Vee Networks Ltd. v Econet Wireless International Ltd.

Section 67 of the Arbitration Act 1996 concerns challenges to substantive jurisdiction, not ordinary merits determinations concerning the validity of the underlying contract. The separability principle preserves an arbitration agreement unless it is independently invalid. A party challenging jurisdiction must raise the objection explicitly and in time. A late or insufficiently stated objection cannot convert a merits award into an implied jurisdiction award.

Under section 68, a procedural irregularity causes substantial injustice where it may have led the tribunal to reach an adverse conclusion which a properly conducted process might have avoided, provided the alternative conclusion is reasonably arguable. The court should not retry the underlying issue.

Econet Wireless Nigeria Limited applied under sections 67 and 68 of the Arbitration Act 1996 to challenge a partial arbitration award concerning a Technical Support Agreement with Econet Wireless International Ltd. The arbitrator had held that the agreement was not ultra vires the respondent’s memorandum of association.

The section 67 issue was whether the award impliedly determined the arbitrator’s substantive jurisdiction. The section 68 issue was whether the arbitrator had relied on an unargued construction based on amendments to the Bermudan Companies Act 1981, without giving the parties an opportunity to respond.

1. Section 67 application. The application under section 67 failed in limine. Section 7 of the Arbitration Act 1996 embodies separability. It permits an arbitrator to determine the validity of the matrix contract where the arbitration agreement remains independently valid. A challenge to the matrix contract is not, without more, a challenge to the arbitration agreement.
2. A party wishing to challenge substantive jurisdiction must make that objection explicitly and within the time required by section 31. EWN’s pleadings, correspondence and agreed preliminary issues treated the arbitrator as having jurisdiction to determine the ultra vires issue. The later skeleton argument did not effectively raise an independent challenge to the arbitration agreement. The award therefore did not amount to an implied award on substantive jurisdiction. In any event, sections 31 and 73 precluded the challenge.
3. Section 68 application. The arbitrator relied on the 2003 amendments to the Bermudan Companies Act 1981, although the parties had proceeded on the basis that the memorandum was to be construed against the statutory background existing at incorporation. This was a failure to comply with section 33. The principle in Zermalt Holdings SA v Nu Life Upholstery Repairs Ltd required the arbitrator to give the parties an opportunity to address a point on which he intended to rely.
4. Section 68 requires substantial injustice, not proof that the tribunal reached the wrong conclusion. EWN’s construction argument was reasonably arguable and might have produced a different result had it been considered under the correct statutory background. The court should not retry the merits to determine that question.
5. The partial award was remitted to the arbitrator for reconsideration in light of the judgment.

The judgment concerned an application to the High Court under sections 67 and 68 of the Arbitration Act 1996 challenging a partial arbitration award dated 17 July 2004. The section 67 challenge was rejected, but the section 68 challenge succeeded and the award was remitted.