BTC Bulk Transport Corporation v Glencore International AG

An arbitral tribunal must give each party a reasonable opportunity to present its case and answer the opposing case. Where a tribunal determines the merits of a counterclaim after a party has sought only summary dismissal and has reserved further evidence and submissions, without making the intended final procedure clear, it may breach Arbitration Act 1996, section 33. The resulting irregularity is serious where it causes substantial injustice. Substantial injustice may be established where the party lost a reasonably arguable opportunity to advance evidence or submissions, seek reasons, or pursue an appeal on a point of law. The court must not determine the underlying merits under section 68.

BTC applied under section 68 of the Arbitration Act 1996 to set aside or remit a second final award concerning Glencore’s counterclaim. BTC had asked the arbitrators to dismiss the counterclaim summarily because Glencore’s evidence was said to be insufficient, while expressly reserving further evidence and submissions if that application failed.

The arbitrators later issued a final award determining the counterclaim without clearly informing BTC that they would proceed on that basis. BTC’s proposed section 69 appeal was abandoned because reasons had not been requested. The central issues were whether the arbitral procedure breached section 33 and, if so, whether the breach caused substantial injustice.

1. Application allowed. The award was remitted to the arbitrators for reconsideration. BTC was awarded its costs of the applications, assessed at £13,000 net.
2. The correspondence showed objectively that BTC sought determination of a summary application to dismiss Glencore’s counterclaim. BTC reserved the right to adduce further evidence and make further submissions if the application failed. The arbitrators never clearly stated that they would determine the counterclaim finally or required BTC to put forward its complete case.
3. By proceeding to a final determination in those circumstances, the arbitrators failed to act fairly and to give BTC a reasonable opportunity to put its case and deal with Glencore’s case, contrary to section 33 of the Arbitration Act 1996. The irregularity therefore fell within section 68(2)(a).
4. The substantial-injustice requirement is a high threshold. Section 68 is a longstop remedy supporting the arbitral process. The court should not try the underlying dispute. It is sufficient that the procedural irregularity caused the tribunal to reach a conclusion which it might well not have reached, provided the applicant’s alternative position is reasonably arguable. That approach was consistent with The Petro Ranger [2001] 2 Lloyd’s Rep 348 and Vee Networks v Econet Wireless International Ltd [2005] 1 Lloyd’s Rep 192. The high threshold was also recognised in Lesotho Highlands Development Authority v Impregilo SPA [2006] 1 AC 221.
5. BTC suffered substantial injustice because it lost the opportunity to address the tribunal’s view of section 32(2) of the Sale of Goods Act 1979, to adduce further evidence and submissions concerning the settlement, to cross-examine witnesses, and potentially to seek reasons and permission to appeal under section 69. Its arguments concerning section 32(2) were not hopeless, although the court deliberately expressed no final view on their merits.