of only US$10,088,834.57. He treated credits of US$5,994,937.83, originally pleaded by Ronly under other contracts, as relevant to the immediate payment direction, while declining jurisdiction to determine those contracts. The central issues were whether the award was incomplete or exceeded the arbitrator’s powers, and whether the withdrawn credits or a possible set-off justified the reduced payment.

1. Principal application allowed. The court allowed Ronly’s application under section 68, alternatively section 67, of the Arbitration Act 1996.
2. An award must be final as to issues decided and complete as to all issues before the tribunal. An arbitrator has no power to reserve an issue for the parties or another tribunal. Issues may be reserved to the arbitrator only through a properly constituted interim award under section 47, subject to the exceptional provisional relief contemplated by section 39.
3. The arbitrator had determined that the shortfall amount was outstanding under the agreement, but neither ordered its payment nor determined that it was not due. Leaving its fate to the parties or third parties left the arbitration in limbo. The award therefore failed to deal with an issue under section 68(2)(d), or alternatively exceeded the arbitrator’s powers under section 68(2)(b), causing substantial injustice.
4. The credits could no longer justify the reduced award. They had been pleaded on the basis of a broader accounting picture, but Ronly’s amendments removed them without terms. Zestafoni had not accepted the offer, had not relied on it, and there was no estoppel. The amendment ended the matter for the purposes of the arbitration.
5. The court provisionally considered that a transaction set-off arising under a separate contract might be available as a defence, drawing on [1994] 1 WLR 1634 and [1999] 2 Lloyd’s Rep. 410. However, such a point must be live, the separate contract must be investigated, and the arbitrator must determine the relevant position. No set-off issue was before the arbitrator here.
6. The appropriate relief was to require payment of the US$5,994,937.83 shortfall. Ronly’s subsidiary application to correct the award under section 57 was dismissed because that power belonged to the arbitrator, and no serious irregularity was established.