Lesotho Highlands Development Authority (Respondents) v. Impregilo SpA and others (Appellants)

A tribunal exceeds its powers under section 68(2)(b) of the Arbitration Act 1996 only when it purports to exercise a power which it does not possess. An erroneous exercise of an available power, including an error of law in construing the underlying contract, is not an excess of power.

Section 68 provides an exceptional remedy for serious irregularity within its closed list which causes substantial injustice. It cannot be used to evade an agreed exclusion of an appeal on a question of law under section 69. Unless excluded by a written agreement, a tribunal seated in England may award pre-award interest under section 49(3). Section 49(6) preserves other powers to award interest but does not give them priority over section 49(3).

Lesotho Highlands Development Authority v Impregilo SpA arose from a London-seated ICC arbitration concerning a construction contract governed by Lesotho law. The tribunal awarded the contractors sums expressed in European currencies and pre-award interest. The ICC rules excluded an appeal on a question of law under section 69 of the Arbitration Act 1996.

Morison J rejected a challenge to the tribunal's substantive jurisdiction but held that it had exceeded its powers under section 68(2)(b). He remitted the currency and interest issues to the tribunal: [2003] 1 All ER (Comm) 22. The Court of Appeal unanimously upheld that decision: [2003] EWCA Civ 1159.

The contractors appealed. The central question was whether a tribunal's possible error in construing the contract or the statutory scope of its remedial powers was an excess of power under section 68(2)(b), rather than an error of law challengeable only under section 69.

1. Disposition. The House unanimously allowed the contractors' appeal. Lord Steyn delivered the leading speech. The order remitting the currency and interest issues was set aside, and the employer's section 68 application was dismissed.
2. Meaning of excess of power. Per Lord Steyn, with Lord Hoffmann, Lord Scott and Lord Rodger agreeing on the decisive currency ground, section 68(2)(b) requires a distinction between purporting to exercise a power which the tribunal does not possess and exercising an available power erroneously. Only the former is an excess of power. A mistake of law or fact made while exercising an existing power does not become jurisdictional merely because it is serious. The public-law approach associated with Anisminic Ltd v Foreign Compensation Commission did not govern arbitral review.
3. Restricted judicial intervention. Per Lord Steyn, section 68 of the Arbitration Act 1996 is a long-stop remedy with a high threshold. Intervention is available only after an award, for a serious irregularity within the statutory closed list, and where the applicant proves substantial injustice. Section 68 does not authorise review of whether the tribunal reached the correct conclusion. Treating a contractual error as an excess of power would improperly circumvent section 69, particularly where the parties had excluded an appeal on a question of law.
4. Currency award. The four-Lord majority concluded that the tribunal possessed the statutory power to express its award in any currency. Even if it selected the wrong contractual exchange rates or otherwise erred in law, this was at worst an erroneous exercise of that power and not an excess under section 68(2)(b). Lord Steyn additionally considered section 48(4) to confer an unconstrained power, but that broader construction did not command a majority. Lord Hoffmann, Lord Scott and Lord Rodger preferred to leave that question unresolved. Lord Phillips considered that section 48(4) conferred only procedural power and that the tribunal had purported to exercise a discretion which it lacked; he nevertheless concurred in allowing the appeal because his view was in the minority.
5. Pre-award interest. Per Lord Steyn, with all other members of the House agreeing, section 49(3) was available because no written agreement excluded it. The contract's interest provision concerned certified payments and did not cover the uncertified sums in the arbitration. Lesotho law was not an agreement to the contrary in writing. Section 49(6) merely preserved other powers to award interest and did not displace section 49(3). Independently, the employer had not proved that the interest decision caused substantial injustice. The employer was ordered to pay the contractors' costs in the lower courts and the House.

1. House of Lords: In [2005] UKHL 43, unanimously allowed the contractors' appeal, set aside the remission order and dismissed the employer's application under section 68 of the Arbitration Act 1996.
2. Court of Appeal: In [2003] EWCA Civ 1159, unanimously dismissed the contractors' appeal and upheld the ruling that the tribunal had exceeded its powers on both currency and interest.
3. High Court: Morison J rejected the substantive-jurisdiction challenge but held that the tribunal had exceeded its powers under section 68(2)(b). He remitted the currency and interest decisions to the tribunal: [2003] 1 All ER (Comm) 22.